Graph & Analysis

Despite ongoing geopolitical tensions and global economic headwinds, India’s office market continued its upward trajectory in H1 2025, demonstrating strong growth momentum. The Top 7 cities collectively recorded gross leasing activity of approximately 38 million sq. ft., alongside the addition of around 25 million sq. ft. of new supply to the market. This represents a ~21% y-o-y increase in gross leasing compared to the same period in 2024, underscoring the resilience and sustained demand within India’s commercial real estate sector.

Widespread Leasing Momentum:

• For the first time in the history of India’s office market, five out of the top seven cities recorded leasing activity exceeding 5 million sq. ft. in H1 2025. Notably, all seven cities registered positive y-o-y growth in gross leasing compared to H1 2024.
• This momentum reflects increasing occupier confidence, especially from GCCs, flex space providers, and companies across sectors like technology, BFSI, engineering, and manufacturing.

Absorption Leaders:

• Bengaluru led office leasing activity in H1 2025, accounting for 28% of total absorption at approximately 10.5 million sq. ft., reaffirming its position as the country’s leading office market.
• It was followed by Delhi NCR and Chennai with 15% each, Hyderabad at 14%, and Mumbai also at 14%, indicating broad-based demand across key commercial hubs.
• Chennai, Hyderabad, and Bengaluru recorded the highest y-o-y growth, each witnessing over 20% increase in leasing volumes compared to H1 2024.

While the technology sector remained the primary demand driver across all major cities, leasing activity was also supported by sector-specific momentum — including engineering and manufacturing, and aviation in Bengaluru; BFSI and consulting in Delhi NCR and Mumbai, and strong demand for flex spaces in Hyderabad and Chennai.

Supply Trends:

• With fresh supply of over 25.5 million sq. ft. in H1 2025, reflecting a 16% year-on-year increase compared to the same period in 2024.
• Bengaluru led new completions with 8.1 million sq. ft., accounting for 32% of total supply and recording a ~5% growth over H1 2024.
• Pune and Delhi NCR followed with 30% and 15% shares, respectively. Collectively, these three cities contributed 77% of the new supply during the period.

In Bengaluru a new supply was led by North Bengaluru due to its proximity to KIA and infrastructure upgrades. Pune saw supply concentration in Kharadi and Viman Nagar, driven by strong connectivity and IT demand. Whereas in Delhi NCR, most additions were in Golf Course Road, Gurgaon, owing to its prime location and connectivity.

Vacancy Compression:

• India’s overall office vacancy declined to 15.5% in H1 2025, a reduction of 120 basis points from 2024, as demand outpaced supply in most major cities.
• Chennai reported the lowest vacancy at 8.9%, followed by Mumbai (10.4%) and Bengaluru (12.4%), driven by strong absorption and limited new supply.
• Bengaluru witnessed a notable 13% year-on-year reduction in vacancy, driven by robust demand across sectors.
• In contrast, Hyderabad (24.2%) and Delhi NCR (18.5%) continued to record high vacancies, owing to large vacant stock and moderate leasing activity.

These dynamics underscore a growing demand-supply disparity across markets, with core cities moving toward tighter vacancy environments.

Outlook:

• India’s commercial real estate sector is set to maintain its strong performance through 2025, supported by a diversifying occupier mix, stable supply inflow, and growing investor interest.
• Driven by sustained demand from GCCs, flex space operators, technology, BFSI, and engineering & manufacturing sectors, office leasing across the top 7 cities is projected to reach 70–75 million sq. ft. by year-end.
• Established markets such as Bengaluru, Delhi NCR, Hyderabad, and Chennai are expected to command the majority share of this demand.
• As leasing momentum continues to outpace new completions, vacancy levels are anticipated to decline by an additional 50–100 basis points, reaching approximately 14.5%.
• Furthermore, occupier decisions are increasingly being shaped by a focus on ESG compliance, green-certified developments, and wellness-oriented workplace environments.

Bengaluru’s residential real estate market experienced remarkable growth in 2024, driven by robust supply and demand dynamics. The city witnessed 65,400 new unit launches, reflecting a 13% increase compared to the previous year. On the demand front, 67,000 units were sold, marking a 3% rise from 2023.

As of December 2024, the unsold inventory stands at 52,200 units, with the inventory overhang reducing to nine months, down from ten months in 2023. Notably, for the first time, the premium segment (INR 1 - 2 Cr) emerged as the most dominant category, contributing 40% of total sales. The mid-segment (INR 0.5 - 1 Cr) followed closely, accounting for 36% of sales. In terms of typology, 3 BHK units led the market, comprising 54% of the total supply, while 2 BHK units made up 32%. Additionally, the average unit size increased by 10%, rising from 1,480 Sq.ft. in 2023 to 1,600 Sq.ft. in 2024, underscoring homebuyers’ growing preference for more spacious living.

Premium Segment: The premium segment (INR 1 - 2 Cr) witnessed strong traction, with approximately 30,100 units launched, accounting for 46% of the city’s total supply. Demand surged by 58%, with over 26,900 units sold, making it the most dominant price category. This segment’s share of total sales rose from 26% in 2023 to 40% in 2024. Notably, 3 BHK units comprised 70% of total absorption, reflecting a growing preference for spacious homes. Given the strong demand, the inventory overhang in this segment is currently just 7 months.

Mid Segment: The mid segment (INR 0.5 - 1 Cr) accounted for 30% of Bengaluru’s supply, with over 19,600 units launched in 2024. However, sales declined by 25% compared to 2023, leading to a drop in this segment’s share of total demand from 49% in 2023 to 36% in 2024. Despite this decline, it remained one of the most sought-after categories, with 2 BHKs comprising 55% of total sales. The segment currently holds 21,400 unsold units, resulting in an inventory overhang of 11 months.

Luxury and Ultra Luxury Segments: Luxury Segment (INR 2 - 5 Cr): Sales surged by 68%, with 9,300 units sold in 2024, reflecting increasing demand for high-end living. Ultra Luxury Segment (> INR 5 Cr): Demand grew by 42% compared to 2023, as buyers sought premium amenities and superior specifications. 3 BHKs and 4 BHKs dominated sales, accounting for 54% and 40%, respectively. The inventory overhang for units priced above INR 2 Cr stands at 7 months, with 5,700 unsold units.

Affordable Segment: The affordable segment (< INR 50 Lakhs) contributed just 5% of the city's supply, with 3,300 new units launched in 2024. Demand continued to decline, with sales dropping 45% year-on-year to 5,400 units. Its share in total demand fell from 15% in 2023 to 8% in 2024, reflecting a significant contraction. With demand waning, this segment faces a substantial inventory overhang, signaling a shift in Bengaluru’s affordability dynamics.

Outlook

• The growing preference for larger homes is expected to drive a 7-8% increase in average unit sizes by 2025.
• The premium, luxury, and ultra luxury segments will continue their upward trajectory, fueled by evolving lifestyle aspirations and higher disposable incomes. Additionally, the share of Grade A supply will expand to meet rising demand in these segments.
• The mid-segment is expected to stabilize as developers fine-tune their offerings in response to shifting buyer preferences.
• With steady price appreciation and increased demand for spacious homes, the sub-INR 50 lakh price segment is likely to phase out. As a result, Bengaluru’s affordable housing benchmark may shift, redefining the INR 50 lakh to INR 1 crore range as the new affordable segment in coming years.

Bengaluru’s residential real estate market demonstrated resilience and dynamism in 2024, marked by strong sales momentum, growing demand for premium properties, and a shift toward spacious living. As the city continues to evolve, these trends signal a promising outlook for both homebuyers and investors in the years ahead.

Bangalore set another record in office leasing, with over 28% more area leased in the first nine months of 2024 compared to the same period last year. The net office absorption stands at 10.72 million square feet as of Q3 2024. The top seven sectors accounted for over 90% of the market share, with IT/ITeS remaining dominant with a 39% share, followed by manufacturing (18.5%), flex (13%), and BFSI (6.6%). Other sectors include automotive (5.1%), consulting (4.7%), and R&D (3.7%).

Compared to the same period in 2023, IT/ITeS experienced an increase of 85%, manufacturing grew by 53%, and flex increased by 45%. On the other hand, BFSI decreased by 63% and consulting by 34%. The automotive sector saw a significant jump of 417%, primarily due to Mercedes Benz’s acquisition of 0.51 million square feet in Whitefield. In terms of micro-markets, the highest office leasing was witnessed in the ORR, with a 35% share, followed by Whitefield (18.6%), SBD (12.7%), and North Bangalore (10.2%).

• ORR (Outer Ring Road): Continues to thrive with a 3% increase in leasing year-over-year. Key occupying sectors in this region are IT/ITeS (59%), BFSI (15%), and manufacturing (9%). Notable tenants include Walmart, Synopsis, and NatWest.
• Whitefield: Has witnessed an 8% decline in leasing due to a shift towards ORR. The IT/ITeS sector continues to dominate, accounting for 35% of the market share, followed by BFSI at 23% and manufacturing at 17%. Notable tenants in this area include Google, Mercedes Benz, and Matchco.
• Secondary Business Districts (SBD): Saw a remarkable 110% increase in leasing, totaling 1.35 million square feet. The key occupying sectors are IT/ITeS, which account for 51%, followed by a flex at 28% and manufacturing at 16%. Notable tenants in this region include Tablespace, Computacentre, and Atlassian.
• North Bangalore: Witnessed a 60% increase in leasing activity, fueled by proximity to the airport. The primary sectors occupying this market are IT/ITeS (50%), manufacturing (16%), flex (11%), and consulting (11%). Major tenants in this area include LTIMindtree, AstraZeneca, and Takeda.
• Hosur Road: Significant growth driven by Bosch's acquisition in Electronic City, with manufacturing (77%) and R&D (11%). Other notable tenants include Syngene International and Tejas Networks.
• Central Business District (CBD): Recorded a 6% increase in leasing, dominated by flex spaces (78%) and consulting (11%). Major tenants in this area are Tablespace, WeWork, and EY.

Overall, in the micro-markets of ORR, Whitefield, SBD, and North Bangalore, IT/ITeS holds the largest share, averaging around 50%. In contrast, the Hosur Road micro-market is primarily focused on manufacturing, while the CBD is characterized by a strong presence of flex spaces. Average office take-ups in the IT/ITeS sector range from 40,000 to 250,000 square feet, while manufacturing spans from 35,000 to 130,000 square feet, and flex ranges from 30,000 to 140,000 square feet. For BFSI and consulting, average take-ups are between 20,000 and 60,000 square feet, R&D typically occupies about 100,000 square feet, and the automotive sector averages around 50,000 square feet.

OUTLOOK

• Based on past trends, Bangalore’s net office absorption is projected to reach ~14.0 million sq. ft. by the end of 2024, with a CAGR of 20%. This growth is largely fueled by office expansions across key sectors.
• The IT/ITeS segment will continue to dominate the market, complemented by rising demand for flexible office spaces.
• ORR, Whitefield, and SBD are expected to remain the top micro-markets, experiencing marginal fluctuations in activity, while North Bangalore is set to see a significant increase in leasing volumes due to its proximity to the airport and KIADB Industrial Parks, alongside excellent connectivity and planned infrastructure developments.
• Major developers are proactively establishing land banks along Airport Road to anticipate future demand.
• Overall, this vibrant leasing landscape will position Bangalore as a resilient and adaptable hub for diverse industries, with manufacturing and flex spaces also expected to grow in the coming years.

Bangalore residential real estate performance in 2023 sustained the previous year’s momentum where it had made a remarkable recovery post COVID-19. Bangalore remained as one the strongest markets in India with ~15% share of new launches in 2023. The city saw a supply of around 58,000 units, a 7% increase Y-o-Y and absorption of around 65,400 units with 12% increase Y-o-Y. The unsold inventory stood at 54,000 marking 15% decrease Y-o-Y. Increased sales coupled with sustained launches led to a decrease in the overhang period from 11 months in 2022 to 10 months in 2023.

Bangalore North (32%) micro market has emerged as the top performer followed by Whitefield (20%), Sarjapur Road (20%) and Hosur Road (15%). In terms of absorption the micro markets which performed the best were Sarjapur Road (23%) and Whitefield (20%), followed by Bangalore North (13%) and Hosur Road (13%).

Sarjapur Road and Hosur Road witnessed maximum traction and together saw an absorption of 23,300 units; Thus, having the least overhang period (6 to 7 months) among the other micro-markets of Bangalore. Completion of Namma Metro Phase-2 (R V Road – Bommasandra) boosted residential real estate developments towards this catchment. Specific Hosur Road Micro Market has witnessed a sharp 40% increase Y-o-Y in supply followed by Whitfield & North Bangalore Micro-markets.

North Bangalore has witnessed 18,600 units launched with an 18% increase Y-o-Y and over 8,200 units were sold. Proximity to the international airport, increasing economic activity, improved social infrastructure and under-construction of Namma Metro (Blue line) along Bellay Road has triggered investor preferences towards this quadrant of the city.

Whitefield saw a supply of 15,000 units with an 11% increase Y-o-Y and absorption of 20,400 units. In Whitefield alone 12,900 units were absorbed, driven mainly by the IT professionals. Purple line metro’s full operation gave an additional boost in 2023.

Price-Segments: The highest share of launches was seen in the Mid- segment (46%) segment, followed by High-end (30%) and Premium (11%) segments, indicating a rising economic profile of the city, and changing preferences for premium homes. Around 5,200 premium units and 1,300 luxury units were sold in 2023, the highest ever seen.

Outlook: With the robust economy and infrastructure developments, the residential real estate outlook for Bangalore in 2024 is positive. The city is expected to witness a ~7-8% further surge in supply and demand. North Bangalore and Hosur Road Micro-Markets are expected to lead the market with anticipated operation of Metro-line connectivity in these locations. Also, rising demand for luxury and high-end homes will result in the development of high-end specification & quality large scale projects with lifestyle amenities.

• Co-Working spaces started to emerge globally in the early 2000s and around 2005 – 08 in India. Until the year 2020, the occupier base for Co-Working spaces was confined to small businesses, freelancers, or start-ups. Looking at the advantages like ease to expand, consolidate and working from any location, even large corporates (MNCs & companies with 100+ employees) occupy a significant share in the Co-Working office market space today. Microsoft, Facebook, and IBM are a few of the top companies to have occupied space in Co-Working offices.
• In India, especially post 2021, Co-Working spaces have rapidly emerged as a vital player in the commercial real estate sector. Demand from corporates, start-ups and entrepreneurs has resulted in a huge jump in the Co-Working share in total office leasing which increased from 8% in 2017 to 20% in 2023.
• As of January 2024, the estimated number of Co-Working seats in India are around 7 Lakh seats and around 3.5 Lakh seats are expected to come up in next 2 years. The top 8 cities, namely Mumbai, Delhi NCR, Chennai, Kolkata, Bangalore, Hyderabad, Pune and Ahmedabad, account for 94% of the seats. The Co-Working footprint is also rapidly picking up in other cities such as Jaipur, Kochi, Coimbatore, Nagpur, and Surat (about 5% of Total), and likely to reach 7-9% in the next two years.
• Given the opportunities in the sector, large-scale investments are being made in this space. Between 2020 to 2023, Co-Working operators raised USD 740 million in India. Co-Working operators are utilizing the funds for scaling up further, both in terms of geography as well as technological innovations.
• The flexibility combined with unhindered amenities and a community driven ecosystem are main attractions to the occupiers of Co-Working space. Additionally, the decision of businesses to ask employees to return to the office has spiked the demand for co-working spaces in recent times. Co-Working spaces are gaining popularity among businesses in India, with demand doubling in the past four years and expected to grow multifold in the coming years.

The India residential real estate market had surpassed the pre-COVID levels in 2022. Despite the global headwinds and anticipated impact of monetary tightening, the year 2023 was yet another remarkable one as both supply and absorption sustained the previous year’s momentum. And had witnessed stable absorption with over 4,50,600 units and a marginal 2% YoY growth in supply of over 3,77,300 units. Also, the expected time to liquidate the inventory (Overhang) reduced to 12 months in 2023 from 13 months in 2022.

Supply: The top 3 cities that contributed the most to the annual launches were Mumbai (30%), Hyderabad (20%), and Pune (19%), together accounting for 69% of the total supply. Mumbai launched over 1,15,000 units in 2023, followed by Hyderabad with over 75,000 units, and Pune with over 73,500 units. Bengaluru and Delhi also launched over 58,000 units and 28,100 units respectively.

Absorption: The top 3 cities that contributed the most to the annual sales were Mumbai (34%), Pune (19%), and Hyderabad (15%), together accounting for 68% of the total sales. Mumbai moved up to the top position with more than 154,000 units sold in 2023, followed by Pune with over 86,000 units, and Hyderabad with over 69,000 units. Bengaluru and Delhi also recorded healthy sales of over 65,400 and 48,500 units respectively.

Unsold Inventory: A marginal decrease of 6% from the previous year was seen in the stock. The top 3 cities that had the most unsold inventory were Mumbai (33%), Hyderabad (22%), and Pune (14%), together accounting for 69% of the total stock. Mumbai had over 1,51,000 unsold units in 2023, followed by Hyderabad with over 1,02,000 units, and Pune with over 64,500 units. Kolkata and Chennai had the lowest unsold inventory of around 20,200 units and 20,600 units respectively.

Overhang: Overhang period indicates the time expected in months to liquidate the unsold stock. In 2023 the three cities with least expected overhang were Pune (9) and Bengaluru (10). Increased sales coupled with sustained launches made these markets stronger than the others in the country. However, high amount of supply as compared to absorption led to highest overhang in Hyderabad (18).

Outlook: Despite various challenges the country witnessed a great traction in the residential market during 2022 and 2023. This trend is likely to remain the same in 2024. An expected 7% growth in supply and 6% growth in sales is foreseen. Bengaluru likely to remain the most promising market in the future. Pune might emerge as the next growth centre of residential real estate in the country as it is set to become another large IT hub of India.

• A ‘Second Home’ is a secondary dwelling, other than the owner’s principal residence. A second home can be a vacation, or a holiday home located in the tourist spot, a weekend home, or a farmhouse – located in proximity to one’s primary residence or an ancestral home, in a different city.
• A vacation home or a holiday home is defined as a second home located in a prominent tourist spot. The owner’s use it primarily for leisure or recreation and capital value appreciation. Since 2015, the vacation home market in India has witnessed entry of reputed developers and organized operators in short-term rental space. The product has evolved today significantly in terms of design as well as the services offered. Further, advancements in technology have catalysed both the sale as well as renting out of the vacation home.
• Today, a vacation home has evolved into a vacation rental home which is not only a lifestyle product but also an investment product. Vacation rental homes are villas or apartment units that are purpose-built and are semi or fully furnished, with an operator managing the unit as well as assisting for short-term rental.
• Globally and in India, tourist destinations such as beach locations, tea and coffee estates, vineyards and hill stations are gaining momentum for the development of vacation home projects. Proximity to a major city and connectivity (presence of an airport) are also pivotal for vacation home projects.
• Locations preferred for vacation rental homes in India:
  • Goa started witnessing developments of vacation homes since the late 2000s. Goa, on account of its connectivity, beaches, hospitality infrastructure, tourist footfalls, favorable regulations has always been a preferred location to purchase a vacation home.
  • Locations of Alibaug, Lonavala – Khandala, and Mahabaleshwar - Panchgani are amongst the most preferred locations catering to the people of Mumbai and Rishikesh, Dehradun and Mussoorie were preferred in the north region.
  • With Himachal Pradesh easing regulations in the year 2015 with regards to purchase of lands by non-domicile, vacation rental home developments in Shimla and Kasauli gained momentum. Emerging now are locations of Ranikhet and Haldwani in Uttarakhand in North
  • In the south, locations of Ooty – Coonoor and Kotagiri started witnessing early developments of vacation rental homes as it was one of the preferred locations by tourists and conducive regulations for purchase of units. With Karnataka repealing 79 A/B Land Act, regions of Malnad – Coorg, Chikmagalur and Sakleshpur are witnessing increased developments. Other preferred locations in south are Wayanad in Kerala and Kodaikanal in Tamil Nadu.
  • In terms of locations, Goa, Shimla, and Kasauli will continue to witness highest activity and will attract buyers from all the states of India. Connectivity required tourist infrastructure, high tourist footfalls and conducive weather are some of the key reasons for the high preference for these locations. Other locations of Alibaug, Lonavala, Malnad and Uttarakhand will continue to attract buyers from large cities located within 5 Hour driving distance. Locations of Wayand in Kerala, Nashik, Karjat in Maharashtra are likely to witness entry of organized players.
• The product is in the evolving phase from all perspectives: market, product design, technology, and operations. Flexibility to work from home, advancements in technology and recurring returns on investment are likely to drive the growth of this product type in the coming years.

Organized warehousing is 7 to 10 years old story in India. Currently it is growing at brisk rate between 15% and 20 % annually for next 3 to 5 years. It is currently in growth phase and moving into matured stage. Growth of e-commerce industry firstly fueled the development of large warehousing in peripheral regions of Tier 1 cities now it is also making way deep in Tier 2 and 3 locations of India. In addition, the product type has also evolved significantly- apart from large warehousing spaces, urban logistic space (smaller spaces within cities) is witnessing high growth. This segment will keep evolving with growth of e-commerce industry and advancement of technology.

Datacenters have been in center stage since 2018. Post outbreak of COVID, the attention towards this segment has increased multifolds. There are multiple reasons for growth of datacenter in India including Growing internet and mobile broadband penetration, surge in data usage, increased adoption of cloud service and proactive government policies on data security in India. Industry capacity to grow about two times to ~ 1,200 MW by 2025 in India. Currently, this segment is registering a CAGR of 22%. Datacenter is in growth phase and will keep growing in future as well. It is expected to remain in this phase for next 7 to 10 years.

Co-Working has entered in highest growth period in the last 12 months. The demand of managed offices/ co-working/ flexible space is expected to grow between 20% and 30% (in terms of seat absorption) owing to companies adopting hybrid model of work. In 2021, Co-working accounted for 15% of the total office space absorption. In 2022, Co-working is accounting between 18% and 22% of the total office absorption and expected to account over 35% of total office pie by 2025. Therefore, this sector will be the focal point in office space in coming years.

Co-Living sector witnessed good growth pre pandemic period. However, it has gone through a tough period during pandemic as expected and many operators have shelved the business or bought over by larger players. Most of the Co-Living facilities have occupancy over 80% in major cities and operators have started signing additional space for future growth. This sector has crossed the initial stage and is entering the growth phase. In the next 5 years, this sector is likely to reach its peak.

There are other newer products namely flatted factories and BTR (Built-To-Rent). They are all in the nascent phase and the product has to be aligned to the market requirements and is yet to be tested in real environment before it witnesses growth.

Office has witnessed good traction in H2 2021; leasing traction in Q1 2022 is higher compared to the last 2 years. Despite, IT/ITeS sector performing extremely well supported by hirings, net absorption of office space is less than 50% as compared to absorption in the year 2019. The current leasing activity is lesser compared to hiring activities mainly due to change in working behavior of the workforce. We expect the ratio of actual hire to physical space will drop considering hybrid model is the future. Office sector is expected to grow at slower pace in coming years compared to 2015-19 cycle.

Retail is at the cusp of recovery phase; this sector has been in slowdown phase for many years now largely on account of penetration of e-commerce. Retail real estate is expected to keep evolving with technology improvements. However, we expect it to start doing well in short term onwards. Even though, demand size has been shifted here compared to expectation in last one decade.

Hospitality sector overall is expected to be entering in expansion phase with rise in affordability and changing consumer behavior. However, different product namely leisure and business products will perform differently. We are expecting many new developments in leisure segment across different parts of the country.

Residential has entered its dream run phase. It has been performing very well since Q4 2020 and expected to be in expansion mode for the next 3-5 years more. Different residential products are in demand on account of improved affordability. Yes, we are living in high inflation phase and cost of living is rising at brisk rate, we are expecting income growth is dominant sector will also remain healthy to keep demand of this segment going.

• The e-commerce sector will drive bulk of the volume, as the accelerated growth trajectory that the pandemic pushed the sector toward is expected to sustain. Most consumers that were forced to shop online will continue to do so and the existing brick-and-mortar stores will also look to leverage online channels to push sales. The 3PL sector will sustain market share as e-commerce and other sectors increasingly outsource their warehousing requirements to specialists in the field.
• Indian e-commerce market is on the cusp of its next phase of growth with Indian business giants such as the Reliance and Tata groups have entered in this field along with global players including Amazon and Walmart to capture this growing market. A growing economy like India with the second largest population in the world still holds massive potential for its warehousing market which will fructify over the next few years.
• It is estimated that the e-commerce sector will consume the most space in the next five year (2021-2026). Similarly, 3PL and Other Sector companies are expected to take up more space in the next five years compared to the preceding period. These three occupier groups are expected to account for almost 90% of the total transacted space in the next five years.

• The eight prime markets of India held an estimated 252 mn sqft of warehousing stock at the end of H1 CY 2021. The Mumbai & Delhi NCR market accounts for 40% of this stock. The larger warehousing markets of Mumbai and Delhi NCR have a significantly lower proportion of Grade A warehouses as they are much older markets and the bulk of their stock had been built before the demand for Grade A warehousing gathered momentum. Bangalore, Pune, and Chennai have the higher levels of Grade A stock due to their primary demand base of ecommerce, auto and auto ancillary occupiers.
• Prominent cities or Tier 2 markets that are witnessing increased warehousing developments are Guwahati, Coimbatore, Bhubaneshwar, Lucknow, Visakhapatnam, Kochi, Vapi and Surat. Annual demand in these markets have grown significantly; from a share of 10% in 2015 the absorption in these markets have grown to 20% of the total demand across top 8 markets in the year 2020. We expect this trend to continue, and tier 2 locations will have a share of 25% of the prime markets in next few years.
• Absorption is likely to grown between 18% and 22% annually for most of the markets. Rental escalations for Grade A space are expected to be between 4% and 6% and 3% to 5% for Grade B spaces in the coming three years.

• Modern Indian warehousing story started between 2005 and 2010 when logistics companies built the first Grade A warehouses in the country. A growing economy with a consumption base of over 1.35 bn people, made the Indian warehousing market a compelling investment proposition. Since last one decade, growth witnessed in the e-commerce and 3PL sectors caused warehousing demand to grow at a CAGR of 35% in the last 5 years.
• Currently, proportion between Grade A & Grade B warehousing spaces is 45% and 55% respectively. Since 2016, Grade A spaces have been growing at 30% and whereas Grade B facilities have witnessed CAGR of 12%. We are expecting going forward the CAGR gap between Grade A and Grade B to further widen as Grade A spaces offers opportunity in the secondary investment market.
• In addition to the attractive domestic consumption story, the Indian government's focus on manufacturing with the Make in India initiative and Production Linked Incentive (PLI) scheme among others, and with India being among the possible beneficiaries of the global companies looking to disperse manufacturing capacity across Asia, the sector is likely to see a surge in demand from different sectors.