Despite the global economic slowdown, strong demand from the IT space as against financial services has helped NCR (National Capital Region) overtake Mumbai as the largest commercial market in India with nearly 85 million (8.5 crore) square feet of office space under operation, of which Gurgaon and Noida have contributed nearly 89 percent of the upcoming office supply, a latest report by property research firm Knight Frank pointed out.
So what is it that makes Delhi more attractive than Mumbai for corporates?
Improved infrastructure, open spaces, good transport connection, low-cost housing , a metropolitan lifestyle in areas around offices and cheaper land.
Good infra and connectivity key to rise in office absorption in Delhi
Delhi commercial realty is completely IT-driven, which are not only expanding but also consolidating operations by renting large spaces in areas like Gurgaon and New Delhi, Santosh Kumar, CEO Operations at realty firm Jones Land LaSalle India told Firstpost. Gurgaon’s biggest advantage is its proximity to the airport, smooth connectivity to New Delhi and land costing between Rs 65-100 a square foot, which is what IT companies can afford, he explained.
Moreover, apart from Gurgaon, companies are seen shifting office space to Noida too. This is because rentals are nearly 50 percent lower in Greater Noida compared to Gurgaon. This has been the biggest pull factor for companies looking to set up big campuses here. “Good connectivity, planned infrastructure and ample affordable housing options for employees are some of the key contributing factors to the growing commercial developments in Greater Noida. The proposed metro will further boost the real estate development in this region,” said Samanthak Das, national research head at Knight Frank in its latest report.
Cheaper land, easier payment options for builders in Noida
Secondly, land in Noida is government-controlled which is then auctioned off for construction. This makes it easier for developers too as they can pay for the auctioned land in installments, said Kumar.
While Capgemini, Ingersoll Rand took up place in IT SEZ buildings in Gurgaon, Google signed up a deal in a non IT stand alone building in Gurgaon. Hewitt and United Health Group preferred Noida over other micro-markets.
Mumbai, on the other hand is an expanding city with diminishing space. As an Outlook report pointed out “MMRDA built the Bandra Kurla Complex but did not factor in transport connections. Planning when it happened, was piecemeal, sectoral and driven by vested interests.”
BKC, the alternative to Nariman Points for commercial space, commands rentals as high as Rs 135-to Rs 200 a square foot when the average demand is in the Rs 50 a square foot range. Moreover, in an economic slump financial services is not expanding but contracting, which is why one has not heard of any Citigroup-like deal in BKC in the last four quarters.
Cost is cheaper in Navi Mumbai but approval delays prevent it from being a business hub
Navi Mumbai with its unique economic microcosm should have proved to be something of a game changer in Mumbai’s realty space. But sadly it failed to do so because of its inability to connect to with the rest of the MMRA region, delayed launches and government approvals for construction of more office and residential spaces. “Even through office rentals in Navi Mumbai are as low as Rs 30-Rs 50 per square foot, it never became the commercial hub as against Andheri or Lower Parel. This is because development was a slow process and that too with many loopholes, said Pankaj Kapoor, MD at property consulting firm Liasas Foras.
Real estate and infrastructure go hand in hand, they cannot be isolated
Andheri East is soon emerging as the next business hub in Mumbai as the region has a blend of commercial and residential areas equipped with better connectivity and availability of bigger spaces at reasonable price. But here too infrastructure is the biggest issue— poor roads, poor public transport, insane traffic and the prolonged metro work has begun affecting demand.
This is why real estate and infrastructure development need to be looked at as a single phenomenon while planning a city, rather than in isolation. A sealink is not the answer, what Mumbai needs is affordable homes near work places, a better public transport system and better connectivity across Mumbai Metro Region, which includes Thane, Navi Mumbai, Kalyan and other far-off suburbs.
Authorities like MMRDA have experimented with low-rental housing schemes, but these have not been very successful as a proper framework has been missing for such schemes. Limitations in such schemes include development in far-flung areas, which are not suitable as affordable housing locations and lack of means to identify end users.