THE ECONOMY IN 2012..!
2012 was a sluggish year in terms of economic
growth, largely because of high interest rates & poor industrial
production.
Indeed, the index of industrial production rose by
just 0.4 per cent in April to August 2012, as compared to 5.6 per cent in the
same period of 2011. Manufacturing activity, which contributes significantly to
India’s GDP, also took a big hit in 2012. Inflation remained high, impacting
sentiments & investor interest across businesses – including real estate.
RESIDENTIAL REAL ESTATE IN 2012..!
As has been the case in the past, the larger cities
of Mumbai & NCR-Delhi recorded healthy absorption of residential units
during 2012, with a 60 per cent contribution to the overall absorption. Chennai
& Pune were among the other 2 cities that increased their share of
absorption during 2012 to 26 per cent from the 23 per cent recorded a year ago.
At a country level, a total of 1,60,622 residential
units were launched in 2012, as compared to 1,54,701 units for the
corresponding period of 2011.
From the pricing perspective, the average
residential capital values in 2012 appreciated in the range of 1 to 3 per cent
year on year.
Among the top seven cities of India, the capital
value growth in Pune & NCR-Delhi was the highest, while Hyderabad and Bangalore
saw a slower rate of capital value growth. There is still no price correction
on the cards, but the quantum of appreciation definitely reduced significantly
in all the top seven cities of India in 2012.
Although demand showed signs of improvement with
the approach of the festive season, developers are still struggling with rising
inventories & have attempted to sell off their existing stock via
out-of-the-box marketing techniques and pricing mechanisms to attract end users
and investors.
Infrastructure deficit continues to be a key
restraint for the growth of residential markets across India.
Overpricing has been an issue in Pune, Hyderabad
& Kolkata, resulting in a relatively smaller share of absorption from these
cities during 2012.
From a supply perspective, Hyderabad & Kolkata
saw a decline in the number of residential units launched, accounting for less
than 2 per cent respectively of the total in 2012 YTD.
RETAIL REAL ESTATE IN 2012..!
With an operational stock of close to 6.5 crore
square feet during 2012 YTD, the retail mall supply across the top 7 cities of
India slowed considerably as compared to the supply recorded in 2011.
With a drop in supply of over 65 per cent, new
completions in 2012 YTD were at a new low when we consider the trend of the
last 5 years (since 2007).
Barring Hyderabad, all cities recorded completions
during 2012, albeit at a slower pace than witnessed in 2011.
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| Mr. Anuj Puri |
Mumbai, Delhi - NCR, Bangalore & Chennai
together absorbed 81% of the total retail space in 2012. This is significant,
considering their consolidated contribution of 70 per cent in total retail
space absorption in 2011.
Retailers in cities like Delhi - NCR, Mumbai &
Bangalore continued to actively lease space in superior quality malls due to
the limited availability of new space & the low vacancy rates in existing
prime malls.
The total net absorption of retail space across
India projected for 2012 was 44 lakh square feet, led by Delhi - NCR, and
Bangalore (which together absorbed 26 lakh square feet). They were followed by
Mumbai, Pune & Kolkata, where absorption was around 0.8, 0.5 and 0.4
million square feet respectively.
COMMERCIAL REAL ESTATE IN 2012.!
The SBDs (Secondary business districts) of Mumbai,
Bangalore & Pune, followed by CBDs (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 trough levels in the past.
The CBDs of NCR-Delhi, Mumbai, Pune & Hyderabad remained neutral markets because of
negligible vacancies (5 to 10 per cent) as compared to the national average of
19 per cent. Also, these locations saw persistent market stagnation because of
negligible rental growth and lower vibrancy.
The suburban business districts of Delhi - NCR (National Capital Region),
Mumbai, Chennai & Kolkata, which have higher-than-average vacancies,
remained occupier friendly markets. Higher vacancy expectations continues 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 (Multi National Companies) 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 7 (seven) cities, Mumbai & Delhi
- NCR recorded a year on year absorption
drop of about 47 per cent and 26 per
cent 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, Delhi - NCR, Bangalore & Chennai contributed to a
healthy 72.5% 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.
About the author..!
Mr. Anuj Puri is Chairman and Country Head at Jones
Lang LaSalle India
Mr. Anuj Puri Chairman and Country Head, India
+ 91 22 6620 7575
Email: anuj.puri@ap.jll.com
For more details
contact:
Arun Chitnis,
Assistant Vice
President, Marketing
Jones Lang Lasalle
India
Level 6, Amar Avinash
Corporate Plaza
Bund Garden Road,
Pune - 411 001.
Tel: (020) 3093 0441
Fax: (020) 4019 6101
Mob: +91 93227 38464
Website:
www.joneslanglasalle.co.in
Blog:
www.joneslanglasalleblog.com/realestatecompass
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