India’s commercial real estate market is poised to scale new heights, with net leasing of Grade A office spaces projected to hit a historic high of 50 million square feet (msf) in FY26, according to a new report by CRISIL Ratings. This marks a robust compound annual growth rate (CAGR) of 7–9% over the next two years, fuelled by resurgent demand across key sectors and steady supply pipelines.

CRISIL’s study of 78 commercial office players—representing a quarter of India’s Grade A office stock—reveals a positive outlook, underpinned by healthy operating metrics and conservative leverage, which are expected to support stable credit profiles across the sector.

“With healthy demand absorbing the elevated supply, the overall vacancy level for India’s Grade A office market is expected to decline to 15.5–16.0% by the end of FY27,” said Gautam Shahi, Director, CRISIL Ratings. This marks a 100 basis points (bps) improvement from FY25, with sharper vacancy declines expected in the Mumbai Metropolitan Region and National Capital Region, driven by strong demand from BFSI, IT/ITeS, and flex workspace segments.

A key driver of this surge is the continued expansion of global capability centres (GCCs), which now account for 30–40% of annual net leasing. India’s skilled talent pool and cost efficiency have cemented its status as a hub for offshore delivery centres. The BFSI sector and flex space operators are also expected to experience double-digit growth in net leasing, with the former driven by expanding credit and hiring, and the latter by demand for hybrid-friendly, agile workspace solutions.

However, demand from the IT/ITeS sector is likely to be moderate, with a growth rate of 5–6%, driven mainly by GCCs. Domestic IT demand remains tepid in comparison.

On the supply side, office completions are expected to rise to 53–55 million square feet (msf) this fiscal year and 55–57 msf next year, compared to 47 msf in the previous year. Developers are adjusting their pipelines carefully to mitigate excess vacancy in oversupplied micro-markets. India’s total office stock is expected to grow from 810 msf in March 2025 to 920–925 msf by FY27.

Vacancy levels are likely to remain stable in southern markets, such as Bengaluru and Hyderabad, despite new supply, thanks to sustained demand from the GCC. Pune, however, may experience a marginal increase in vacancies due to concerns about oversupply.

According to Snehil Shukla, Associate Director at CRISIL Ratings, “Declining vacancy levels, contracted rental escalations, and recent rate cuts by the central bank will bolster cash flows for office developers. This, combined with prudent debt management, is expected to improve their debt service coverage ratio (DSCR) to 1.9–2.0 times this fiscal and next, up from 1.7 times in FY25.” The sector’s debt-to-Ebitda ratio is also projected to improve to 4.0–4.2 times by March 2027, from 4.7 times currently.

While the outlook is strong, CRISIL cautions that global headwinds—such as geopolitical volatility and economic slowdown—could impact net leasing activity, particularly by multinational GCCs. Higher-than-expected leverage by developers is another monitorable risk. Nonetheless, India’s Grade A office market appears well-poised to scale new peaks, supported by structural demand drivers and disciplined supply-side responses.