By Mr.
Hariharan Ganesan, Jones Lang LaSalle India
In middle 2010,
India’s investment grade real estate that was under construction joined the 100
billion-dollar club.
Under Construction..!
Now, the value of the
investment grade real estate under construction in India is estimated to be USD
17,390 Crore (About 35 per cent more than Vietnam’s nominal GDP) as against the
USD 16,010 Crore figure in 2Q 2011 and USD 10,130 Crore in 2Q 2010.
Following a steep
rise of 58 per cent year on year during 2Q 2011, the past 15 months have seen
the value of these projects grow by a mere 8.6 per cent. Rising input costs in
recent quarters & lackluster macro-economic sentiment have led to
relatively fewer new construction launches in the sector when compared to 2010.
Between then and now,
the country’s real estate market has traversed from a great deal of positivity
to uncertainty.
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Hariharan Ganesan
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With 2012 nearly
through, it hard to deny that it has been a forgettable year for the Indian
realty market.
Commercial Real
Estate..!
The market value of
the commercial (office & retail) real estate under construction is USD 41.6
billion. The commercial office space that is under development contributes
approximately 78% to the estimated market value of the commercial sector.
The nominal decrease
in supply, which was offset by a marginal rise in capital values, caused the
share of the market value of commercial assets under construction to remain
range bound to the figures estimated in 2010 & 2011.
As the number of
malls that were under development dropped &
the size of malls increased, compared to 2 Q 2011, the market value of
retail assets under construction remained unaltered during 3 Q2 012.
The Tier I cities of
Mumbai, Delhi - NCR and Bangalore contribute about 67 per cent to the market
value of the commercial office space under construction, while the Tier II
cities of Chennai, Pune, Hyderabad and Kolkata contribute nearly 17 per cent.
Other
investment-grade developments in Tier III cities contribute nearly 16 per cent
to today’s Pan-India market value.
With infrastructure
developments and relatively lower real estate costs, the share of the market
value of Tier III cities grew from 9 per cent in 2 Q 2010 to 16 per cent
presently. While Tier I cities have contributed nearly 58 per cent of the
commercial retail space that is under development, Tier II and Tier III cities
supplied about 27 per cent and 15 per cent, respectively.
Due to the increased
construction activity & rapid recovery of property prices since their
trough levels in middle 2009, the contribution of the residential property
sector has grown.
Residential Real
Estate ..!
The market value of
residential real estate under construction increased from 66 per cent in 2 Q
2010 to 76 per cent in 3 Q 2012, touching USD 13,230 crore – nearly double the
levels seen in 2 Q 2010.
While Delhi - NCR has the largest volume of residential
properties currently being developed, Mumbai contributes a larger share to the
market value. Aided by its self-liquidating nature and the high demand for
housing in India, the resilient residential sector has been the focus of
developers & investors.
Estimating Market
Value..!
The market value
& costs of development have been estimated using the prevalent property
prices & costs of construction, while considering various asset classes
& geographical locations.
Only investment grade
office, retail & residential projects have been considered in estimating
the market or / investment value of real estate under development.
Projects have been
considered if they have broken ground. But, have not acquired tenants. Proposed
projects that have not begun construction have not been considered in this
study.
About the author..!
Mr. Hariharan Ganesan
is AVP – Research and Real Estate
Intelligence Service at Jones Lang LaSalle India
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