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How the BFSI Sector Dominates India's Commercial Real Estate Market in 2024

How the BFSI Sector Dominates India's Commercial Real Estate Market in 2024
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The Rising Dominance of BFSI in India's Commercial Real Estate Market

In India, Banking, Financial Services and Insurance (BFSI) sector has emerged as dominant driver of commercial real estate market. While the punchiness of growth can be determined by the latest data from JLL India, who recently found that BFSI is now the second largest office space occupier in India after the IT/ITeS sector. The growth is a reflection of the evolution of the sector, supported by technology, a strong talent pool, and new dynamics of global and local markets.

Key Highlights of BFSI’s Real Estate Footprint

- Significant Share in Office Leasing: As of Q3 2024, the BFSI sector accounted for 16.4% of the 53.4 million sq ft of total gross leasing in India’s top seven cities. This places it just behind the IT/ITeS sector, reflecting strong demand for high-quality office space.

- Top Leasing Cities: Mumbai, Bengaluru, and Hyderabad collectively represent over 50% of the office space leased by BFSI companies, demonstrating their prominence as hubs for both domestic and international financial players.

- Domestic vs. International Demand: While Mumbai leads with approximately 44% of domestic BFSI occupancy, Bengaluru has captured the attention of foreign BFSI players, securing 30% of the international share due to its tech-driven ecosystem.

Evolution of the BFSI Sector's Demand for Office Spaces

The BFSI sector had an approximately 11% share in office leasing from 2017 to 2019. But, in recent years, this number has increased to 17-18%. The increase only highlights how much more impact the sector has had on commercial real estate requirements. Significantly, this segment has seen approximately two-thirds of all leasing activity in India in the last six years, from global BFSI players.

The arrival or expansion of the int'l financial service providers in India is largely due to the strength of the country's skilled workforce at competitive cost levels, and the presence of a strong IT infrastructure, according to JLL's findings.

City-Specific Insights

1. Mumbai: The Financial Nucleus

Mumbai, long regarded as the financial capital of India, continues to dominate the BFSI leasing space, particularly for domestic financial organisations. The city claims about 44% of the space occupied by domestic BFSI occupiers. This leadership is further bolstered by Mumbai’s strategic positioning, financial ecosystem, and connectivity.

2. Bengaluru: The Tech Hub Of Nation —

With a well–established technology ecosystem, Bengaluru is gaining preference for global BFSI firms and has captured 30% of the leasing activity in the sector. Hong Kong.Created as a financial world, the city is also right to be a new hub where technology meets innovation where multiple ventures like combine ultra-competitive segments of finance and high-tech.

3. Hyderabad and Chennai — New BFSI Hotspot

More than 80 per cent of demand for the BFSI GCC is from these cities along with Bengaluru and Pune. The state has provided a favorable ecosystem for the flourishing of tech and finance sectors, with the state government playing a proactive role in attracting investments.

4. Delhi NCR: A Competitive Market

Delhi NCR plays a significant role as well, with an 18% share of domestic BFSI occupancy and 17% from international firms. Its position as a major commercial center makes it a competitive space for financial institutions looking to establish or expand operations.

The Role of Fintech and Future Prospects

Growth of BFSI sector is synonymous to growth in fintech. There is plenty of room for growth, given that India has a $584 billion fintech market growing rapidly to $1.5 trillion by 2025. We see a growing demand for office space as BFSI GCCs already constitute 20% of overall GCCs in India.

Rahul Arora, Head of Office Leasing & Retail Services at JLL, stated, “The BFSI sector is spearheading India's economic growth, driving innovation and digital transformation. We anticipate continued demand for office spaces that can support innovation and attract top talent.”

The Future of Commercial Real Estate for BFSI

Considering the evolving needs of the BFSI sector, real estate developers can build new-age office spaces equipped with the latest technology and facilities to cater these businesses. The move from blended to more fully-fledged workspace being specifically designed to facilitate hybrid work models is therefore one that will only gain traction.

Samantak Das, Chief Economist, JLL India, said, "The sector is on an upswing as the Bank, Financial Services, and Insurance (BFSI) sector leased more than 11 million sq ft of office space in 2023, as the highest position in the history of leasing, with expectations of breaking higher records in 2024."

Conclusion: A Growth Trajectory Backed by Opportunity

BFSI — a mainstay of all Indian commercial real estate, backed by its nimbleness, willingness to invest in tech and calibrated focus on talent Mumbai, Bengaluru, Hyderabad, and Delhi NCR are among the prominent cities that play an integral role in facilitating this growth in turn, developers are responding to the demand by curating advanced, sophisticated office spaces to suit the modern requirements of a financial institution.

The increasing focus on the fintech sector, the natural advantages of the country, and the demand from BFSI companies for office space, are likely to sustain requirements for office space and therefore BFSI will continue to anchor commercial real estate space in India.

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