India’s first-ever Commercial Property Rental Index (CPRI), developed by IIM Bangalore in collaboration with CRE Matrix, highlights a steady 3.6% compound annual growth rate (CAGR) in average effective office rentals across major cities over the last five years. The index, which analyses over a decade of transactional data, provides key insights into trends across ten major cities covering 90% of Grade A office stock.

“Traditionally, Indian real estate markets have relied on anecdotal evidence or skewed data from limited transactions,” the report states. “The IIMB-CRE Matrix CPRI addresses these challenges using a spatiotemporal modelling approach that considers real and hypothetical transactions, offering a balanced market view.”

Pune, Bengaluru, and Chennai Shine

Pune emerged as the top performer with a 12-year CAGR of 6.9%, followed by Chennai and Bengaluru at 5.5% and 5.3%, respectively. Pune’s Central Business District recorded the highest rental value in Q3 2024, solidifying the city’s growing prominence in the office space sector.

Bengaluru, known for its tech-driven economy, has been the most consistent market, reporting positive rental growth in 44 out of 50 quarters. Key macro-markets like Whitefield and South Bengaluru have driven growth, with Whitefield posting a 12-year CAGR of 6.3%. Venkatesh Panchapagesan, Chair of the Real Estate Research Initiative at IIM Bangalore, emphasised Bengaluru’s resilience, stating, “The city reflects robust fundamentals despite global uncertainties.”

Hyderabad also showcased potential, with the Gachibowli macro-market achieving a 6.2% 12-year CAGR, while Delhi’s South region saw a notable quarterly increase of 9.4%, the highest among all cities.

Post-Pandemic Recovery and Future Trends

The index highlights a strong recovery in office rentals post-pandemic, with 92% of quarters since Q2 2022 showing positive growth. Bengaluru’s adaptability and steady rental increases underscore its position as a preferred destination for corporate offices.

The CPRI also reflects emerging trends in India’s commercial real estate sector. “India’s journey towards becoming a $25 trillion economy by 2047 requires robust tools like the CPRI for transparent decision-making and effective capital allocation,” said Panchapagesan. Abhishek Kiran Gupta, CEO of CRE Matrix, added, “High-quality data will empower stakeholders to navigate complexities and capitalise on growth opportunities.”

A Comprehensive View of the Market

The CPRI captures normalised rental data, accounting for anomalies like rent-free periods or escalations. Sub-indices for 36 macro-markets offer a granular perspective on rental performance, positioning the index as a critical tool for investors, occupiers, and policymakers.

As the office rental market continues to evolve, Pune, Bengaluru, and Chennai are set to lead, showcasing India’s dynamic commercial real estate landscape.