(Bloomberg) -- While Indian cities grapple with a slump in home sales and a booming office market, Kolkata, one of the country’s four metropolises, faces the exact opposite.
Major developers in Kolkata say their focus on affordable apartments has helped prevent the price drops seen in other cities, though an unviable build up of commercial space has led to a plunge in rents and sales.
“The real estate market in Kolkata is only driven by actual users rather than investors,” said Harsh Neotia, chairman of developer Ambuja Neotia Group. While urban migration sustains demand for relatively cheap flats, in the commercial market “a huge capacity got built on the expectation of some boom in the IT and IT-enabled businesses,” which hasn’t played out, he said.
About 43% of offices in Kolkata, home to Asia’s second-largest cigarette maker by market and the world’s biggest coal producer, were lying vacant in the second half of 2019, the highest among major Indian cities, according to data from Knight Frank. Kolkata saw home prices rise 3%, bucking a trend of falling costs in places like Mumbai and Chennai.
Read more: India’s Office Space Attracts $2.4B Investment in 2019
Sales of residential units will further pick up over the next 12-18 months, according to research firm JLL India. Sushil Mohta, chairman of the Merlin Group, said about 90% demand in Kolkata is for homes priced at between 3 million rupees to 7.5 million rupees.
For office space, however, rents haven’t increased from five years ago, said Neotia.
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