NCR Real Estate Sector Update
The Indian IT sector is witnessing slow growth due to the global economic meltdown. Moreover, US companies that had bought stakes in Indian real estate companies are facing crunch, thereby slowing the demand in IT-led real estate development in NCR..The Real estate market in Delhi-NCR, like in other parts of the country, is witnessing some slowdown and price correction in certain corridors and this trend may continue for sometime. The slowdown may result in:
Price rationalisation in real estate products
Price correction in select corridors
Delay in project completions
A continued wait-and-watch sentiment amongst end user and investor alike
Reduction in demand for the developments across sectors
The booming Indian Information Technology (IT) sector is witnessing a slower growth in the current fiscal (08-09) due to the global economic slowdown and lower technology spending in America and United Kingdom. American companies that had bought stakes in Indian real estate companies are facing a cash crunch, thereby slowing the demand in IT-led real estate development in NCR.
Project spans may witness an increase for existing projects and real estate developers may find it difficult to complete their projects, as the cash flows have become difficult to obtain from most sources (viz financial institutions, funds, investors and even end users, which actually drive the core consumption in real estate.)
However, recent relief measures announced by various government institutions targeting the demand in the middle income segment have provided impetus to developers to position residential sector developments in this segment. Moreover, well-planned, branded and properly positioned projects are currently witnessing demand in prominent growth corridors. The present year may see rationalisation of real estate products in terms of their quality, pricing and positioning; which, coupled with improvement in market sentiment, will boost the demand in times to come.
Current prominent projects--
Residential projects
Gurgaon: Magnolias by DLF and Nirvana Country (integrated township) by Unitech
Faridabad: The Forest by Omaxe, BPTP Grandeur, Pranayam by Puri Constructions
Noida: Jaypee Greens by Jaypee Group, Unitech Grande, Assotech Celeste Towers
Ghaziabad: Orange County by Meriton Group, Shipra Suncity by Suncity Projects
Corporate projects
Gurgaon: Palm Drive by Emaar, DLF Corporate Park, Vatika Atrium
Faridabad: Saffron Square, Charmswood Plaza
Noida: Corenthum, Logix Cyber Park
Ghaziabad: lacks any prominent commercial development
Major developers in Delhi and NCR regions
Among the major developers in Delhi-NCR region are:
DLF
Unitech
Parsvnath
Omaxe
Ansals
Supertech
BPTP
Emaar MGF
Vipul Group
Vatika Group
JMD Group
Logix
Major areas of real estate activity
The major areas in Delhi NCR witnessing developments in real estate sector are:
Gurgaon: NH-8, Golf Course Road, Southern Periphery Road and Sohna * Faridabad: NH-2 and areas across Agra Canal
Noida: Sectors 18, 37, areas along Taj Expressway and Greater Noida Expressway
Ghaziabad: Indirapuram and NH-24
The global financial crisis and the subsequent slowdown in real estate sector have led to a slowdown in investment activities across all segments of investors, viz funds, HNIs, etc. Most investors are holding off their investment plans at present. However, a market scan for potential lucrative projects is an ongoing process.
Target customer profile/segments for developers
Current state of the real estate market
Target customer profile/segments for developers
At present, the focus of developers is to complete the ongoing projects being developed for the HIG and MIG segments. However, given the incentives of targeting the middle income segment of the population in the wake of the recent relief measures, many developers are planning to position developments targeting the MIG and upper LIG segments. That said, as an after-effect of the economic slowdown and ongoing market sentiment, consumers are less inclined to buy real estate at present, and may stall their real estate procurement plans for some time. However, the softening of capital prices may act as a catalyst to boost demand.
Current state of the real estate market
The real estate market in present times is experiencing a great turmoil in terms of project timeliness/completions, pricing strategies and intensity of demand for the developments across all its sectors. As for the different sectors of the real estate industry - the financial crisis has resulted in noticeable price corrections across all sectors. For instance, in the retail realty sector, the impact of the recent slowdown has resulted in an overall price correction of approximately 15-20 per cent in Delhi - NCR region.
The impact has been observed to be more on the organised retail malls, where the retailers are under severe pressure due to major decrease in sales and high rentals. This has even forced some retailers to vacate space taken in operational malls, while the retailers who have signed agreements in upcoming malls have stepped back and have even withdrawn from their agreements. The high streets markets of the city have also experienced the impact of the retail slowdown, which has been reflected in a correction of rental values from those prevailing in the last two to three months. However, the market is witnessing price stability or correction depending on the supply situation from micro market to micro market.
Non IT and IT-BPO sector is also witnessing impacts that include lowering of contract rates with further delay in signing of contracts, decrease in growth rate of the IT sector and restricted employment in the sector. All these factors are resulting in the rapid lowering of rentals in IT/ITeS complexes, thereby creating severe problems for the developers. However, though some small and medium-sized companies are experiencing a heavy impact due to the slowdown, large IT companies (both Indian and MNCs) are likely to prevail.
The residential sector has also experienced the brunt of the slowdown. This has been evident from the major decrease in demand for residential projects among both investors and end users. The result is a lowering of sales of residential projects over the last three to four months, thereby leading to major problems for the developers.
Real estate developers are seriously affected by the severe fund crunch and are experiencing in executing projects. Many intend to delay their projects due to lack of demand. Major real estate developers like DLF etc have not been as seriously affected, as they have been able to raise equity/debt from large private equity players, banks and hedge funds. However, there are some large developers who may be seriously effected if they are not able to raise funds to meet the ongoing commitments.
In all, major developers - irrespective of their leverage positions, are seeking additional funds to complete their under-construction projects or pay off expensive loans.
Source: Merinews.com Delhi-NCR real estate sector update