With RERA coming into play and the emphasis on compliance, institutional real estate developers are entering the realty market to develop mid-to-large housing projects.
By Anuja Sathe
Housing has always been a preferred investment option not only for individual investors but also for institutional ones. In the past, institutional investors showed a preference for office spaces as against residential primarily owing to stable returns and recurring rentals. Of late, commercial development has been able to attract equity investors due to long tenor rental generating capabilities.
Further, REITs bring liquidity for their investment for commercial space. On the other hand, residential developments being self-liquidating in nature have a limited development timeline, and hence lag in equity investments. Residential developers are offered more of debt/structured debt options. With RERA coming into play and emphasis on compliances, institutional developers such as Godrej, Mahindra and Shapoorji are entering the realty market to develop mid-to-large housing projects. Most of these developers are either backed by strong institutional foreign funds or strong balance sheets of the parent corporate.
Few cities have been doing well in terms of attracting investors in India and certain growth factors contribute to their success. These are as follows:
Bengaluru, India’s Silicon Valley, has outperformed other markets in the country despite the lull in the IT sector. The demand for office space and commercial establishment continues to grow. Ready-to-move-in stock has seen the highest absorption. Housing needs of people who are preferring to stay close to their workplace have given a big boost to the residential projects around IT and commercial developments. Availability of large land parcels are perfect for the increased affordable housing sector demand. Robust road infrastructure, presence of excellent educational and medical facilities makes Bengaluru the preferred home-buyer market. For investors looking for stable returns, Bengaluru provides multiple options. Infra projects such as road widening projects, Peripheral Ring Road (PRR) and development of large townships will contribute to improve investor prospects in the peripheral areas. Whitefield, Outer Ring Road, Sarjapur Road as well as few locations in North Bengaluru are the micro-markets to watch out for.Mumbai - MMR
Mumbai is the financial capital of India and continues to attract investors for residential and commercial spaces. Being the most populous city in India, with an estimated population of 12.4 million, Mumbai has always attracted people from all over the country. The city always provides constant growth in employment opportunities. Mumbai, however, continuous to remain the most expensive property markets in India. It also gives lucrative returns to investors due to steady rentals, which the commercial properties fetch. With the upcoming metro and monorail projects, connectivity to the high-density corridors to distant parts of the city will result in an increase in real estate prices in corridors through which the Metro will run. Navi Mumbai is already witnessing increased demand due to the proposed airport. Due to lower cost of operations, many IT companies have been shifting to places like Vashi and Airoli in Navi Mumbai. Thane is also attracting demand in housing due to the excellent infrastructure it enjoys.Pune
Pune continues to attract investors owing to its proximity to Mumbai. It is not only a major educational hub, but also home to IT companies, engineering, and automobile manufacturers. Migrant employees and student demand for housing have made Pune a good option for investors to invest in the residential market. Infrastructure initiatives by the state and central government such as Metro and Smart City projects will give the much-needed boost to the real estate micro-markets in Pune. Few preferred micro-markets for investors have been Wakad, Balewadi, Baner, Hinjawadi, Bavdhan, Viman Nagar and Kharadi in Pune.Hyderabad
With the government strengthening infrastructure around areas where major IT establishments are coming up, Hyderabad is witnessing a surge in housing demands. Hyderabad is set for a major transformation due to fast-paced infrastructural developments like strategic road development plan, construction of four major flyovers and three corridor elevated metro line of the Mega Hyderabad Metro project. The end of political instability and proactive government policies have positively impacted the investor market for Hyderabad. The city is picking up as the most active residential and commercial markets. The growth of the IT/ITeS sector has further resulted in the development of the organised retail sector in Hyderabad. Properties are better-priced and closer to work options are being preferred by the salaried/professional home buyers. Top micro-markets in Hyderabad include Hitech City, Gachibowli, Jubilee Hills, Banjara Hills, Panjagutta, Begumpet and Himayath Nagar while the upcoming IT/ITES/residential markets are Rajendra Nagar, Kokapet, and Manikonda.Chennai
Chennai has a majority share in the country’s automobile exports and leads to massive employment generation due to presence of number auto manufacturers and industrial manufacturing units. Since 2000, IT companies have also influenced the Chennai market with South region of Chennai gaining the most from their influx. E-Commerce giants like Amazon, Flipkart, etc have also set up their warehousing base in Chennai. Attracting PE investments, the city is fast emerging as the hub for warehousing. Rapid infrastructure development has led to growth of residential belts along the Old Mahabalipuram Road (Siruseri, Shollinganallur, Thoraipakkam), Grand Southern Trunk Road, Perumbakkam, Porur, and Pallikaranai are among the most preferred micro markets.Delhi - NCRThe national capital continues to attract migrant job-seekers from across the states. Although, Delhi is still recovering from the overall slowdown, many micro-markets in Delhi NCR belt are witnessing price corrections. Faced with huge demand for affordable housing, supply for the same has been limited. There has always been a demand-supply mismatch in Delhi with supply in Delhi being low while Noida and Gurugram seem to perform comparatively better. Micro markets that offer mid-segment projects have been performing relatively better than the expensive ones such as Greater Kailash II, Panchsheel Park, and South Extension II. Dwarka (L Zone), Narela micro-markets offer affordable homes with connectivity to the main city.(The author is assistant general manager, Capital Markets & Investment Services (Pune) at Colliers International India)