For investment in commercial property in India, Mumbai Real Estate Market has emerged as most attractive destination in recent months. Delhi NCR property market has slipped in the list due to over supply of Office Space and thus is not likely to give high returns to investors, according to a report by Knight Frank, a global real estate consultancy firm.
However the property market of Delhi NCR will not loose it position as biggest suppliers of office space in Indian Real Estate Market, despite of the current market scenarios. The report has taken into consideration the economic growth as a factor while forecasting the returns from investment in commercial property in Indian real estate market. According to report, as the economy is likely to revive in coming years, the demand of office space in Delhi and Mumbai property market will increase.
Delhi NCR realty market has a total stock of 110 million sq. ft., in terms of office space, out of which 88 million sq.ft. is already occupied and around 45 million sq.ft. will be added over next five years, says the report. It means, about 50 percent of total existing commercial space is about to be added in next five years. Also, the occupancy is being expected to stabilize at 18.8% by 2017, before that vacancy level will peak during these years, says report. It means around 38 million sq ft of additional office space will be absorbed by the market by 2017. Around 2.5 million new jobs will be created in the NCR region, as a corollary to this, a the report said. Thus a huge demand for residential real estate can be easily expected. Therefore, investments in residential property in the NCR are likely to give high returns in the future.
Returns from investment in commercial properties in the NCR, the report said, will fetch one of the lowest — between 10% and 11%. While the Peripheral Business Districts (PBD) of Noida and Gurgaon will give a return of 11% per annum, while the CBD and SBD in Delhi would fetch returns of around 10%.
Micromarkets like Connaught Place, Nehru Place, Saket, Jasola, and Bhikaji Cama Place in Delhi will give subdued returns, around 10%. Samantak Das, Knight Frank India’s chief economist and director (research and advisory services), said that the rentals in the CBD and SBD of Delhi are not likely to appreciate very sharply due to abundant supply of high quality space in the peripheral business district of Gurgaon and Noida.
In the NCR region, the peripheral business districts of Gurgaon, Noida, and Greater Noida are likely to give returns of around 11%. In prime areas like MG Road, NH-8, Golf Course Road, and Golf Course Extension Road rentals are likely to increase by around 25% — to Rs 106-137 per sq ft per month by 2017, against current levels of Rs 85-110 per sq ft per month. During the same period, the capital values are likely to appreciate to Rs 19,550-25,300 per sq ft, from Rs 13,600-17,600 per sq ft. In Noida, similarly, rentals are likely to increase by 13% — to Rs 51-62 per sq ft per month by 2017, from the present rentals in the range of Rs 45-55 per sq ft per month. In the next five years, capital values in Noida are likely to appreciate to Rs 7,650-9,350 per sq ft from the current levels of Rs 6,000-7,350 per sq ft.
In Connaught Place, the report said, rentals are likely to increase by 13% — to Rs 272-294 per sq ft per month from Rs 240-260 per sq ft per month. In the next five years, the report suggested that capital values are likely to increase to Rs 35,000-37,900 per sq ft from the current levels of Rs 30,000-35,000 per sq ft. The net return on investment in the Delhi CBD is around 10%, the report said.
According to the report, Central Mumbai, on the other hand, emerged as the most attractive investment destination in the country for office properties with 19% net annual return, as prices are expected to rise 63% — and rentals by 47% — over five years.
“At 19% per annum return, Mumbai’s central district, which comprises Parel, Lower Parel, Dadar, and Prabhadevi will yield the best investment return in the country,” Samantak Das said.
Mumbai’s (SBD-West) will give a return of 15%. Availability of talent, conducive business environment, international air connectivity, and presence of prominent stock and commodity exchanges along with the presence of the headquarters of several banks form the backbone of the financial industry in Mumbai, the consultant noted. India’s financial capital’s office space has seen highest occupancy of 26% by the banking, financial services and insurance (BFSI) sector, followed by IT/ITeS segment, at 25%.
Source – Knight Frank & TOI
Alok Kumar Upadhayay