Real estate market in Gurgaon and Noida is likely to have most of the absorption of real estate in the Delhi NCR real estate market. A report says that rents are expected to increase in certain micro markets by the second half of 2013, as the demand-supply gap of quality office space is expected to increase because of the supply constraints in select precincts of the Delhi NCR.
Also, prices of residential real estate, particularly in the NCR region, are likely to appreciate in 2013, which in turn will attract more buyers to the market.
Another interesting trend observed in the last two years was that the stock in the range of Rs 2,000-3,000 per sq ft was fast sold out. In 2013, this range is likely to shift to Rs 3,000-5,000 per sq ft with the increase in inflation and construction costs.
Year 2012 closed with a few notes of positivity, as the inflation was below the RBI’s projected levels and the Index of Industrial Production (IIP) growth increased in the last two months of the year, giving new hopes for 2013.
Gurgaon continued to be the frontrunner in residential real estate market with the city registering an upswing in terms of capital values and project launches during the year. Year 2012 saw an improvement in demand over 2011 for residential properties in Gurgaon.
In order to cash in on the prevailing demand, developers launched projects mainly in mid-end, high-end and luxury projects. According to a report of Cushman & Wakefield (C&W), the total number of units launched in Gurgaon during 2012 was 22,219 units.
Growth corridors like Dwarka Expressway (also known as Northern Peripheral Road), New Gurgaon (Sectors 81-95), and Golf Course Extension registered a majority of the launches. Amongst the locations, Dwarka Expressway had the highest number of residential project launches followed by New Gurgaon (Sectors 81-95) and Sectors 78 and 79.
The C&W report says that during 2012, capital values registered an average appreciation of 24% over 2011. The highest appreciation in capital values was at Dwarka Expressway, owing to its strategic location — it is in close proximity to Delhi and the IGI Airport, and the forthcoming commercial office spaces in Aerocity.
Capital values appreciated at Golf Course Extension mainly due to steady construction schedule of most properties in the location and no new significant launches. The Southern Periphery Road (SPR) also registered a steady appreciation in capital values in 2012, owing to increased demand in residential projects launched by prominent developers.
Sohna Road registered yearon-year appreciation of around 20% owing to healthy demand for existing and forthcoming residential projects.
While no new project was launched during the year, Golf Course Road also registered significant appreciation, in the range of 20-25%, owing to the forthcoming infrastructural projects. Year 2013 will see developers focusing on delivery of the apartments.
With development of better infrastructure facilities like the rapid Metro and the 16-lane corridor, which would provide connectivity to DLF Cyber City and Golf Course Road, these locations and the neighbourhood are expected to report increased demand resulting in price appreciation.
Steady infusion of supply on Sohna Road, Golf Course Road and Golf Course Extension will keep prices under check. Also, developing locations like Dwarka Expressway, Southern Periphery Road and New Gurgaon will continue to see demand as these locations offer a range of investment options. Further, the allocation of nearly Rs 600 crore in various infrastructural development projects is expected to enhance connectivity and improve civic amenities in the city.
At the same time, the economy is expected to revive, which would boost demand for residential real estate. With the expected moderation in inflation and strengthening policies, Jones Lang LaSalle India has pointed out a few interesting insights for 2013.
In the report, Ashutosh Limaye, the head of Research & Real Estate Intelligence Service, JLL, says: “As per the RBI, the policies will focus towards growth in 2013, although risks of inflation will continue to remain. Interest rates are expected to see a downward correction of 100 to 150 basis points in 2013. The softening of interest rates is expected to reduce the home loan rates, in turn increasing the buying of real estate assets. Increasing urbanization and consumption will be the key drivers of the economy in 2013.”
The recent policy initiatives taken by the government, Limaye says, are expected to improve the investment climate and business environment, and are likely to benefit the real estate sector in 2013. A few policies to look for in 2013 are: the Real Estate Regulation Bill, likely to be tabled in the forthcoming session of Parliament; the Real Estate Investment Trusts (REITs) or Real Estate Mutual Funds (REMFs), expected to be launched in 2013; and the Land Acquisition and Rehabilitation and Resettlement Bill, likely to be tabled in the Budget session in 2013.
REITs, allowing investments in rental housing, is a new trend worth watching in the country. The framework and details of REITs, once formulated, are likely to drive investor demand across prime cities in India in 2013.
Another emerging trend, which is likely help the real estate sector, is the pickup in the investments in the infrastructure sector.
The infrastructure sector achieved a substantial FDI of $2.8 billion, accounting for a notable 7.7% of the total FDI inflow in financial year 2012. In 2013, the relaxation of FDI policies in multibrand retail is expected to boost investment in back-end infrastructure development like logistics. Moreover, FDI of up to 100% is also permitted under the automatic route in built-up infrastructure and is likely to boost the development of the city and the regional-level infrastructure in 2013.
In this scenario, debt capital is likely to increase in 2013. Banks are expected to be more flexible in lending. Most of the realty funds are close to their exit periods, as they were invested around 2006-2007. Therefore, the exit of real estate funds is expected to increase in 2013. Meanwhile, interest on income-producing assets by institutional investors is likely to increase over the year. However, the availability of such assets will continue to remain a challenge. Assets will see a softening of yield rates amidst increased liquidity.
In the retail real estate segment also, the relaxation in FDI policies in multi-brand retail has boosted aggressive growth amongst Indian retailers to take the first-mover advantage.
This is expected to drive demand in 2013. However, as supply of retail malls remains a challenge, retailers are likely to opt for built-tosuit (BTS) options or high street properties. As most developers are focusing on residential developments, the supply of malls will reduce in major cities over the year.
In 2013, retailers will be cautious and take more time to execute agreements, as they will do a detailed analysis before closing transactions. Retailers will commit to space only if they see approvals in place and the construction of the space in progress.
Alok Kumar Upadhayay
Real Estate Professional