Plan for future in the ongoing correction phase

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: Prashant solomon

Joint Managing Director, Chintels India

For a real estate player it is very important to anticipate market trends to sustain its existence and ensure lucrative Return on Investment (ROI). The slowdown in the US has lead to inflation, which in turn has shot up interest rates and discouraged investments to the extent that small developers are not left with sufficient investments to complete some of their projects. The need of the hour is to be patient and wait for the market conditions to sail through this correction phase. There is a possibility of stability in the fluctuating scenario of the real estate sector.

We should start planning for the future because the best is yet to come. FDI is flowing in and the interest of NRIs towards Indian real estate for commercial and residential property is rising. If we just consider National Capital Region (NCR), we see an expansion in the length, breadth and width of the land mass with the inclusion of places like Manesar, Sonepat etc as a part of the NCR region.

NCR is not just getting bigger but also getting better. There would be a 360-degree development in the so-called New Gurgaon region with upgraded infrastructure in place. Better roads, well-managed water supply etc would be some of the key factors that are expected to be taken care of. Therefore one can be rest assured about connectivity with rest of NCR. So if we say that it’s a correction phase that we are experiencing now, we indicate both economic and infrastructural components. Increasing space crunch in Delhi has in turn opened new horizons for such locations to be developed in way like never before, ensuring more competition and so a better market.

Developers are making the best possible use of this opportunity and soon urbanisation will encompass these areas, the way it touched Gurgaon some years ago. The volume of every city is expanding and the extended part of the city is now eyed in anticipation of the demand for property. Sectors 106, 108, 109 and 114 of Gurgaon will be the key areas for development due to their strategic location, vicinity to the Airport and for all practical purposes being a part of Delhi. The problem of major crunch in office space would be reduced to some extent once this area is developed. The case is similar for places like Mumbai, Hyderabad and Bangalore.

Looking at the broader perspective and after referring to industry data, a huge opportunity in this sector is anticipated in the next 10 years. It will be a gradual process wherein the FDI in real estate sector will increase by $21 billion, according to the latest ASSOCHAM report. The current scenario of demand will also start getting better by the next quarter as suggested by Cushman and Wakefield.

The Q2 report by Cushman and Wakefield, on office space in NCR suggests that the office market will remain firm with rental values except for the IT/ITES segment in Noida and Gurgaon, which is expected to by 3% and 13 % respectively over this quarter. However, the demand for office space in general remains firm. This coupled with the huge increase in FDI over the next decade and the growing economy of the nation augers extremely well for the real estate sector in general and particularly the non IT/ITES office segment.