Real estate clobber in India is anchored in its stout financial augmentation currently being observed in the nation, principally in the ITES sector, which has created innate requirement in Realty sector, mainly in the housing sub-division. The realty segment fκte in India is roaring right now and seems to flout the laws of gravity. Albeit we exclude the standard demand in the metropolitan cities still we will be observing an elevated latency in the bazaar.
The envisaged bottoming out of the
real estate market has not turned out hitherto. Market analysts suggest countless explanations, like the ongoing buoyant outlook in the market to the dawdling deliverance of stock on the supply side. "High grade office supply is still short of demand. Three years ago, the entire office stock of the country was still less than Bangkok city. Even today, the city states of Hong Kong or Singapore have more office stock than the all-India market," said Anshuman Magazine, CEO of property brokers CB Richard Ellis India. Then again, CEO of Colliers Jardine Property Services, Akshaya Kumar, felt the strong upbeat mood, both in the stock market and in the economy in general, are propelling prices. "Prices are still firm. There is no sign of a let-up," Mr Kumar said.
Real estate prices in the country have been skyrocketing for more than eight months. In various cities and different segments of the property market, prices are rising stridently, ranging from 15% at the stumpy end to 40% for high-demand properties. The admonition sounded by HDFC chairman Deepak Parekh also failed to have any beneficial upshot on the inflamed realty market.
Prices have stopped rising or have fallen in some (exceptional cases) markets where the growing ascent was rapid and motivated by speculators, Gurgaon and the National Capital Region (NCR) for instance. Infotech and ITeS industries have continued to be the main propellants for
commercial real estate, consuming as much as 70% of the new stock coming into the market. This has indirectly and through secondary buying in other property sectors like residential housing fuelled prices.
A survey by Richard Ellis mentions that 80% of the commercial supply of corporate grade office space was being snapped up by the IT and BPO sectors. The survey predicted that commercial supply is expected to cross the 100m square feet mark by the end of '06. "The year '03 saw a total stock of approximately 36 m sq ft, which grew to 58.1m sq ft in '04. The total stock is expected to add over 23m sq ft in '05 to reach approximately 82.3m sq ft. The year '06 is expected to add approx. another 24m sq ft, thereby making the supply cross the 100m sq ft mark," the Richard Ellis statement said.
Significantly, however, the story of commercial real estate has shifted away from the big cities, as Pune, Hyderabad and Chennai have come into the limelight in the past six months, said the half-yearly property survey by Colliers Jardine. "Central Business Districts (CBDs) of most metro cities have been out-performed by suburban locations where new stock is being developed for IT/ITeS companies as per their requirements. This new stock is represented by grade 'A' quality buildings, larger floor plates with higher efficiencies, ample car parking with prices ranging from Rs 20-40/sq ft per month," the report said.
In Chennai, the most significant office space development is taking place on the Old Mahabalipuram Road, and the city promises to deliver around 3m sq ft over the next 12 months, the report added.
From the consumer's point of view, office rentals have not spiralled upwards as have capital values. In Delhi, the Colliers survey said that the rentals in the central business districts like Connaught Place have seen an appreciation of 10-20%, while in the Gurgaon-Noida region, they remain in check due to huge supply.
In Grade 'A' buildings such as the DLF's Cyber Greens and Unitech Cyber Park, rentals are in the Rs 30-35 per sq ft per month range. In the CBD locations such as Birla House or DLF Centre, lease rates are from Rs 85 to Rs 150 per sq ft per month.
In the retail sector, Mumbai's shopping mall development has shifted almost entirely to the suburbs after the initial spurt in projects like Phoenix Mills and Crossroads. Cheap industrial land is a factor. By end '06, it is expected that there will be around 26 fully-functional malls covering 4.8m sq ft.
In Delhi, though, retailers are opting more for high-street locations as a majority of the mall space is under planning, the Colliers Jardine survey reported. The concentration of malls is mainly seen in Gurgaon, Ghaziabad, Indirapuram, Vaishali and Kausambhi. By end '07, the NCR Region is expected to have as much as 18m sq ft of running shopping malls, the report predicted.
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