Jones Lang LaSalle (JLL) India forays into the retail real estate India market with the company’s tie up with Everstone, one of the leading Private Equity (PE) firms and real estate advisors of India. Both the companies will collaborate in the construction and launch of four shopping malls at four main cities of India namely Vadodara, Kochi, Pune and Ahmedabad. These shopping mall projects are to be finished by 2017 or within a span of five years. Continue reading
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South Indian Real Estate Sector footprint
What a South Mumbai is to Mumbai or a South Delhi is to Delhi could well be South Indian cities to India! The question is – will the southern region become the downtown of India?
Southern India has for long been the silent crusader, building and strengthening its real estate development as one of the most sought after destinations in the country. With improving transparency and visibility of the real estate markets in the South zone, cities such as Bangalore, Chennai and Hyderabad have attained a place on the global real estate map, a status that was limited just to Mumbai and Delhi in the past.
While South Indian cities constitute nearly 45% of the country’s office space, the stock of 140 million sq ft in these cities is projected to grow at a CAGR of 8% for the period 2012 – 2016, lower than the projected national growth of 11%. This implies that the southern cities, particularly Bangalore and Hyderabad, are relatively rationalised in terms of medium term supply of office space, and the cities have chosen a strategy of pursuing selective quality developments over rapid expansion. While this would keep their share in India’s office stock range bound at 37%-40%, the South Zone’s vacancy rate by end-2012 is expected to be 16%, considerably lower than the pan-India vacancy rate of over 20%.
While demand remains healthy for organised retail spaces, it is polarised towards either successful malls or high streets, which have better footfalls and conversion ratio. As the mall stock in the southern cities sum up to breach the 40 million sq ft mark by end-2016, the vacancy by then is expected to witness a notable decline from the peak levels of 2014 to drop below the national average of 20.5%.
South India’s residential market has been an ardent follower of the ‘affordability’ mantra, with more than 80% of the new launches in the past two years being priced under INR 4,000 per sq ft (USD1 812 per sqm). As a result, the residential markets of South Indian cities have remained resilient in the past few quarters, relative to the significant decline recorded in the sales volume of Mumbai and NCR-Delhi.
The focus of Indian real estate is shifting from Tier I to Tier II cities, and the southern region is also embracing the same, with secondary hubs developing in Kochi, Coimbatore, Vishakhapatnam and Mysore, that are persistently striving for higher milestones.
Unitech comes up with Gardens Galleria in Noida.
Unitech, one of the India’s leading integrated developers of large-scale real estate projects, has launched Gardens Galleria in Noida. It is part of Unitech’s existing 147 acres entertainment-cum-retail destination in Noida.
Gardens Galleria, designed by US-based firm Callihon, is spread over 8.36 acres, is strategically positioned adjacent to sector -18, Noida and Film City. It is minutes away from ITO, East Delhi, South Delhi, and Noida Expressway. The project is in the midst of established residential areas, offices, colleges and other commercial towers.
The destination already comprises of an international standard themed amusement park Worlds of Wonder and The Great India Place, a shopping mall. The mall, a combination of entertainment, retail and hospitality, in Noida will comprise of hyper market, departmental stores, international shops, spa, gymnasium, banks, ATMs, food and fun joints. The project comprises 230 retail outlets and there is also parking facility for 8,500 cars. Unitech has already got over 10 lakh patrons a month in its three operational malls the Metro Walk in New Delhi, Great India Place in Noida and Gurgaon Central.
Commenting on the launch, Munish Baldev, head-retail of Unitech said, “We are happy to launch Gardens Galleria in Noida. Unitech has already developed 1.3 million sq ft of mall area in New Delhi, Noida and Gurgaon since 2006, and is developing another 4 million sq ft of retail space in cities such as Kochi, Gurgaon, Bangalore, Lucknow, Mohali, Bhopal, Bhubaneswar, and Dehradun. We have always been bullish about the retail development space and have been developing the shopping malls as per our business plan. We have been getting strong traction from retailers for leasing of the mall-space under development.”
Genesis Luxury, Genesis Lifestyle, French Connection, Nautica, Louis Philippe, Van Heusen, Calvin Klein are among some of the major brands who have their stores in Galleria. The company is also developing another 4 million sq ft of retail space in cities such as Kochi, Bhopal, Bhubaneswar, Bangalore, Dehradun, Mohali, Lucknow, and Gurgaon in the next 4-5 years.
Bangalore is just about office… office.
While demand for residential space was mostly sluggish in 2011, demand for office and retail space remained healthy in Bangalore.
The market for commercial space is estimated at 50 mil sq. ft. across the country. The average yearly absorption rates in Bangalore and NCR are about nine mil sq. ft. While six mil sq. ft. is absorbed in Mumbai, the rates are 4 to 5 mil sq. ft. each in Chennai and Hyderabad.
However, last year, Bangalore topped the list with the highest absorption of more than 13 mil sq. ft. of non-captive office space, about 2 mil sq. ft. more than the levels seen in 2010. About 80% of this came from the IT & ITES sector.
“Consolidation of real estate portfolios by Indian and MNC IT companies has boosted the real estate market in Bangalore,” said Karun Varma, MD (Bangalore and Kochi), and Jones Lang LaSalle India. “Demand for back offices and contact centres has resulted in continued strong growth in suburban real estate development, with IT companies lining up their investments for setting up new facilities in the city,” he added.
Experts predict demand for 16 mil sq. ft. of office space in 2012 in India’s Silicon Valley, which will be the highest ever in the country. This will be mostly due to the new SEZ norms and direct tax code (DTC) that will come into play.
About 75% of the 16 mil sq. ft. office space will be in upcoming SEZ regions. Recently, global investment banking firm Goldman Sachs took up 1 mil sq. ft. of office space developed by Kalyani Developers on the outer ring road. “Companies see an opportunity from a tax break perspective; so, many are planning to migrate their future work to SEZ parks,” said Shrinivas Rao, CEO (Asia Pacific), Vestian Global Workplace Services.
In the next three years, an additional 28.8 mil sq. ft. of office space will be available in the region, for which projects are already under way. “We are expecting to see about 6 to 7 mil sq. ft. of this to come up in 2012,” said Rao.
Renaissance of Realty Sector
In last few months Indian real estate has undergone a reawakening enforced by a noticeable increase in the level of construction activity of low-budget housing coupled with low home loan rates reached an all time low in the last few years.
As researched by Boston Analytics, the Indian realty sector has undergone an increased supply and pace of development activity which brought an improvement in pessimism associated with the realty prices. A low interest rate on home loans driven by Government’s impetus packages have also catalysed the Indian consumers to buy homes.
“Increased supply, improvement in pessimism related to realty sector rates, and low rates of interest on home loans seems to be encouraging Indian consumers to firm up their home purchase decisions” as said by Shirin Bagga, Economist, Boston Analytics.
The data was collected by conducting a monthly survey that targets 10,000 respondents cross 15 Indian cities—Delhi, Mumbai, Hyderabad, Kolkata, Chennai, Bangalore, Chandigarh, Nagpur , Ahmedabad , Kochi, Jaipur, Lucknow, Bhubaneswar, Patna, and Vishakhapatnam.
According to the recent reports the conviction concerned to speed of construction activity conveys more anticipation with regards to observed change in construction activity in Tier II and Tier III cities relative to Tier I cities. The real estate projects which are in different phases of completion in all levels of towns and cities appear to be introducing optimism about the expected change in construction activity among respondents across Tiers,” the report said.
As brought into light by Economic Survey of FY 2009-10, the need of the construction and real estate sector in creation of both financial and physical assets has been amplifying over the years. The construction sector now accounts for 8 percent of GDP at constant prices, hiked from 7.7% in 2004-05.Equivalently, the share of real estate ownership of dwelling and business services in overall GDP as hiked to 9.2 percent in FY 2008-09 from 8.9 percent in 2004-05.