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To build or not to build...
Anil Urs | January 07, 2006
Confused about whether property prices are going to boom, stagnate or go bust? Join millions of Indians who think it's a great investment but are unsure whether they should buy now, or later or, for that matter, sell now, or later.
One thing is sure, though - real estate in the next five years will primarily be driven by the retail, logistics and warehousing sectors. Currently, this sector is fuelled by the knowledge sector - IT, BPO and call centers - according to Manisha Grover of Jones Lang Lasalle, an international real estate consultancy company.
The government allowing private players to build and operate special economic zones and take up the modernisation of key airports is likely to see more multinational companies setting base in India. Residential real estate is going to be driven by an aspiring middle class, and the average age of house owning is likely to come down to 25-35 years.
Mumbai: The city will get more financial and legal offices in addition to being one of the country's key export gateways. In the short term, the city is likely to witness a shortage of office space and a further 10-15 per cent increase in capital and rental values over the next couple of quarters across micro-precincts.
Bangalore: With the international airport coming up at Devanahalli, the property market in the north of the city is likely to witness hectic activity and this is likely to industrialise the districts of Kolar, Tumkur and Hassan.
Over the next five years, Mysore is likely to come closer to Bangalore through a doubling of the railway tracks, the construction of an expressway, and more townships coming up between the two cities.
Based on the current latent demand in the market, it seems likely that the first half of 2006 will witness fresh lease commitments in excess of 3 million sq ft with strong activity build-up in the first two quarters. According to a Cushman and Wakefield report, 2006 may witness total lease commitments in the region of 5.5-6 million sq ft.
Hyderabad: Hyderabad is increasingly being recognised as the next hub of technology sector activity, mainly due to its low cost of living and ability to draw quality talent from other locations. The current market may rise to an overall absorption of 3.5-4 million sq ft. However, the supply constraint could negate this.
Chennai: The success of Ford and Hyundai is likely to lead other global auto-majors to look at the city to set up base. The city also has an abundance of technical manpower and has seen major multinationals set up centres. In the short term, IT and ITES sectors will continue to drive the market. Commercial office space supply is currently lagging behind demand and this imbalance is likely to remain for a short while.
NCR (Delhi, Noida and Gurgaon) region: The Metro will play a major role in defining the demand and prices along the proposed routes to be commissioned in the next few years. Acording to a Cushman and Wakefield estimate, the demand will remain buoyant over the entire year.
However, supply of approximately 7.63 million sq ft, projected across Delhi, Noida and Gurgaon in 2006, is expected to keep rental and capital values under check. Demand will be driven primarily by BPO, KPO, IT/ITES and the corporate sector engaged in banking, insurance, pharmaceuticals, telecom and media companies. The R&D sector in the field of bio-technology and the manufacturing industry also look to be promising drivers.
Kolkata: Kolkata is increasingly getting noticed because of low cost availability of talent and low attrition rates. The state has a stable power supply situation and a proactive state government taking initiatives to promote IT & ITES sector. Improving quality of real estate supply due to entry of reputed national developers and a few proactive local developers will further fuel the growth of this city.
Pune: Pune is getting noticed for its availability of talented professionals at relatively low costs. The city's proximity to Mumbai is drawing attention from companies located in the south.