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Real estate prices for commercial space in Capital are likely to remain buoyant in the short term while realty prices in Mumbai are expected to witness a dip in medium term, global consulting firm has said.
Lease rentals and capital values are expected to remain high in Delhi property market in the short term, Cushman and Wakefield said in its latest updates.

It pegged office space supply at 7.8 million sq ft in the Capital during the year. During last quarter (January-March), office rentals rose by 10-16 per cent in booming satellite city Gurgaon.

On Mumbai property market, C&W said supply of 12 million sq ft of new office space in the next 24-36 months was likely to bring a downward correction.

This much-needed downward price correction over medium term would help retain Mumbai’s competitiveness over the long term, the realty consulting firm said.

C&W, however, predicted the rising trend of Capital and rental values of office space to remain for few quarters to come due to short supply of quality space.

The thaw in Indo-Pak relations has attracted investment in mega projects, worth Rs. 3,204.59 crore, in Amritsar. Moreover, with a majority of the projects belonging to the real estate sector, it seems that the city will soon have more malls, multiplexes, townships, and penthouses. This investment also includes infusing fresh capital of Rs.765 crore by four industrial houses.

Of a total of 25 projects, 21 projects are from the real estate sector. Real estate developers like Alpha G Corporation Ltd, Dynamic Continental (P) Ltd, PVP Entertainment (P) Ltd, PVP Entertainment (P), Ansal township & Project Ltd, DLF, Parsvnath Developers Ltd. are making their presence felt by building township, malls and multiplexes. Confederation of Indian Industry (CII) Northern Zone Chairman Gunbir Singh said: “There is immense Potential in Amritsar. Also, the modernization of the city will help in attracting tourists. At present, in the absence of professionally managed hotels, most of the tourists do not want to stay in the city.”

Alpha G Corporation is investing Rs. 239 crore for the development of a city center and a hotel, Dynamic is investing Rs. 100 crore, PVP Entertainment Rs. 105 crore, DLF Rs. 463 crore, and Ansal Township Rs. 800 crore. While DLF will develop an SEZ in Amritsar, Ansal will concentrate on building townships.

Alpha G Corp CEO S K Sayal said: “Developers planned by the state through private-public partnership is also a large motivating factor.”

Also, India’s largest waste paper unit at a single location, Khanna Paper Mills, will be investing Rs. 500 crore for capacity expansion, while Rana Sugar Mills has already set up their distillery unit with a total project cost of Rs. 35 crore. Also, Khusi Ram Bihari Lal, a company engaged in rice processing, is investing Rs. 205 crore in a new unit in Amritsar.

Already, 17 companies (three industrial houses and 14 real estate companies) have signed the memorandum of understanding (MoU) with the state government and the remaining would also sign the MoU shortly. According to sources at the district industries center, these projects will be completed within three years from the date of signing the Mou. The development has also led to a sudden hike in land prices immediately after the announcement of advent of big business houses.

The government is thinking hard about the ways to accommodate urban poor, a goal which can bring a round of applause for politicians. Urban housing is struck in between the outdated policies and bureaucracy.

Considering housing for poor a prime responsibility, the government has largely focused its attention towards development of large number of houses and allotted them to the poor. Funds have been garnered for development of such units, with the remaining cost shared between a bank and the beneficiary.

Demand for residential property among urban poor is increasing because of a rapid urbanization. Since, there is a shortage of land in cities; an effective urban policy requires to be brought into effect to optimize proper land use.

Outlined below are some suggestions for drafting housing policies for poor:

Housing policies must meet broader economic goals in the best way, thereby ensuring regulated urban development.

Any urban housing policy must give the first priority to urban poor who actually run the urban growth engine. Else, it will only serve as one of the futile incentives, which do nothing than promoting indiscriminate migration
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Government should look towards developing enough stock of rented housing for the poor. It will set a new paradigm instead of transferring ownership to inhabitants.

The rents will seldom be an additional burden on the poor, as they pay s 500 – 1,000 per month for dingy huts in slum, without access to basic facilities. Contrary to this, residents will not suffer from the problem of uncertainty in tenure. In any case, the government housing schemes now have a significant bank loan share, which the beneficiary (who can be allotted rent vouchers) repay in monthly installments. Rent Vouchers will only be helpful in replacing the rent payments.

Seeing the large demand for lower income housing units and the pool of long tenure financing prospects, these ventures offer large potential for builders.

A contract can be signed with private builders to develop these housing units for poor. A build-operate-transfer contract for tenure of 15-20 years can be an attractive proposition. They can collect predetermined rents and the rental subsidy from the government can be directly transferred to the builders. The move can help to ensure better focusing of the subsidies.

Indian firms are being bullish on to buy or rent office space in Mumbai, a factor which has fuelled the prices of commercial property in the city. Another factor pushing the average rentals in the commercial business district areas is a sharp increase in value of rupee. The rentals are believed to be more than those in New York.

The average per sq ft cost in Nariman Point and Bandra Kurla Complex (BKC) stands at 1.5 times higher than Manhattan. According to the market trend, the rentals in BKC will rise higher than the existing rates.

Rentals in Mumbai are going through the roof. Knight Frank finds it cheaper to lease 1 lakh sq ft of commercial space for $55 per sq ft per annum than to pay $90 for the same in Mumbai.

Close on the heels of BKC, Nariman Point is also fetching rentals which are around 1.5 times higher than Manhattan, says Pranay Vakil, Chairman, Knight Frank India.

The weighted average rental in Manhattan hovers around $60, according to the latest survey. It all started a year ago when Lehman Brothers leased a property in BKC for Rs 300- 400 per sq ft per month, adds Mr. Vakil.

The cost per sq ft per annum in Mumbai’s CBD was never heard to exceed $30. As compared to it, it has been three times higher in the past 18 months.

The overall average rental in Manhattan was $53.43 sq ft, says Cushman & Wakefield. The amount was the highest ever recorded.

Rents for class A offices in Manhattan are now $64.54 per square foot. Shortage of Grade ‘A’ supply and increase in demand has caused a sharp increase in Mumbai by 20-30% over the last quarter.

Andhra Pradesh Chief Minister Y S Rajasekhara Reddy turned down the proposal of bringing a further hike in property tax to increase the revenue of local bodies.

The minister has also expressed his displeasure over the manner in which the municipalities and municipal corporations raised the property tax even after the dissent of the state government for the same.

Reddy has asked the municipal administration department to issue a fresh government order canceling the revision of property taxes for residential purpose after 2004.

Instead of making the things worst for common man as far as buying the property is concerned, municipalities should think of another way to bring improvements in their non tax revenue.

The municipalities have also been assigned the work of identifying lands to develop commercial property to add to their income. If it is a government land, municipalities need not pay for it. On the other hand, if it would be a private land, the expenditure will be borne by the state government.

Commercial complexes would be developed on a public private partnership (BOT). The local bodies will be permitted to use the revenue generated from such complexes to execute other development activities.

The minister also agreed for outsourcing necessary staff like managers, sanitary inspectors, bill collectors and ministerial staff by the municipalities.

People buying residential property in Ahemdabad can now also buy parking space by shelling out some extra money. They can easily get it in around Rs 1.2 lakh to 1.5 lakh in upmarket areas of the city.

However, some economically less well-off parts may charge near about to Rs 20,000 for the same. The trend will soon be seen in both commercial and residential property market. Earlier, the prospect of buying parking space was available with only a few builders in areas such as Prahladnagar, C G Road, S G Road, Navrangpura, Ellisbridge and Satellite.

As such, the legality of selling parking space has not been specified under the existing norms. It requires some space reserved for parking of the total permissible floor space index, says I P Gautam, Ahemdabad Municipal Commissioner (AMC).

Selling parking space in a megacity can be an attractive option for builders. Considering the increase in number of vehicles in Ahmedabad, the trend to buy the space is likely to boom.

The cost of parking space should be determined by studying the density of parked vehicles in the area, construction costs, and parking management costs, says Saswat Bandyopadyay, a CEPT Professor.

In case the property buyers narrow down on the option of buying parking space, they should demand added facilities such as car wash area, proper sheds, and maintenance of the parking space.

Currently the real estate market is going through a phase of correction in prices and there are inflated possibilities that the artificially inflated/increased prices are likely to come down.

Before the slow down phase in the past, the projects were sold instantly without any hitch at an exorbitant rate. But that would be a thing of past now. The negative impact is explicitly visible as lots of high-end /cost oriented projects are still lying unsold. In such an eventuality, there may be blessing in disguise as high profile speculators will be out making way for the actual users.

It is but natural that with price correction, the market will turn towards end users thereby enabling the developers to sell out their remaining products.
Meanwhile, the beginning of correction phase started with the increase in home loan rates by the banks/ government since February/ March onwards which mainly, interalia, eroded the purchasing power of middle and upper middle class majority of whom are covered in the category of end users or actual users. Now the real estate marketing is passing through the scene of wait and watch for seizing the best opportunity clubbed with the hope of reduction in home loan rates.