Year 2007 was good for real estate market. Because of the rise in the interest rates, the prices of residential real estate corrected by 10% to 15% in most of the suburb markets of National Capital Region (NCR) of Delhi, Mumbai, Bangalore, Chennai , Hyderabad, Pune and Kolkata.
Consultants feel that as the economic growth will continue to be strong, demand will outstrip supply in 2008. Ernst and Young partner and national leader in real estate sector, Ganesh Raj, said over the past few years, the real estate sector had grown at an unprecedented rate of about 30%, and is expected to continue growing at 25% for the next 3 to 4 years. Year 2007 saw the sector clocking $48 billion , which is expected to reach $140 billion by 2012 — projecting a growth of 21% per annum.
The sector is currently on a high — mainly because of the high economic growth, shortage of residential spaces, growth in IT/ITeS and retail. The focus though would now shift more towards smaller cities since the metros are getting saturated. Also, we can now expect growth to trigger off in other sectors like biotechnology , warehousing, logistics and the financial sector. Similarly , hospitality sector would also witness an upward curve since there is an overall shortage of around 110,000 rooms, says Ganesh Raj.
As the demand is likely to outpace supply, consultants feel the prices will firm up in the short-to-medium term - but, price rise will not repeat the peaks it scaled in 2005 and 2006. A senior consultant said prices in suburbs would hover at the current range or would go up by around 10% in 2008.
The growth in demand is likely to be strong as the economy is all set to cruise around 9% in 2008-09 . Commercial activities will further grow in the area. The development in road and metro infrastructure has brought a large area within easy commutable range of Delhi. In particular, better connectivity to Manesar, Koundli, Sonepat, Greater Noida and Hapur will enable the developers to increase supply of commercial real estate.
This, in turn, would create demand for residential space in the region.
Commercial
According to Cushman and Wakefield, the major Indian cities of NCR, Mumbai, Bangalore , Chennai, Hyderabad, Pune and Kolkata witnessed a rise in demand for commercial real estate by approximately 20% in the year 2007, indicating a bullish trend in the country. However, high quality properties continued to be in short supply. But, at the same time, because of increased economic activities , the demand for these resulted in large precommitments , along with steady or appreciating rentals. According to market sources, at present, there is almost no availability of large plate area of commercial space in cities like Delhi and Gurgaon. Almost all the builtup areas to be constructed and delivered in the next two years have already been sold or leased out.
However, as Haryana government has notified the Gurgaon Manesar Master Plan in 2007, the availability of land will go up. Besides, better connectivity has also brought regions in Faridabad, and up to Hapur on National Highway 24, within the development range of Delhi. This is likely to increase the supply of office space. Planned supply of commercial space is likely to stabilize the rentals in the area in 2008. According to one estimate, after the development of Manesar, the rentals in Gurgaon are likely to stabilize in the range of Rs 70 to Rs 90 per square feet per month.
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