Amidst the recent turmoil faced by India’s real estate industry, the residential sector has emerged as the sole bright spot for retail investors. It’s resilience in the face of negative global cues is as much a result of the latent demand for affordable housing in India as the large share of the Indian real estate pie that the residential sector holds.
As with office space and retail malls, residential property did, to a lesser degree, suffer the effects of the global downturn in 2008 and 2009. However, unlike it’s counterparts, the residential sector has begun to show signs of stability in many markets, and even (dare we say it) recovery in certain cities. Whether this trend will continue depends in large part on economic factors (mortgage rates, GDP growth, labour market stability) and on prudent decisions by developers on issues relating to prices and quality of product being offered.
Jones Lang LaSalle Meghraj Research has conducted an analysis of residential markets across India to help identify investment hotspots for retail investors. While abnormally large returns can be found in specific projects throughout the country, we have limited our analysis to India’s 7 largest cities due to high residential demand from their large populations, relatively higher transparency levels and presence of premium regional and national developers. In order to round out our top 10 list, we have also included 3 additional noteworthy cities which we feel have the potential to provide significant returns to investors.
“With the country’s urban population growing up to 3.8 percent annually due to higher birth rate as compared to death rate and migration from rural areas, urban areas will be short of an estimated 26.53 million dwelling units by 2012.” Ministry of Housing and Urban Poverty Alleviation, Government of India.
Based on proprietary data from our Real Estate Intelligence Service (REIS), we examined each cities potential across a variety of parameters including affordability, investment yield, absorption momentum, supply overhang, commercial developments, demographics and migration trends. Our analysis was conducted at a micro-market level, the aggregate of which is presented in the table below.
Top 10 Residential Real Estate Investment Hotspots 2010
-Massive infusion of commercial office and retail space
Currently 22 million sq ft office space expected to grow to 40 million sq ft by 2012
-Substantial rationalization of prices
Correction of over 25-30% across micro-markets
-Wide breadth of projects across price ranges and geographies
Downturn has opened new geographies at much rationalized prices
-Shortening absorption period
Increased absorption rates leads to reducing housing units to be sold
-Quality developers and developments
Tier I developers and good quality developments
-Water, power and connectivity continue to be areas of concern
Metro expected to improve connectivity
-High income demographics
High investment activity levels across price bands
-Massive infusion of commercial office and retail space
-Relative affordability in suburban markets
Most of the markets within the city unaffordable. Affordability in Eastern Suburbs, Thane and Navi Mumbai
-Infrastructure can’t keep pace with growth of city
Infrastructure developments to boost residential demand in suburbs
Noida
-Affordable micro-markets
Reasonable price range has led to increased absorption momentum
-Excellent connectivity
Connectivity through existing road infrastructure and metro
-Commercial office space
Addition of another 12 million sq ft of office space in the next 3 years
-Residential demand primarily linked to IT/ITES sector
-Huge supply of office space - Addition of another 19 million sq ft of office space in the next 3 years
-Affordable micro-markets close to the city
-Oversupply in select micro-markets only
-Proximity to Mumbai
-Shifting geographies of commercial office development
-Most of the micro-markets highly affordable
-Residential demand linked to growth of IT/ITES sector.
-City has attained a critical size of IT occupiers which shall help attract more IT occupiers.
-Infrastructure hasn’t kept pace with the growth of the city
-Diversified migrant population working in industrial, logistics and IT & ITES sector
-Prices have rationalized across micro-markets
-Properties along OMR benefits from excellent connectivity and proximity to IT hubs
-Absorption rate yet to pick up
-High affordability in Hitec City and Gachibowli
-Oversupply in Hitec City – Gachibowli; other markets having low activity
-Residential demand linked to growth of IT/ITES sector
-Absorption rate has picked up in Rajarhat
-Highly affordable micro-markets
-Growth in office take up projected to be low
Ahmedabad
-Newest metropolitan city with population of more than 4 million
-Absorption rate has picked up in affordable markets closer to the city
-Highly affordable micro-markets
-Pharmaceuticals, logistics and automotive sector to drive population growth in the suburban markets
-Poor IT/ITES presence
-Short term growth of commercial activity uncertain
Kochi
-Diversified economy with growing IT/ITES presence
-Highly affordable micro-markets
-Huge Non-Resident Keralite demand drives residential real estate
-Micro-markets of Edapally and Kakkanad highly dependent on IT/ITES sector
Source: JLLM
Popularity: 3% [?]
0 Responses to “Top 10 Residential Investment Hotspots”