In mid-2010, India’s investment
grade real estate that was under construction joined the 100-billion-dollar
club. Currently, the value of the investment-grade real estate under
construction in India is estimated to be USD 173.9 billion (nearly 35% more
than Vietnam’s nominal GDP) as against the USD 160.1 billion figure in 2Q11 and
USD 101.3 billion in 2Q10.
Following a steep rise of 58% y-o-y
during 2Q11, the past 15 months have seen the value of these projects grow by a
mere 8.6%. Rising input costs in recent quarters and lacklustre macro-economic
sentiment have led to relatively fewer new construction launches in the sector
when compared to 2010. Between then and now, the country’s real estate market
has traversed from a great deal of positivity to uncertainty. With 2012 nearly
through, it hard to deny that it has been a forgettable year for the Indian
realty market.
The market value of the commercial
(office and retail) real estate under construction is USD 41.6 billion. The
commercial office space that is under development contributes approximately 78%
to the estimated market value of the commercial sector. The nominal decrease in
supply, which was offset by a marginal rise in capital values, caused the share
of the market value of commercial (office and retail) assets under construction
to remain range bound to the figures estimated in 2010 and 2011.
As the number of malls that were
under development dropped and the size of malls increased, compared to 2Q11,
the market value of retail assets under construction remained unaltered during
3Q12.
The Tier I cities of Mumbai,
NCR-Delhi and Bangalore contribute approximately 67% to the market value of the
commercial office space under construction, while the Tier II cities of
Chennai, Pune, Hyderabad and Kolkata contribute about 17%. Other
investment-grade developments in Tier III cities contribute about 16% to
today’s Pan-India market value.
With infrastructure developments and
relatively lower real estate costs, the share of the market value of Tier III
cities grew from 9% in 2Q10 to 16% presently. While Tier I cities have
contributed about 58% of the commercial retail space that is under development,
Tier II and Tier III cities supplied approximately 27% and 15%, respectively.
Due to the increased construction
activity and rapid recovery of property prices since their trough levels in
mid-2009, the contribution of the residential sector has grown. The market
value of residential real estate under construction increased from 66% in 2Q10
to 76% in 3Q12, touching USD 132.3 billion - nearly double the levels seen in
2Q10.
While NCR-Delhi has the largest
volume of residential properties currently being developed, Mumbai contributes
a larger share to the market value. Aided by its self-liquidating nature and
the high demand for housing in India, the resilient residential sector has been
the focus of developers and investors.
By Hariharan Ganesan, AVP -
Research
& Real Estate Intelligence Service,
Jones Lang LaSalle India
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