Gurugram realty and its lifeline-in waiting

Two recent reports by ANAROCK Property Consultants should serve as a ray of immense hope for realty watchers in the National Capital Region. Tracing the growth of real estate market in Gurugram, Santhosh Kumar, Vice-President of ANAROCK, analyses various facets and comes to the conclusion that with global companies flocking back to India, the Millennium City remains a priority destination for many of them. The second report by Prashant Thakur, Head  – Research of the consultancy firm, focuses on Dwarka Expressway, which was  conceptualised under the Gurugram Master Plan 2021. After listing various advantages of the realty market around the area, the report says that despite all odds over the last few years, Dwarka Expressway is set to emerge as one of the prominent office destinations in the near future. Realty & More reproduces edited version of the two well-researched reports for the benefit of its readers.

The Millennium City of Gurugram has a very prominent place on the country’s residential real estate map and is considered a bellwether of the state of the market for NCR. If we study what happened in the city’s housing market in the first quarter of 2018 against the same period in 2017, some interesting changes emerge.

 Pricing  

• Q1 2018 – The weighted average price for housing properties launched between January and May in 2018 is Rs 4580/sft.
• Q1 2017 – The weighted average price for housing properties launched between January and May in 2017 was Rs 4,300/sft.

In other words, we are seeing an uptick in pricing for newly-launched housing projects in Gurugram, in line with the returning end-user demand as a result of improving market transparency.

Launches

• In Q1 2018, approximately 4,100 new units have been launched in Gurugram, accounting for nearly 32 per cent of the total stock in entire NCR. Interestingly, out of the total stock launched in Gurgaon during this period, nearly 37 per cent consisted of units in the affordable category (Rs 40 lakh), followed by 33 per cent in the luxury segment (Rs 80 lakh – 1.5 Cr) and 28 per cent in the ultra-luxury category (Rs 1.5 cr). The mid-income housing segment saw very few new launches in 2018.
• In Q1 2017, approximately 5,600 new units were launched in Gurugram accounting for nearly 43 per cent of NCR’s total stock. Out of the total stock launched in this period, a whopping 83 per cent comprised units in the affordable category, followed by 16 per cent in the mid segment (Rs 40 – 80 lakh). The luxury and ultra-luxury categories saw minimal launches during the period.

While the new launch units in Gurugram have declined in 2018 as against 2017, particularly because builders are focusing on completing their previously launched projects, it is interesting to note that the new supply in the luxury and ultra-luxury segments has seen a major uptick this year on the back of renewed buyer confidence. The Government’s focus on affordable housing had somewhat taken the sheen off other segments (luxury and ultra-luxury) in the previous years.

 Unsold Inventory  

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In Q1 2018, out of the total unsold housing stock in the NCR (approximately 2,00,400 units), nearly 26 per cent were unsold in Gurugram. In Q1 2017, out of the total unsold stock in the NCR (approximately 2,15,000 units), nearly 24 per cent were unsold in Gurugram. The burden of unsold housing in entire NCR is quite evidently reducing, although absorption in Gurugram was marginally faster last year.

Commercial real estate

Gurugram is a prominent commercial office market of Delhi-NCR as well as India, and the dynamics of its commercial office market in Q1 2018 as against the same period last year are worth noting. The data indicates that the city is holding its own on the commercial office front.  

In Q1 2018, the city saw significant demand from IT-BPM as well as manufacturing and engineering companies. In this period, there were 68 million sq. ft. of good quality office stock in Gurugram’s CBD and other areas. While the CBD has a limited vacancy of 2-3 per cent, there is a vacancy rate of 35-37 per cent in other areas. The CBD areas of Gurugram command rentals of Rs 118-122/sq.ft./month, which is lower than CBDs of many other cities. However, in other areas of Gurugram, one can lease an office property at Rs 65-70/sq.ft./month.

In Q1 2017, Gurugram’s commercial office sector witnessed significant absorption from BFSI, engineering and manufacturing companies. In this period, the city had around 66 million sq. ft. of good quality stock altogether in its CBD and other areas. The vacancy in CBD areas was around 5-6 per cent, while in other areas it was around 35-40 per cent. Gurugram’s CBD areas commanded rentals of Rs 118-120/sq.ft./month, while other areas of the city saw office rentals at Rs 68-70/sq.ft./month.

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With improving business conditions and rising ease of doing business, global companies are now flocking back to India and Gurugram is a priority destination for many of them. While lease rentals in the CBD and non-CBD areas have not changed significantly over the last one year, the vacancies have dropped marginally – largely on the back of rising demand.

1. We are seeing an uptick in pricing for newly-launched housing projects in Gurugram, in line with the returning end-user demand as a result of improving market transparency.
2. While the new launch units in Gurugram have declined in 2018 as against 2017, particularly because builders are focusing on completing their previously launched projects, the new supply in the luxury and ultra-luxury segments has seen a major uptick this year.
3. The burden of unsold housing in entire NCR is quite evidently reducing, although absorption in Gurugram was marginally faster last year.
4. In Q1 2018, Gurugram saw significant demand from IT-BPM as well as manufacturing and engineering companies. In this period, there were 68 million sq. ft. of good quality office stock in CBD and other areas.
5. Gurugram’s CBD areas commanded rentals of Rs 118-120/sq.ft./month, while other areas of the city saw office rentals at Rs 68-70/sq.ft./month.
6. Stretching along 18 km, the eight-lane and 150-meter-wide Dwarka Expressway aims to provide seamless connectivity between Delhi, Gurugram and Manesar.
7. The recent clearance of all major hurdles has given a new ray of hope to prospective buyers and investors focused on Dwarka Expressway’s many transit-oriented benefits.
8. It is well connected to Gurugram Cybercity and other major office hubs via NH 48, and provides good connectivity to Manesar industrial belt and Maruti Suzuki India Ltd, which is just half an hour’s drive away.
9. In the last five years, Dwarka Expressway has seen a fresh supply of over 29,100 units. More than 80 per cent of the supply was added during the period 2013-15.
10. Out of the total supply launched since 2013, the region currently has just 7 per cent (around 2,000 units) ready-to-move-in units. The land acquisition issues along the expressway hampered its development.

Dwarka Expressway

Conceptualised under the Gurugram Master Plan 2021, Dwarka Expressway or the Northern Peripheral Road (NPR) was initially planned to connect Dwarka in Delhi to Palam Vihar in Gurugram. However, it was further extended to Kherki Dhaula toll plaza intercepting NH 48 as per the Master Plan 2025.

Stretching along 18 km, this eight-lane and 150-meter-wide expressway aims to provide seamless connectivity between Delhi, Gurugram and Manesar. The expressway passes through Sectors 109, 113, 37D, 88B, 105, 99 and many other Sectors which saw an upsurge in residential real estate activity since its announcement.

 With land acquisition issues over the years, the residential real estate market along the region suffered a major setback. However, the recent clearance of all major hurdles has given a new ray of hope to prospective buyers and investors focused on Dwarka Expressway’s many transit-oriented benefits.

 The major attraction of Dwarka Expressway is its seamless connectivity between Gurugram and Delhi.

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• Road: Sectors along Dwarka Expressway will enjoy excellent connectivity to Delhi and the international airport. It is well connected to Gurugram Cybercity and other major office hubs via NH 48, and provides good connectivity to Manesar industrial belt and Maruti Suzuki India Ltd, which is just half an hour’s drive away.
• Metro: The nearest metro station is Huda City Centre, a 30-minute drive.
• Air: A fully-operational Dwarka Expressway will reduce travel time to Indira Gandhi International Airport.
• In the last five years, Dwarka Expressway has seen a fresh supply of over 29,100 units. More than 80 per cent of the supply was added during the period 2013-15.
• Various litigation issues created a slump in this region and new supply saw a major decline. In 2016, Dwarka Expressway saw the highest decline in new launches of more than 50 per cent from 2015.
• The new supply in 2017 was also restricted to a mere 2,500 units, a decline of more than 30 per cent since 2016. The decline in new launches from 2016 was the cumulative effect of delay in land acquisition along the expressway, DeMo, RERA and GST coupled with weak consumer sentiments in the NCR.
• Interestingly, out of the total supply launched since 2013, the region currently has just 7 per cent (around 2,000 units) ready-to-move-in units. The land acquisition issues along the expressway hampered its development.
• Around 29 per cent (8,500 units) of the total supply is expected to complete within a year, and a significant share is likely to complete in one or two years.
• The total unsold inventory along Dwarka Expressway is close to 13,300 units, of which a massive share of 98 per cent is still in under construction.

Despite all odds over the last few years, prices have improved in the region. Dwarka Expressway saw a steady rise in capital values at a CAGR of 4 per cent for the period from Q1 2015 to Q1 2018, which shows that the area has immense future potential. Once fully operational, Dwarka Expressway will be a harbinger of change for NCR’s real estate market.

With the office space market in most areas in Gurugram saturated, Dwarka Expressway will emerge as one of the prominent destinations for IT-ITeS companies, as it will enjoy seamless connectivity with the international airport and other key office destinations in Gurugram. On the residential front too, there will be increased activity in the coming years as a significant number of units are slated to complete.

With builders now concentrating heavily on project completion, buyers will have ample options across segments along Dwarka Expressway. Increased commercial and residential activity will eventually attract various social infrastructure facilities including hospitals, malls and entertainment centres.

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