By Accommodation Times News Service
Population migration to the capital is the major driver for real estate development in the region around New Delhi which is the hub of bureaucratic power as well as the commercial centre of North India. Employment opportunities in the government sector as well as development of various trading and service industries have given a big boost to the economy and population migration to the capital. Saturation of office space in Delhi as well as need for additional room to accommodate the growing population led to the development of the National Capital Region (NCR) which is spread over total area of around 34144 square kilometers and consists of the National Capital Territory (NCT) of Delhi along with select urban areas from the neighboring states of Haryana, Uttar Pradesh and Rajasthan.
Out of the various regions of NCR, Gurgaon in the south and Noida and Greater Noida in the east have emerged as the key micro-markets. Proximity to Delhi, availability of large land parcels, access to talent pool and enhanced connectivity by means of road and metro network have made these satellite towns preferred destinations for corporates to set up their offices, driving the real estate activity in these regions.
The Gurgaon micro market can be subdivided into Golf Course Road, Golf Course Road Extension, Sohna Road, Dwarka Expressway and New Gurgaon regions. The Golf Course Road and Sohna road markets are developed markets with product profile in mid to luxury segment, the other micro markets of Dwarka expressway, New Gurgaon and Golf Course Extension are still in developing stage. The Gurgaon micro market is also witnessing major infrastructure developments like development of Rapid Metro phase II, KMP expressway, Dwarka expressway, extension of metro line from Dwarka sector 21 to New Gurgaon region, etc which are expected to create a positive impact on the overall market scenario. Although there have been significant delays in completion of most of these infrastructure projects, the real estate market is expected to reap significant benefits post completion of these projects. Thus while price affordability relative to Delhi, proximity to Delhi and employment opportunities remain the major drivers, the overall development of the social and physical infrastructure in Gurgaon will remain a key determinant of future growth. According to Mr. Rohit Inamdar, Senior Vice President, ICRA, “Following the weak macro-economic scenario resulting in subdued real estate demand and rising cost structure, both developers and buyers are taking a cautious approach. As per ICRA research, golf course road extension and new Gurgaon have remained the most active micro markets in Gurgaon witnessing maximum launches. The total area under development in the Gurgaon market stood at 66.11 million square feet (sqft) as on March 2014 end. Of the total area, about 40.7% was in the New Gurgaon region followed by 31.6% million sqft in the Golf Course Road Extension region. ICRA Research also estimates total unsold inventory in Gurgaon at 18.82 million sqft with 63% unsold inventory being in the Golf course road extension and New Gurgaon; commensurate with the surge in supply in these two regions in the backdrop of slowdown in real estate demand. . We believe in the near term, improvement in sales velocity will take precedence over new launches”
New Okhla Industrial Development Authority (NOIDA) is part of Uttar Pradesh sub region and was established in 1976 to be developed as an industrial township. Over the years, this micro market has emerged as a major hub for IT and manufacturing industries leading to increased population and work force participation, thus serving as a demand driver for real estate activity. With migration to the satellite town of Noida exceeding the planned estimates, development extended to new regions of Greater Noida, Greater Noida West and Yamuna expressway. While the Noida and Greater Noida markets are largely mature markets with limited new launches in the recent past, Greater Noida West and Yamuna expressway have seen flurry of real estate activity. While developed infrastructure is one of the key drivers for real estate development in Noida and Greater Noida region etc, protests by farmers and land acquisition issues have been a major dampening factor in the past. However with the same now being resolved to a major extent, construction work has picked up pace. Further Mr. Rohit Inamdar added, “Limited fresh launches and stable demand are expected to result in some price appreciation for the Noida and Greater Noida micro markets. On the other hand, micro markets of Greater Noida West and Yamuna expressway which have witnessed several new launches from the second half of 2012 are showing appreciation of capital values, indicating renewed interest in these markets. Like in Gurgaon, completion of planned and ongoing physical and social infrastructure facilities will remain the key determining factors for the region”
On the regulatory front, approval of land pooling policy by Delhi Development Authority (DDA) is expected to unlock significant portion of land for residential and commercial development. The increased supply in Delhi could have adverse impact on the real estate demand in the micro markets of Gurgaon and Noida, although other factors like circle rates, infrastructure facilities will also play an important role. Further approval for establishing real estate investment trusts(REITs) by SEBI would enable retail as well as institutional investors to channelize their investments into India’s realty sector bringing in the much needed liquidity. The Union Budget 2014-15 also brings in various positives for the sector such as reduction of FDI eligibility threshold, allocation of funds for development of smart cities and more focus on development of Public Private Partnership(PPP) and SEZ projects. However tight monetary policy and weak economic growth is expected to keep the demand subdued in the medium term. Profitability of developers to remain under pressure as cost inflation remains stubbornly high leading to rise in cost of key inputs like steel and cement. Further funding avenues are expected to remain scare with tightening of lending norms by banks and reduced inflows from other sources such as private equity investments.