Estate South 2012 reviews realty progress

Chennai

With improving transparency and visibility of the real estate markets in the South zone, cities such as Bangalore, Chennai and Hyderabad have attained a place on the global real estate map, a status that was limited just to Mumbai and Delhi in the past.

While South Indian cities constitute nearly 45% of the country’s office space, the stock of 140 million sq ft in these cities is projected to grow at a CAGR of 8% for the period 2012 – 2016, lower than the projected national growth of 11%, according to Jones Lang LaSalle. This implies that the southern cities, particularly Bangalore and Hyderabad, are relatively rationalised in terms of medium term supply of office space, and the cities have chosen a strategy of pursuing selective quality developments over rapid expansion. While this would keep their share in India’s office stock range bound at 37%-40%, the South Zone’s vacancy rate by end-2012 is expected to be 16%, considerably lower than the pan-India vacancy rate of over 20%.

Panelists cautioned that if the office space absorption does not expand in the coming years, there will be a concomitant effect on the residential development as well. This in turn necessitates the need to keep the cost control under constant check.

In a one day seminar titled Estate South 2012 and organised by CII recently at Hilton Hotel in Chennai, experts from the real estate sector have brought out that South India’s retail real estate market has gone through a makeover in the past decade when its retail stock grew from a mere 1.6 million sq ft in 2003 to 13.2 million sq ft in 1Q12. The share of South India’s retail stock to the pan-India stock is expected to record a notable increase from 20% at end-2011 to touch 36% by end-2016.

While demand remains healthy for organised retail spaces, it is polarised towards either successful malls or high streets, which have better footfalls and conversion ratio. As the mall stock in the southern cities sum up to breach the 40 million sq ft mark by end-2016, the vacancy by then is expected to witness a notable decline from the peak levels of 2014 to drop below the national average of 20.5%.

South India’s residential market has been an ardent follower of the ‘affordability’ mantra, with more than 80% of the new launches in the past two years being priced under Rs 4,000 per sq ft. As a result, the residential markets of South Indian cities have remained resilient in the past few quarters, relative to the significant decline recorded in the sales volume of Mumbai and NCR-Delhi. Having exhibited healthy resilience during times of uncertainty, it is imperative for the developers to ensure prudent pricing strategies in the coming quarters to remain competitive as well as sustain the momentum that they have gained during early 2012.

The focus of Indian real estate is shifting from Tier I to Tier II cities, and the southern region is also embracing the same, with secondary hubs developing in Kochi, Coimbatore, Vishakhapatnam and Mysore, that are persistently striving for higher milestones.

On the housing finance front, LIC Housing Finance claims to do 50 per cent of the business from the four southern states. “Chennai is one of the fast growing cities not only in real estate development but also in employment generation”, according to V K Sharma, CEO, LIC Housing Finance Ltd. With a growth rate of over 20 per cent, LICHF’s loan book has posted robust disbursement of over Rs10,000 crore in tier III cities in the south.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/estate-south-2012-reviews-realty-progress