by Mr.
Ashutosh Limaye, Jones Lang LaSalle India
Mining
Opportunities From The Complex Real Estate Terrain of India..
Executive
Summary..!
Real
estate is an asset class that demands specialised skills and the complexity
surrounding this sector increases in the Indian context. Compared to the mature
real estate markets in the developed nations, buyers in India need a higher
degree of diligence before entering into property agreements.
Issues
pertain to ownership rights of the property, understanding the difference
between usable area & saleable area in absence of standardised definitions,
completion of the project and receipt of the completion certificate and so on.
Further,
when evaluating multiple investment opportunities, the absence of industry
standards in developer ratings, building structure comparison, price
distinction across different projects & other factors create difficulties
in arriving at a direct comparative approach.
In brief,
information asymmetries and laxity in disclosure norms need to be addressed for
the sector to achieve optimum potential in development and investments.
Amidst
these complexities, real estate sector in India has displayed volatility in the
past decade. Prior to the Global Financial Crisis (GFC) in 2008, the
macroeconomic scenario was extremely robust leading all indicators northwards;
be it property prices or space absorption.
However,
the period coinciding with the GFC and post - GFC absorption levels &
property prices showed a marked correction across all major real estate markets
in India.
 |
| Ashutosh Limaye |
The
recovery led by the residential sector, was also startlingly quick, with
property prices recovering lost ground.
However,
the demand levels have shown only a gradual recovery in the office sector. A
combination of piling up unsold residential inventory due to decline in
absorption rate in post - GFC and rising construction costs are causing
difficulties for the developers.
In such a
scenario, returns through capital appreciation aside, security of the invested
capital has become a big priority. Therefore the investors, end users and
buyers face the pertinent question - Where to invest?
With this
report, we seek to provide the answer to the above question to a certain
extent. In this report, we highlight a few investment hotspots across India.
At Jones
Lang LaSalle, a location / submarket is categorised as a hotspot in a city when
it is emerging as a self-sustained ecosystem with development at all levels.
A
location focused on residential segment & low / no commercial &
entertainment options is not likely to sustain for a long time. Similarly, a
commercial hub with low / no residential development is likely to cause
problems for the employees who may seek for alternate residential districts in
the vicinity, which can reduce the commuting time to work and therefore is not
sustainable.
In
addition to the overall real estate development, infrastructure also plays a
pivotal role in developing a location. Poor infrastructure or delayed
infrastructural developments can eventually reduce the investment potential of
the location.
Though
all-round development requires considerable time, it lends maturity to the real
estate market in the location while ensuring that price growth is sustained
over a longer time period.
To put
the above in context of individual Indian cities and specific locations, Powai
in Mumbai, which has emerged as a well-developed suburb, has seen a steady
increase in prices across all asset classes.
As
against this, there have been a few locations where speculative activity
resulted in increased price volatility which was later marked down considerably
when real activity on ground failed to take off.
Kharghar,
a suburban location near Mumbai witnessed such a trend in a relatively short
time span. With the intent of developing it as a luxury residential hub, the
local authorities announced various projects including a golf course & a
Millennium Business Park. Infrastructure initiatives also attracted investment
by developers & investors in this location which initially resulted in a
sharp price uptick.
Prices
rose further when another round of rise in prices occurred when the
international airport was announced near Ulwe, an area adjacent to Kharghar.
However, with physical activity at a standstill and airport development slowing
down, investor activity has seen a decline which in turn has led to a price
correction.
Considering
all aspects, we have identified eight submarkets as investment hotspots across
the top 7 cities in India. Notable absentees in our selection are the prime
business districts as they have achieved near saturation levels in terms of
development & hence are not expected to either support meaningful price
increments or / they do not provide a large selection of investable assets.
We have
intended to select destinations which are classified as either emerging or /
growing submarkets and are likely to be well-supported by excellent
infrastructural development.
According
to our assessment, these locations offer a large bouquet of investable options
in real estate with their relative lower price levels providing the incentives
for future capital appreciation & healthy returns.
The
locations are:
a Noida & Greater Noida
- National Capital Region (NCR)
a Thane - Mumbai
Metropolitan Region ( MMR)
a Navi Mumbai - Mumbai
Metropolitan Region ( MMR)
a Whitefield - Bangalore
a Viman Nagar and Nagar
Road - Pune
a Gachibowli - Hyderabad
a Rajarhat - Kolkata
While
these submarkets offer good investment opportunities, property price
appreciation is likely to vary depending upon endemic risks associated with the
particular submarkets & their precincts.
Further,
within the submarkets, discounts on property prices vary depending on developer
profile, asset class and current construction status of the project and we
would advise buyers to consider every option based on their risk appetite.
About the
Author..!
Mr.
Ashutosh Limaye is (Head – Research & REIS) at Jones Lang LaSalle India
| Ashutosh Limaye |
| Head Research & REIS |
| +91 22 6620 7575 |
| ashutosh.limaye@ap.jll.com |
Please click here to download the report Emerging Investment Hotspots - Mining Opportunities From The Complex Real Estate Terrain of India in Word format
For Media Contact..
Arun
Chitnis,
Head –
Corporate Communications & Media Relations
Jones
Lang Lasalle India, Level 6, Amar
Avinash Corporate Plaza
Bund
Garden Road, Pune - 411 001.
Tele
phone: 020 - 3093 0441 Fax: 020 - 4019
6101
Mob: +91
96571 29999
Website:
www.joneslanglasalle.co.in
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