The Year 2012 is about to be over now and with the same will be over a sluggish year that was being expected to bring some positive reforms in Indian Real Estate Market.
Indian Real Estate Market had a lot of expectations from year 2012 but all turned down because of government policies, high interest rates and high inflation. Same as year 2011, Infrastructure deficit continued to be a key restraint for the growth of residential markets across India this year too. All this significantly impacted real estate investors’ interest. There is no doubt that the index of industrial production rose by 0.4 percent in April 2012-August 2012 as compared to that of 2011, which was 5.6 Percent in the same period.
RESIDENTIAL REAL ESTATE MARKET OF INDIA IN 2012 – A REVIEW
The residential real estate market of two major cities of India, Mumbai and Delhi-NCR recorded healthy absorption of residential units during year 2012. In overall absorption of residential units in Indian Real Estate Market, these cities contributed 60 percent of the total absorption.
With the increased absorption of 26 percent in 2012, as compared to 23 percent of 2011, Chennai and Pune were other major contributors with their share of absorption of residential units.
According to the data available online, a total of 160,622 residential units were launched in Indian property market in 2012, as compared to 154,701 units for the corresponding period of 2011. However, from the supply perspective, Hyderabad and Kolkata saw a decline in the number of residential units launched, accounting for less than 2 percent respectively of the total in 2012.
From the pricing perspective, the capital value growth in Pune and NCR-Delhi real estate market was the highest among the 7 major cities of India. On the contrary, Hyderabad Real Estate Market and Bangalore property market witnessed comparatively slower rate of growth in capital value. Overpricing has also been a major issue in Pune, Hyderabad and Kolkata, resulting in a relatively smaller share of absorption from these cities during 2012. However the residential capital values in 2012 appreciated in the range of 1-3 percent at an average rate y-o-y.
With the approach of the festive season, the demand showed signs of improvement but the real estate developers are still struggling with rising inventories. The real estate developers have used out-of-the-box marketing techniques like celebrity endorsement, premium tower for selected customers, pay after possession scheme and so many other pricing mechanisms to attract end users and investors in order to sell off their existing stock of residential units.
COMMERCIAL REAL ESTATE MARKET OF INDIA IN 2012 – A REVIEW
The secondary business districts of Mumbai, Bangalore and Pune, followed by central business districts of Bangalore and Gachibowli in Hyderabad, began emerging as landlord markets. This is primarily because these areas have a lower-than-average vacancy levels from a national perspective, and also because of the relatively higher rental value change in these submarkets as compared to the corresponding through levels in the past.
The CBDs of NCR-Delhi, Mumbai, Pune and Hyderabad remained neutral markets because of negligible vacancies (5-10 percent) as compared to the national average of 19 percent. Also, these locations saw persistent market stagnation because of negligible rental growth and lower vibrancy. The suburban business districts of NCR-Delhi, Mumbai, Chennai and Kolkata, which have higher-than-average vacancies, remained occupier friendly markets. Higher vacancy expectations continue to exert short-term pressure on their rental value growth.
In 2012, the cautious occupier sentiment that resulted from the on-going global uncertainties was one of the key reasons behind slow commercial property leasing activity in the major cities of India.
With domestic office occupiers going slow on expansion, MNC occupiers have been delaying deal closures as they have to go through multiple levels of approvals to execute expansion plans amid sustained cost pressures.
Among the top seven cities, Mumbai and NCR-Delhi recorded a y-o-y absorption drop of around 47 percent and 26 percent respectively during 2012. 2012 was defined by a notable decline in absorption of office space across most of the cities in India from the 2011 levels. However, the larger cities of Mumbai, NCR-Delhi, Bangalore and Chennai contributed to a healthy 72.5 percent of the country’s net absorption of commercial real estate. In fact, the share of pre-commitments to absorption in 2012 was more than recorded during the previous year.
RETAIL REAL ESTATE MARKET IN 2012 : A REVIEW
With an operational stock of close to 65 million sft during 2012 YTD, the retail mall supply across the top seven cities of India slowed as compared to the supply recorded in 2011.
With a drop in supply of over 65 percent, new completions in 2012YTD were at a new low when we consider the trend of the past five years (since 2007). Barring Hyderabad, all cities recorded completions during 2012, albeit at a slower pace than witnessed in 2011.
Mumbai, NCR-Delhi, Bangalore and Chennai together absorbed 81 percent of the total retail space in 2012. This is significant, considering their consolidated contribution of 70 percent in total retail space absorption in 2011.
Retailers in cities like NCRDelhi, Mumbai and Bangalore continued to lease space in superior quality malls due to the limited availability of new space and the low vacancy rates in existing prime malls. The total net absorption of retail space across India projected for 2012 was 4.4 million square feet, led by NCRDelhi and Bangalore (which together absorbed 2.6 million sft). They were followed by Mumbai, Pune and Kolkata, where absorption was around 0.8, 0.5 and 0.4 million square feet respectively.
Source – JLL
Alok Kumar Upadhayay
Real Estate Professional