Kolkata has witnessed a notable surge in commercial property sales propelled by a strategic move among companies to capitalise on tax benefits associated with such investments. This trend marks a significant convergence of corporate financial planning and real estate investment strategies. With tax incentives becoming an increasingly influential factor in business decision-making, the commercial property market has emerged as a favoured avenue for companies seeking to optimise their tax liabilities while concurrently expanding their asset portfolios.
Several medium and small-scale companies are investing in commercial spaces not only to avail tax incentives which is offered by the government such as deductions for depreciation or credits, interest expenses, or even direct tax credits for certain types of investments in real estate.
The city saw a significant increase in office space leasing, with 1.4 million sqft leased in 2023, representing a 20 percent year-on-year growth from the previous year. It is worth mentioning that new office completions in the city skyrocketed by an impressive 332 percent YoY, totaling 0.8 million sq ft in 2023—the highest amount recorded in the last five years.
According to market experts, companies are investing in commercial real estate as a means of diversifying their assets that can provide a steady income stream through rental payments, which can be attractive to businesses looking for stable returns on their investments.
“As Kolkata’s commercial property market booms, businesses are strategically tapping into tax incentives to bolster their financial strategies. This synergy of fiscal prudence and real estate expertise not only drives corporate expansion but also contributes to regional economic prosperity,” Mr. B.P. Singh Roy, COO, Keventer Realty said.
Despite the changing hybrid work environment, there has been a significant increase in office occupancy rates. As a result, there is a noticeable surge in demand as occupiers are now approaching their real estate strategies with more clarity and flexibility.
“Large companies often plan their capital expenditures strategically to optimise tax liabilities. Investing in commercial real estate can offer tax advantages compared to other forms of capital expenditure. Further, many are looking at economic growth in certain regions which has increased the demand for commercial spaces, leading to higher sales volumes,” Mr Adarsh Bhagat, Director at Ginni Realty Projects Pvt Ltd said. He also mentioned that companies are seizing the opportunity to invest in these growing markets, especially if tax benefits further incentivise such investments.
According to Ms Priyanka Datta Roy, Marketing Manager at PS Group Realty, many companies are seeing this as long-term stability post Covid-pandemic scenario. “Commercial real estate investments can offer long-term stability and potential appreciation in value. Companies may view owning commercial properties as a way to secure their future and hedge against economic uncertainties,” she added.
Overall, the intersection of tax benefits and commercial real estate investment presents an opportunity for companies to optimise their financial strategies while also contributing to economic growth and development in various regions. However, it’s essential for businesses to carefully evaluate the potential risks and benefits before making significant investments in commercial properties.