Delhi NCR Real Estate – Faridabad’s Past Present & Future

Santhosh KumarSanthosh Kumar, CEO – Operations, JLL India

Faridabad began as a pure industrial town, with the majority of employment opportunities emerging from the industrial sector. There is now a gradual shift in trend, and the service sector is now picking up in the area. Faridabad’s improved connectivity with key cities in NCR, primarily Delhi and Noida, has been favourable for its realty market. Lots of new residential developments have come up; importantly, there has been a spurt in new group housing society projects. Here, Omaxe, BPTP, Puri Construction, Eros Group and Ansals are some of the major developers with noticeable presence.

The average ticket size for apartments in Faridabad is around Rs. 3000-4000/sq. ft. In most of the group housing projects, appreciation has been sluggish of late. The annualised appreciation over the last couple of years for housing projects in this region stands at around 8-10%. This is consistent with the overall trend seen in the NCR market, which has been significantly affected by negative economic sentiments, political uncertainty, high inflation and cost of borrowing and the liquidity crisis. The region mainly has affordable housing in low ticket-size projects, with a few luxury projects.

Faridabad is currently an end-user/buyer market. Still among the most affordable markets in the NCR belt, unit prices and apartment sizes available in Faridabad suit the requirements of average households. Going forward, this region’s real estate market is going to witness additional impetus on account of the improved connectivity brought by the KMP Expressway, FNG flyover and the Badarpur flyover.

It can be said that developers have been somewhat over-enthusiastic when it comes to launching projects in Faridabad. In fact, demand for housing in Faridabad has been on the slower side because of the absence of an inherent ‘pull’ factor. Faridabad has, for the longest time, been a small industrial town. Unlike Noida and Gurgaon, it could never create appeal for corporates, so there was little demand for office spaces. Modes of employment other than industries were limited. Also, it is only in recent times that Faridabad’s connectivity with other key areas such as Delhi, Gurgaon and Noida improved.

All these factors resulted in average traction of residential projects launched in the region. Besides this, Faridabad has always been an end-user driven market, and therefore off the radars of investors. This has resulted in limited activity in the real estate market of the region. Many builders operating in Faridabad tend to have limited bandwidth, experience and resources to execute large-scale developments. This has resulted in delays in some of the projects; but then, we have also seen projects by Mahindra and BPTP approaching completion.

The quality of construction in Faridabad’s residential projects has so far been largely mid-grade. Since a majority of the projects are primarily aimed at mid-income consumers, maintaining affordability has been a priority for most developers with projects in this belt. For low-margin budget housing projects, it is inevitable that builders will compromise on construction quality so as to safeguard their margins. Delays in approval, increased interest rates and construction cost take a further toll. That said, the construction quality of most of the projects launched by BPTP and other leading developers is definitely average to above average.

The high incidence of consumer complaints emanating from the region is primarily due to the fact that Faridabad is end-user driven. In such a market, timely delivery of project, allotment of the right units, construction quality and other such issues become critical. There have been delays in delivery of projects by leading developers in Noida and Gurgaon as well. However, these have not drawn much press since the investor interest in those projects was substantial, and investors are usually not very perturbed by such issues.

In an instance that has caused some negativity in the Faridabad market, BPTP – the largest real estate developer in the Faridabad region, with a land-bank of around 1500 acres – has started selling constructed units as well as plots. There have been reported cases of consumers being allotted plots different from the ones they were originally shown. This has impacted the credibility of the project, despite the fact that there are no concerns when it comes to quality of construction and completion timelines for the projects.

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Smart Cities – A Futuristic Vision Of Urbanization In India

Anuj_PuriAnuj Puri, Chairman & Country Head, JLL India

Across the world, the stride of migration from rural urban areas is increasing. By 2050, about 70% of the population will be living in cities, and India is no exception. India will need about 500 new cities to accommodate the rapid influx of population into its urban regions.

Interestingly, urbanization in India has for the longest time been viewed as a by-product of failed regional planning. Though this is inevitable, and will only change when the benefits of urbanization overtake the costs involved, it is an opportunity for achieving faster growth.

With increasing urbanization and the load on the land in rural areas, the Indian government has now realized the need for cities that can cope with the inherent challenges of urban living and also be magnets for investment to catalyse the local economies. The announcement of ‘100 smart cities’ falls in line with this vision.

A ‘smart city’ is an urban region that is highly advanced in terms of overall infrastructure, sustainable real estate, communications and market viability. It is a city with information technology as its principal infrastructure and the very basis for providing essential services to its residents. There are many technological platforms involved, including but not limited to automated sensor networks and data centres. Though this may sound futuristic, it is now likely to become a reality as the ‘smart cities’ movement unfolds in India.

A smart city offers a superior way of life to its denizens, and one wherein economic development and activity is sustainable and rationally incremental by virtue of being based on success-oriented market drivers such as supply and demand. They literally benefit everybody, including denizens, businesses, the government and moreover the environment.

Origins Of The ‘Smart City’ Concept

The concept of smart cities originated at the time when the entire world was facing one of the worst economic crises. In 2008, IBM began work on a ‘smarter cities’ concept as part of its Smarter Planet initiative. By the beginning of 2009, the concept had captivated the imagination of various nations across the globe.

Countries like South Korea, the United Arab Emirates and China began to invest heavily into research and the formation of smart cities. Today, there are a number of excellent precedents that India can emulate for its own smart cities programme:

  • Smart City Vienna in Austria
  • Aarhus Smart City in Denmark
  • Amsterdam Smart City
  • Cairo Smart Village in Egypt
  • Dubai Smart City and Dubai Internet City in the UAE
  • Smart City Lyon in France
  • Smart City Málaga in Spain
  • Malta Smart City
  • The Songdo International Business District near Seoul, South Korea
  • Yokohama Smart City in Japan
  • Verona Smart City in Italy

Smart Cities In India

In India, the cities that have ongoing or proposed smart cities include Kochi in Kerala, Ahmedabad in Gujarat, Aurangabad in Maharashtra, Manesar in Delhi NCR, Khushkera in Rajasthan, Krishnapatnam in Andhra Pradesh, Ponneri in Tamil Nadu and Tumkur in Karnataka. Many of these cities will include special investment regions or special economic zones with modified regulations and tax structures aimed at making is easier and more attractive for foreign companies to invest in them.

This is an essential factor for success for smart cities in India, because much of the funding for these projects will have to come from private developers and from abroad.

Challenges

The smart city concept is not without challenges, especially in a country like India. For instance, the success of such a city depends on its residents, entrepreneurs and visitors to the city becoming actively involved in energy saving and implementation of new technologies. There are many ways to make residential, commercial and public spaces sustainable by ways of technology, but a high percentage of the total energy use is still in the hands of end users and their behaviour. Also, there is the time factor – such cities can potentially take anything between 20-30 years to build.

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Indian Real Estate Welcomes REITs

Anuj_PuriAnuj Puri, Chairman & Country Head, JLL India

With the stamp of approval by SEBI, REITs are finally a formalized concept. This is a big change from the ambiguity and uncertainty that prevailed about this very important instrument in previous years. It is gratifying to note that SEBI fully intends to deliver on its assurances of bringing better and faster funding into Indian real estate.

As the drafts for REITs stands now, further clarity about taxation eligibility norms is definitely required, and will doubtlessly come before the first listing goes up. When this happens, there will be vastly increased interest from foreign investors.

Currently, Grade A office space in the top seven cities of India amounts to around 376 million square feet, and we anticipate that approximately 50% of this space will get listed in next 2–3 years. The valuation of these assets is around $10-12 billion, and this accounts for a fairly massive influx of funding waiting in the wings to hit the Indian real estate market via REITs over the next few years.

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A Magnet For Retail

Tracking Retail Expansion Across Asia Pacific
retail magnet

Sheer market size, in terms of population and economic might, is one of the most compelling drivers for international retailers’ expansion into the Asia Pacific region. The region now accounts for 54% of the world’s population and the number of people will rise to 4.1 billion by 2020. At the same time, Asia Pacific already accounts for 36% of the world economy, and that share is set to rise to 40% by 2020 with forecast growth roughly twice as fast as the rest of the world from now to the end of the decade.

China and Japan are currently the world’s second and third largest economies after the United States. With forecasts for strong economic growth, more countries in Asia Pacific will move up the rankings of the largest economies worldwide. In addition, more city dwellers with rising incomes create huge potential consumer demand.

Between now and 2020, an additional 40 million people per year will be living in cities across Asia Pacific. China and India account for the vast majority of people shifting to cities in the region, although by 2020 urbanisation rates in both countries (China 61% and India 35%) will still remain well below those seen in more developed markets such as Australia (90%) and Japan (95%).

Urbanisation is one of the main drivers of wealth creation across the region. Currently Asia Pacific accounts for one-third of the world’s middle class, and this is projected to increase to 46% by 2020 (The Brookings Institute, 2012). Rising income levels mean that many aspiring consumers can afford to purchase fashion or even luxury items for the first time, while large urban centres make for ideal entry points for retailers.

In this report, we examine the presence and expansion patterns of 100 top international retailers, both luxury and mid-tier, in 30 major cities in Asia Pacific. We identify major trends in key markets across the region, taking into account factors such as retail sales, market size and rental rates. The primary markets in India – Delhi, Mumbai and Bangalore – rank at 25, 25 and 27 respectively. Greater China and North Asia generally have the highest level of retailer presence by sub-region, while Australia and India have the lowest.

The low retailer penetration for India reflecting in this report has several reasons.

Ashutosh Limaye, Head – Research & Real Estate Intelligence Service, JLL India says, “Though rents for baseline retail properties in India are generally affordable, prime retail assets command premium rentals across Indian cities when compared to other cities in the APAC region. Given that the size of consumer spending in Indian cities is still on the threshold of growth when seen in the Asia Pacific context, the break-even period for retailers in this country is discouragingly high. Also, though the average vacancy rate in malls across India is high at 19%, high-grade malls are actually still in short supply. The vacancy rate in the country’s high-grade malls does not exceed 10%. Poor quality malls are contributing towards higher vacancy, while the vacancy level in superior malls is comparable to that of such malls in China. International mid-tier and luxury segment retailers are focused on this category of mall spaces and therefore have a challenging time while entering or expanding their businesses in India.”

The Chinese retail market had experienced an evolutionary process very similar to the one currently being witnessed in India. However, a changing consumer profile and retail market dynamics ensured that demand for retail spaces in China eventually met with the right quality of supply. The time when Indian retail market will match China on the evolutionary ladder and become more attractive to international retailers is still at some point in the future.

In the meantime, these retailers are not without options in India. With the low vacancy in good quality malls, the country’s more prominent high streets offer an attractive alternative to mid-tier and luxury brands that are not averse to paying higher rentals in exchange for superior footfall and conversion rates.

Click here to download the report: A Magnet For Retail 

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Bangalore Property Investment: Focus On Rajaji Nagar

sanjay malhotra bloreSanjay Malhotra, Head – Residential Services (Bangalore) JLL India

Rajaji Nagar is a residential hub in the north-west of Bangalore, situated close to the established areas of Yeswanthpur and Malleswaram. Due to rapid infrastructural development along the Yeswanthpur-Rajajinagar-Malleswaram corridor, this region has witnessed fast residential real estate development over the past decade.

Apart from being a residential hub, Rajaji Nagar boasts of some notable organized Grade-A commercial establishments such as Brigade WTC and Golden Heights. Because of its proximity to the central business districts (CBD), Rajaji Nagar is developing into an ‘extended CBD’ and is being favoured by corporate occupiers who are looking for alternate destinations close to employee catchments.

Rajaji Nagar has adequately-developed social infrastructure with schools, hospitals and hotels available. The general infrastructure is very conducive to modern family life. Social infrastructure facilities are acting as catalysis for residential development in the area. The area has gained additional popularity because of the beautifully-designed ISKCON temple, which is a magnet for international religious travellers.

In general, Rajaji Nagar is replete with attractions for end users as well as investors. The two mega malls in the neighbourhood viz., Mantri Mall and Orion Mall make it a favourable destination for organized retail that is conveniently juxtaposed to major residential catchments.

Rajaji Nagar is located about 5 kms from the Yeswantpur railway station. The area enjoys superlative connectivity to Bangalore’s various business districts. The major connecting roads are Mahakavikuvempu Road and 8th Main Road. The Metro project has enhanced this area’s connectivity to all parts of the city, and the proposed Mono Rail will improve connectivity to Hebbal Outer Ring Road and BIAL. With the proposed Mumbai-Bangalore Industrial Corridor, Rajaji Nagar will benefit from this economic driver and will significantly increase demand for residential, commercial and Retail.

V Raheja, Purvankara, Brigade Group, Phoenix Ltd., Pride Group, Ranka Group and Sobha Developers are some of the notable developers active in this area, with their offering catering mainly to the mid and high-income buyer segment. The residential supply in Rajaji Nagar is more or less geared at employees of Bangalore’s burgeoning IT/ITeS sector.

Rajaji Nagar presents a favourable investment proposition as it has been seeing consistent annualized appreciation to the tune of 12-14%. With prices ranging from Rs. 8500-10,500/sq.ft, residential properties at Rajaji Nagar command a premium over many other localities in Bangalore.

 

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