India's investment-grade real estate market has grown 8.6% to $173bn in the past 15 months following a 58% increase in 2011, according to Jones Lang LaSalle.
Mumbai-based senior research manager Hariharan Ganesan attributed the slowdown to a recent rise in input costs and "unenthused" macroeconomic investor sentiment. The result has been fewer developments initiated.
Ganesan contrasted recent meagre supply with the steep increase in new developments from $101bn in 2010 to $160bn last year. He said in a note: "The country's real estate market is traversed from a great deal of positivity [in 2010] to uncertainty.
"It is hard to deny that it has been a forgettable year."
Commercial developments have been particularly hit by both macro uncertainty and sector-specific factors. Under-construction office assets account for 78% of India's commercial real estate market, currently valued at $41.6bn.
Mumbai, Delhi and Bangalore accounted for 67% of the market value of commercial office space under construction, with 17% accounted for by second-tier cities Chennai, Pune, Hyderabad and Kolkata.
Third-tier cities accounted for only slightly less (16%), up from 9% in 2010 largely as a result of lower real estate costs, said Ganesan.
Meanwhile, shopping centres decreased in number but increased in size in 2012, which kept the Q3 market value of retail assets at the same level as the previous quarter. In contrast, investment-grade residential construction, valued at $132.2bn in Q3, has almost doubled since 2010. Delhi dominates volumes, although Mumbai contributes greater market value.
Ganesan said residential had proved particularly resilient for developers and investors because of high demand for housing and the fact it was self-liquidating.
Author: Shayla Walmsley
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