City emerging as real estate propositions

Last Updated: Thu, Jan 03, 2013 07:01 hrs

Cities with a high level of job creation continue to see high volumes of real estate supply and absorption.

Cities with few or no economic drivers to spur the growth of employment fall behind, no matter what other factors seem to work in their favour.

Earlier, Mumbai and Delhi attracted the most talent from rural areas. Today, cities like Bangalore, Hyderabad, Chennai, Pune and Gurgaon have taken lead positions and are all set to overtake Mumbai and Delhi, says Om Ahuja, Chief Executive Officer Residential Services, Jones Lang LaSalle India.

IT-centric cities like Bangalore, Hyderabad, Pune and Chennai, to some extent, are now emerging as whole new real estate propositions. IT companies there are expanding their campuses dramatically. Recently, Wipro announced the imminent launch of their new facility and headquarters of approximately 2.5 million square feet in Bangalore. This facility will augment their existing campus, which already employs over 31,000 people. Trends and data points suggest that dynamics in these cities will be very different in the next few years.

“With inflation and construction costs moving northwards, the price trends are changing dramatically.

The graph clearly indicates that supply trends in real estate are in a state of flux. The supply of products priced below Rs 3,000 per square feet is reducing markedly. From 43 per cent in Q4 of 2009, supply in this segment will come down to 8 per cent in Q4 2013. Meanwhile, supply in the price range of Rs 5,000-10,000 per square feet is expanding,” says Ahuja.

On the surface, aspirational and affordability levels are driving such trends. However, smart residential property investors will identify the right products priced below Rs 4,000 per square feet in key growth cities as a best options. In cities like Bangalore, Hyderabad, Chennai, Pune and Gurgaon, one can still find good projects in this price segment for long-term investments and appreciation, Ahuja adds.

The time-related value of money and inflation are two key parameters that one needs to take into consideration.

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