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Property market in Delhi-NCR: 2018 will be a great year, here is why

The year 2017 was an eventful one for the real estate market in India. The overall real estate market came to a standstill, especially in the first quarter of the year just after the demonetization. Other surprises, such as the Real Estate Regulation Act, GST implementation, changes in Benami Transactions Prohibition Act, all impacted the transaction volumes, especially in the second half. Surprisingly, the commercial real estate market remained robust across India, including the NCR market. Till November 2017, we recorded approx. 34 million sq. ft. of leasing activity (excluding renewals and pre-commitment) at PAN-India level. Out of this, NCR shared about 18%, which translates to approx. 6.25 million sq. ft.
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The expectation is that the overall leasing volume will remain at par with last year. The demand for Grade-A office space was driven by technology companies, followed by engineering, manufacturing, BFSI and co-working operators. Although GDP shows a dull growth in the past 2–3 quarters, taking cues from the positive policy related initiatives, most large occupiers are reviewing their long-pending commercial real estate decisions. Tenants in expansion mode relocated and locked in large office spaces at favorable lease terms. The trend of pre-committing large spaces picked up this year and co-working spaces made their entry in the market in a big way.
Gurgaon has remained the preferred office destination in NCR with about 63% share in overall leasing. As per Colliers International, the leasing profile will be dominated by corporate offices of large IT/ITeS companies. As business confidence in the economy picks up, we expect these tenants to commit to large office spaces, especially in the Special Economic Zones coming up in Gurgaon. NOIDA is picking up, but as a market it is still contributing about 24% of the leasing volume. The lack of elite Grade-A building and building management is one of the reasons why corporates are shying away from this city, despite lower rentals.
The supply-demand equilibrium will keep rents in check in peripheral locations. However, rents in micro-markets like Cyber City, certain parts of Udyog Vihar and NH8 in Gurgaon, Aero City in Delhi and sector 62 and Noida Expressway will continue to strengthen further. As per our observation, premium buildings will continue to command a premium over market average rates in supply-restrained locations, such as Cyber City and Golf Course Road exerting upward pressure on rents. However, there can be a downward pressure on rents in peripheral micro-markets and Grade B buildings. Thus, average rents are likely to remain stable over the short to medium term.
Golf Course Road Extension Road is positioning itself as a significant future development destination, with large upcoming supply. We expect urban infrastructure to get a boost, as work on the widening of the National Highway 8 (NH8) is going on in full swing and the Hero Honda Chowk Flyover is likely to see completion in 2017. The major infrastructure plans to decongest four major junctions of NH8, including IFFCO Chowk, Signature Tower Chowk, Rajeev Chowk and Hero Honda Chowk, is likely to improve the micro market in a big way. The work on these projects is moving very fast and we expect the completion of all these major infra projects by Q1 2019. All in all, 2018 is expected to be a great year for the commercial real estate market in NCR.
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