India Ratings and Research (Ind-Ra) has maintained a neutral outlook for the Indian commercial real estate (CRE) sector for FY27, with leasing expected to strengthen. Gross leasing is projected to rise 12%-14% yoy to 85-90 million square feet (msf) in FY27 (FY26 estimate: 79-80msf, up 10% yoy; 1HFY26: 29.5msf, down 8% yoy) on a high base and limited Grade‑A ready supply. Mumbai Metropolitan Region (MMR), Bengaluru, and Chennai are expected to lead absorption with 15%-25% yoy growth in FY27, on active pipelines and GCC-led demand. Domestic occupiers (IT‑BPM, BFSI, and manufacturing) and flex operators continue to anchor demand. India’s structural advantages – skilled talent pool, cost‑effective Grade‑A offices, and improving infrastructure – remain intact and supportive of medium‑term growth.

Ind‑Ra expects office stock across the top eight cities to reach about 1,500 msf by March 2027 (up 8% yoy). FY26 is completion‑led with a deliberate push to finish projects (ready stock up; UC down), and FY27 will be a measured rebuild. The share of under-construction (UC) projects reduced to 13% in 1HFY26 from 16% 1HFY25 and is likely to edge up towards 16% in FY27 – below prior cyclical peaks, indicating disciplined additions rather than oversupply. The UC-to-absorption ratio, a key demand‑supply gauge, improved sharply to 2.6x in FY25 from 5.0x in FY24, and is likely to stabilise around 3x in FY26–FY27, reflecting stronger absorption than new starts.

Ind-Ra expects growth in rentals to moderate to 4%-6% yoy in FY27 (FY26: 5%-7%), as new completions ease tightness in select tech corridors. Meanwhile, prime Grade‑A assets will retain a premium on a flight to quality. Vacancy levels are expected to remain range‑bound at 12%-18% across most cities, supported by sustained leasing, full‑time office operations, and GCC expansion.

City trends are divergent: Bengaluru and Hyderabad saw sharper prints in 1HFY26 on limited ready supply and pre‑lease conversions, MMR/NCR/Pune remained firm on quality bias, while Pune and Ahmedabad faced elevated vacancies (23%-25%) as inventory additions outpaced net take‑up. Capital values posted modest gains in FY26 and might be broadly steady in FY27, tracking rent growth and stable cap rates; pre‑leased, green, amenity‑rich assets continue to support pricing.

GCCs and Flex Remain Core Demand Engines: GCCs now contribute 35%-40% of annual leasing and are expected to absorb 42%-45% of the overall demand through FY27, with a larger share in Bengaluru, Chennai, MMR, and Hyderabad. The share of flex/managed spaces might remain elevated at 20%-40% of the gross leasing across cities in FY26-FY27, acting as an execution layer for faster ramps and multi‑hub strategies. Sustainability has become baseline: a rising share of new supply is green‑certified, and leasing is increasingly concentrated in certified Grade‑A buildings.

REITs to Outperform Non‑REIT Owners: As of 1HFY26, REITs held around 175msf of commercial and retail assets valued over INR2,384 billion. For FY27, Ind‑Ra expects revenue growth of 10%-12% yoy, EBITDA margins of 70%-75%, net leverage of 4x–5x, loan to value ratio of below 30%, and comfortable liquidity (1.4x–2.0x), aided by access to institutional capital and lower tenant churn. The Reserve Bank of India’s move permitting bank participation in listed REITs is a credit positive, deepening liquidity, broadening investor base, and improving refinancing visibility.

Stable Rating Outlook (Offices) for FY27: Ind-Ra has maintained a Stable rating Outlook for its rated commercial real estate company for FY27. The agency expects Grade‑A occupancy to remain high at 90%-95%, net leverage to be 4.5x–5.5x, and EBITDA interest cover at 2.0x–2.25x, broadly in line with FY26. Rating actions in 2025 were skewed towards upgrades compared to downgrades, driven by higher occupancies and stickier weighted average lease expiry (WALEs) in completed assets, firmer rents in prime corridors, refinancing at lower spreads/longer tenors, and sponsor support. Developers with higher under‑construction risk, concentrated expiries, and weaker micro‑market positioning continue to face higher refinancing and vacancy risks.