India’s commercial office leasing market is expected to maintain its strong momentum in FY2026, with net absorption likely to match the all-time high levels seen in FY2025, according to rating agency ICRA.
This robust demand will be driven by Global Capability Centres (GCCs), Banking, Financial Services and Insurance (BFSI) players, flex-space operators, and domestic IT-BPM firms.
In FY2025, net absorption across the top six Indian cities — Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai Metropolitan Region (MMR), and Pune — reached a record 65 million square feet (msf), marking a 14% year-on-year growth and outpacing new supply of 58 msf. This strength has continued into the first quarter of FY2026, which saw net absorption of 17 msf against a supply of 17.7 msf.
“The slowdown in leasing from global IT firms has been compensated handsomely by the GCCs and the BFSI segments, which ICRA expects will continue to dominate leasing activity, accounting for the majority of the space uptake in FY2026,” said Abhishek Lahoti, Assistant Vice President and Sector Head, Corporate Ratings at ICRA.
Vacancy Levels Expected to Decline Further
According to ICRA, overall vacancy levels across these cities are expected to decline to 13.0–13.5% by March 2026, from 13.9% in March 2025 and 15.5% a year earlier, reflecting the strengthening demand-supply fundamentals in the sector.
As of June 30, 2025, the total Grade A office stock across the top six cities stood at approximately 1,030 msf. Bengaluru leads with a 26% share of total supply, followed by Delhi-NCR and MMR. New supply in FY2026 is expected to remain robust at 63–64 msf.
City-wise vacancy projections indicate continued demand traction:
- Bengaluru: Vacancy to decline from 9.8% to 9.0-9.5%, with 16.5 msf new supply.
- Chennai: Vacancy likely stable at 9.0-9.5%, with 5 msf added.
- Delhi-NCR: Slight easing from 22.4% to 21.5-22.0%, with 12 msf of supply.
- Hyderabad: Steady vacancy at 17.5-18.0%, amid 15.5 msf new space.
- MMR and Pune: Both expected to see marginal drops in vacancy due to healthy net absorption.
Improving Credit Metrics for Office Players
ICRA also noted that the financial health of office space developers remains stable, supported by improving net operating income (NOI) and stronger leasing trends.
“The credit profile of ICRA’s sample set of office players is expected to remain stable, driven by healthy growth in NOI backed by higher rentals. The leverage metrics, as measured by debt/NOI, is expected to improve to 5.0x-5.5x as of March 2026, from 6.0x in FY2025,” Lahoti said.
The debt service coverage ratio (DSCR) is also projected to strengthen to 1.35x-1.40x in FY2026, up from 1.3x in FY2025, driven by rising NOI and lower interest rates.
