House prices have flared up in Delhi and Mumbai since the beginning of the year. And after remaining stagnant for the past year, commercial rents are up in these cities.
Prices at a residential park being built by Mahindra-Gesco Properties in Gurgaon have almost doubled from Rs 1,400 per sq ft in January to Rs 2,600 now. DLF's Trinity Towers has seen a jump from Rs 1,200 to Rs 2,000 per sq ft during the period.
Houses in prime Delhi locations like Prithviraj Road, Aurangzeb Road, Chankayapuri, Golf Links, Jor Bagh, Shanti Niketan and Vasant Vihar are 10-15 per cent costlier than six months ago, but Cushman & Weikfield says prices will keep climbing.
In Mumbai, apartments in Powai and Goregaon are 50 per cent costlier than six months ago, with prices rising to Rs 2,700 per sq ft. House prices in central suburbs like Mulund have also climbed from Rs 1,800 to Rs 3,000 per sq ft. Apartment prices in Bandra, Kandivli and Borivli have risen from Rs 3,000 per sq ft to Rs 4,000.
"There is a revival of investor interest. As 80 per cent of most residential projects are booked before construction, the recent rise in demand has pushed prices up considerably," said Anurag Munshi, associate director of Jones Lang Lasalle, a real estate consultancy.
The glut in the market has been sucked out. Developers like Ansal Properties & Industries and DLF said house prices would keep climbing because demand was much higher than the national supply of 7
In contrast, commercial property prices have inched up 1-2 per cent over the last six months. But Jones Lang Lasalle pointed out that commercial property rents in Delhi, Mumbai and Bangalore were up 10 per cent in the last three months.
Decreasing vacancy and rising demand for Grade A space in the central business districts are pushing rents higher. In Delhi, buildings like DLF Centre, Meridien Commercial Tower and Birla House are quoting rents in the range of Rs 120-140 per sq ft.
The demand for upcoming office space was strong in May 2004 with 219,000 sq ft being absorbed across all Delhi's business districts, of which Gurgaon accounted for 94 per cent. Around 1.8 million sq ft office space is coming up in Gurgaon by the fourth quarter of 2005.
The trend is replicated in Mumbai where buildings like Maker Chambers VI are quoting 10 per cent higher rents in May 2004 at Rs 140 per sq ft than at the beginning of the year. With office stock static and steady demand, rents are expected to rise in Grade A buildings in the central business district.
In Bangalore, rents in the central business district are up 5 per cent from the beginning of the year and are likely to climb on continuing demand from multinational corporations.
The secondary and peripheral business districts are also expected to see a flurry of leases.