Can Samsung’s Noida plant replicate the Maruti effect in Gurgaon?

The twin cities of Noida and Greater Noida already house over 50 mobile units that include Vivo, Oppo, and Xiaomi. Oppo has a manufacturing unit in Noida and is setting up a second plant in Greater Noida with a capacity to produce 10 million handsets a year. What the setting up of the Samsung facility is expected to do is to create jobs in the region. The industrial region of Delhi-NCR is expected to see an investment of Rs 10,000 crore and generate employment for over three lakh people. With Samsung being the latest entrant, the region will become the mobile phone hub of the world, say experts.

Impact on residential and commercial demand

What has happened in this case is that a big player has cashed on economies of scale by setting up a new facility in Noida. The Noida-Greater Noida belt is a value-for-money location and as the Jewar airport draws closer to being operational, this will prove a healthy growth proposition.

“Currently, companies are not relocating from Gurgaon to Noida. Only those planning to expand or set up large sized campuses are looking at Noida and Greater Noida seriously. That’s also to do with the availability of better infrastructure than Gurgaon, especially the upcoming Metro corridor that is expected to improve connectivity and the Jewar airport connected through the Yamuna Expressway,” says Anckur Srivasttava of GenReal Advisers.

The Noida market has historically been the preference of cost-conscious backend IT companies looking for affordable rents and excellent connectivity with Delhi. Notwithstanding the traditional image, the city is also gearing up to host a plethora of MNCs in coming years. A healthy supply of 13 million sq ft is currently under various stages of construction across Noida. Out of this upcoming supply, about 62 percent of projects are in the form of commercial assets. With an increasing supply of Grade A buildings we expect this market to evolve into a more diverse commercial office hub in the future, says Sanjay Chatrath, Executive Director (NCR) Colliers International India.

This is a positive development for the Noida-Greater Noida micro market. The most positive impact will be on job creation, which in turn will create housing demand, retail demand and indirect demand for social infrastructure. The Samsung plant will be located in Sector 81. So, this sector and its immediate neighbourhood would be the biggest beneficiaries. Prices and rents depend on several factors of demand-supply dynamics and thus one singular factor should not be seen as the only influencer. However, such a big setup is bound to be a demand driver and if supply remains constant, logically, we shall see off take of ready space first, and subsequently, a possibility of a rise in prices, says Ramesh Nair, CEO & Country Head, JLL India.

Not to replicate the Maruti effect

Real estate experts also say the setting up of Samsung’s unit may not have the same impact like that of Maruti factory in Gurgaon because it is not the first time that an anchor tenant has decided to set up a facility in Noida. It must be remembered that the Uttar Pradesh government had in 1976 established Noida or the New Okhla Industrial Development Authority with an aim to acquire agricultural land from farmers to set up industries in the area. There are already several established manufacturing units in the area.

“This belt has always been a hub of commercial activity. We’ve had factories set up here, the hardware manufacturing companies are already here. It has all along been a hotbed of manufacturing. This will be one more shot at getting jobs back on track,” says Gulam Zia, Executive Director - Advisory & Valuation, Retail & Hospitality, Knight Frank India.

Move manifests improved law and order situation in Noida region

The new Samsung plant in Noida is a manifestation of improved law and order situation in the area. Some tough legal actions such as life imprisonment awarded by a Noida court to the kidnappers of Adobe CEO Naresh Chand Gupta's son in 2011, has helped instill confidence in multinational firms to consider the Noida market, say experts.

Gulam Zia, Executive Director - Advisory & Valuation, Retail & Hospitality, Knight Frank India agrees the improved law and order situation will help rebuild confidence among corporates and provide one more shot at getting job creation back on track

Will it lead to increase in prices for commercial real estate?

While commercial real estate rentals in Gurgaon are at Rs 80 to 90 per ft, in Noida top-of-the-line ‘A” grade spaces with Metro connectivity it may be available for Rs 40 per sq ft to Rs 50 per sq ft.

“The first stage in price improvement is to do with absorption picking up.  Volumes pick up 6 to 12 months later. Getting anchor occupiers is important for any new corridor to gain traction. Prices in Gurgaon’s Golf Course Road improved after GE set up its corporate office there. The same trend was seen in Bengaluru’s Whitefield corridor. In Noida, prices may not rise immediately because there is no dearth of land. But a shortage of ready supply may help bump up rent for the short term but not for the long term because of excess availability of land,” says Srivasttava.

Compared to Noida, Gurgaon has an edge because it is multi sectoral office space market which is not driven only by industrial activity. “On the one side you have Maruti, Honda etc and on the other a huge service network, IT, BPO and financial services, banking sector are all concentrated in Gurgaon.

Prices may not increase in the short term as demand for commercial space is still subdued in Noida. The growth in manufacturing will take some time to reflect in office space requirements. Improved demand does not lead to an increase in rentals immediately. If there is a sustained economic activity, job creation, then in the next three to five years, prices may increase, says Zia.

The combined impact of Jewar airport and Samsung facility on Noida market

The Jewar International Airport will definitely lead to an overall development in this area; it will take over 4-5 years to complete the first phase of the airport. The entire belt across Greater Noida and Yamuna Expressway is currently witnessing subdued demand as the area is yet to become sustainable for end-users.

“A new airport will significantly boost real estate development in the region along with the development of civic infrastructure. Whilst several untapped and underdeveloped locations are expected to come on developers’ and buyers radar again, over-supply and subdued demand leaves a very little scope of appreciation in the property and land prices,” says Chatrath.

Other experts are of the opinion that airports are not linked directly to an improvement in real estate. “Airports are a speculative investment to give a fillip to real estate,” says Zia. Be it the Hyderabad airport or the Bengaluru airport, none of them have had an impact on real estate in the vicinity nor is Panvel airport in Mumbai expected to create real estate around the airport immediately.  These are all speculative and are not likely to give a fillip to real estate, he says.

Real estate deals in Noida and Greater Noida

There have been quite a few commercial real estate deals in Noida in recent times. IT company Birlasoft, part of the CK Birla Group, leased an entire office building spread over 3 lakh sq ft at a mixed-use project of Assotech Realty in Noida, as per data obtained from real estate consultancies.

Other companies to take up space along the belt in recent months include Ace Global took up 80,000 sq ft in Arihant IT Park, Sector 126 along Noida Expressway. EXL has taken up 75,000 sq ft in the Blackstone SEZ and Conduent has taken up 1 lakh sq ft in Candor Tech Space SEZ. Amazon has leased 50,000 sq ft in Unitech Infospace; Pitney Bowes has leased 29,000 sq ft in Logix Cyber Park and Ricoh has leased 30,000 sq ft in Winder IT Park.

Vandana.ramnani@nw18.com