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Source: Jones Lang LaSalle

High potential meets uncertainty in Gurgaon realty

As the city of Gurgaon grew and expanded its boundaries, newer areas needed to be brought under the development umbrella.

High potential meets uncertainty in Gurgaon realty

As the city of Gurgaon grew and expanded its boundaries, newer areas needed to be brought under the development umbrella. The new upcoming sectors in Gurgaon encompass the region surrounding the under-construction Dwarka-Gurgaon Expressway (also called the Northern Peripheral Road). Most of these sectors are approved for group housing projects, with a handful of commercial projects also approved for development.

The Next Development Hub


 The two main clusters are along the upcoming Dwarka-Gurgaon Expressway in New Gurgaon's Sectors 102 to 113 and Sectors 76 to 95 along the NH-8 connecting Gurgaon to Manesar. Both these clusters were predominantly marketed as affordable and mid-income housing catchments. A host of projects were launched in these locations over 2009 and 2010. The peak of these areas' popularity was in mid-2010; however, as with most developments, a generic price rise of between 15-20% dampened demand with price-sensitive buyers.

 Though still favoured by budget home seekers, these areas have also seen recent launches in the premium segment by bigger developers like Sobha, ATS and Puri Constructions. This phenomenon has attracted HNI buyers and investors who are looking for capital appreciation opportunities. In comparison to projects in the Dwarka-Gurgaon Expressway precinct, the developments along the NH-8 ' spanning sectors 76 to 95 ' are selling at lower price points. Connectivity to these areas is expected to improve further with the development of the Northern Peripheral Road and the arterial sector roads.

 Sector-114, which lies near the upcoming Dwarka Expressway, is designated for commercial use. Due to its proximity to Delhi and the airport, commercial development here is expected to witness good demand levels. However, the demand for commercial office space would depend on the completion of the Dwarka Expressway, the internal sector roads and other infrastructure improvements. Currently, connectivity is through a 24-meter sector road.

 Demand for commercial office properties in this part of Gurgaon is likely to pick up over the next 3-5 years, when certain projects will show visible signs of construction progress and this will provide a clearer vision of the completion timelines for the Dwarka Expressway. Apart from its proximity to the airport, this region will also benefit from the planned Metro connectivity, which will further fuel demand for office space.

 However, the, bottom line remains that only complete clarity on the timelines for the infrastructure developments in this part of New Gurgaon will finally boost commercial office space demand in this sector. Its proximity to Delhi and the development of the Expressway and the Metro will definitely prove advantageous to this sector over the medium to long term.
 
 Most of residential demand for mid-segment housing is concentrated around the upcoming residential corridors around the Northern Peripheral Road and other sectors around NH-8. Prices in these projects have appreciated steadily over the second half of 2010 and the whole of 2011. This is an indicator of the healthy demand in these clusters.

 The Southern Peripheral Road is close to the established residential corridor of Sohna Road. A host of residential projects have been launched here by Unitech, Tata Housing, Today's Group, BPTP and Tulip, among others. Residential prices on the Southern Peripheral Road are closer to those of projects on Sohna Road and vary between Rs. 4600-7200/sq.ft. Both these upcoming residential corridors in Gurgaon offer a host of options by reputed developers, at and prices which allow for a potential capital appreciation.

 Struggling With Challenges

 On a more somber note, a lot of the proposed infrastructure in these clusters is still being put in place. For instance, the Southern Periphery Road and the last stretch between Sohna Road and the NH-8 are still incomplete. No clue is yet available on the issue that is delaying the completion. The contract for the Dwarka Expressway has been awarded to Indiabulls, and construction is slated to finish over the next 12-16 months. The concern going forward is two-fold:

1.     The support infrastructure ' specifically the arterial and sector roads, traffic management, civic services, etc.

2.     The developers' ability to finish their projects, adhere to schedule and delivery quality


Also still to be demonstrated is the ability of the civic authorities to create and maintain infrastructure which will be able to sustain the pressure of a sizable addition to the population over the next 4-5 years.

 '         Physical infrastructure like roads, power and sewage disposal are developing at a slower pace than what working at optimum capacity would deliver.

'         The road infrastructure, in particular, has struggled to cope with the increase in vehicular traffic.

'         The sector roads in upcoming clusters need to be fast-tracked (the current state of existing roads does not inspire much confidence)

'         Gurgaon has been plagued with inadequate power generation; with power requirements increasing rapidly, concrete steps need to be taken in this regard.

 

In short, infrastructure development in Gurgaon has definitely not kept pace with the speed of real estate development. The Millennium City is already challenged in providing the right quality of life to its citizens, and the upcoming developments there are going to exert further pressure even as capacity building remains at sub-par levels.


Rohan Sharma, Manager ' Research & Real Estate Intelligence Service, Jones Lang LaSalle India

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