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Demand for Residential & Office space demand to be 4 million units and 240 million sq.ft. respectively
6 Oct, 2010, India
- NCR ranks highest in demand for the hospitality sector, ranks 2nd for Residential
- Bangalore to see highest office and retail demand in 2010 to 2014; ranks 3rd in hospitality
- Chennai to see highest growth in hotel rooms supply in the next 5 years
- Mumbai to see highest residential demand; ranks 2nd in office, retail and hospitality
- Retail demand expected to be approximately 55 million sq.ft.
- Hospitality demand expected to be 78 million room nights
According to the Cushman & Wakefield India Real Estate Investment report 2010: ‘Riding the Wave – Re-emergence of Indian realty sector ’ released today at the Global Real Estate Institute India event , the pan – India residential demand for the period 2010 – 2014 is estimated to be approximately 4.25 million units of which mid range and affordable sectors continue to capture a significant share of 70% , while demand for office space is estimated to be 240 million sq.ft. The Cushman & Wakefield study, also estimates demand for Retail space of approximately 55 million sq.ft. with the current oversupply situation likely to stabilise only by 2013. Hospitality sector is expected to see demand of approximately 78 million room nights in the same period.
Manish Aggarwal, Executive Director, Investment Services, Cushman & Wakefield India, Cushman & Wakefield said, “With India's economic environment showing signs of stability and buoyant growth, coupled with improvement in affordability and access to finance, housing demand in the country is expected to witness a revival in the near future.”
Residential
According to the C&W report, about 60% of total estimated pan India residential demand by 2014 is expected to be spread across India's top seven cities, with Tier I metropolitan cities like NCR and Mumbai expected to account for approximately 40% of total demand. Mumbai is likely to witness the highest cumulative demand of 830,000 units as well as growth of 23% as followed by NCR which is likely to witness a growth of about 20%. After NCR and Mumbai, it is Pune that is expected to witness the highest demand in residential sector of 270,000 units during the given period. The growth in demand for residential units in Pune can be attributed to rapidly growing city population (both migratory & local population) coupled with improvement in economic environment with stimulate growth of both IT and other manufacturing sectors in this city.
While the housing sector has recorded a spike in demand over the last two to three quarters, supply largely remains constrained owing to the slow pace of construction activity during 2009–10. As a result of which, demand across the top seven cities is estimated to be three times higher than supply during 2010–14.However, this ratio differs within segments; affordable and mid segment is expected to witness about three times higher demand and EWS would be 6 times higher than upcoming supply whereas high end segment is expected to witness a demand supply gap of approximately 1.5 times, despite the oversupply scenario it is likely to witness in Tier I cities in the medium term.
Office
The Pan India office space demand over the next five years (2010–14) is estimated to be approximately 240 million sq.ft. of which the top three cities (namely Bengaluru, NCR and Mumbai) comprise 46% of the total demand signifying their continued predominance. Tier II cities such as Kolkata and Chennai are, however, likely to generate demand at a faster pace at a CAGR of approximately 22% and 17%, respectively, as some of the suburban locations have attractive price points which would add to the demand growth. Bengaluru, is expected to note the highest cumulative demand of 42.1 million sq.ft. during the period under review, followed by Mumbai at 37.5 million sq.ft and NCR at 32 million sq.ft.
Manish Aggarwal, further added, “The overall demand for commercial office space is subdued in comparison to the supply which is estimated to be approximately 400 million sq.ft. during 2010 to 2014, implying caution and the need for quality supply at the right prices.”
Mumbai is likely to witness the highest addition to stock during the period, with 60.7 million sq.ft. of office space likely to get operational by 2014. Bengaluru will be the only major Indian city where overall demand exceeds new supply as well as in most of the years if taken individually.
Retail
Cushman & Wakefield Research estimates India's retail market size at approximately US$ 600 billion in 2010; while the organised retail market accounts for US$ 50 billion based on private final consumption expenditure.
The demand for retail space across the country is estimated to be 55 million sq.ft; of which the top seven cities will witness approximately 53%. NCR, Mumbai and Bengaluru are expected to account for about 37% of the total demand. Bengaluru is likely to witness the highest cumulative demand for mall space at approximately 7.7 million sq.ft by 2014, closely followed by Mumbai with demand anticipated at 6.5 million sq.ft. Presently, there are over 200 malls across India with total retail space of approximately 56 million sq.ft. Of these, NCR itself accounts for approximately 30% of the mall supply in the country. The total mall supply expected between the period under review is approximately 93 million sq.ft. NCR, followed by Pune, is likely to witness the highest demand-supply gap over the next five years, with supply overshooting demand.
Of all the retail segments, the Apparels and Fashion Accessories category is expected to account for the highest share of retail space, followed by the Food and Grocery segment. These categories are likely to constitute 49% of total retail space demand in the long-term.
Hospitality
The demand for the Hospitality sector is expected to see a surge and is expected to be approximately 78 million room nights between 2010-2014 among the top 7 cities. NCR (34%), Mumbai (18%) are expected to see the highest demand due to the higher volume of business travellers to these cities. Approximately 12% of the demand for Hospitality is expected to be generated by Bangalore and Hyderabad.
The total room supply expected in the top 7 cities between 2010 and 2014 is 8,8000. Chennai leading the seven cities with the highest average growth of 19% in rooms supply over the next five years, followed by NCR (18%), Kolkata (17%), Bengaluru (15%), Hyderabad (15%), Pune (14%) and Mumbai (11%).
In the major metropolitan centres like the NCR and Mumbai, it is the luxurious serviced apartments sector and new high end brands are making an entry with an objective of tapping niche market segments. Tier II and III cities are witnessing supply in the mid market sector due to the increased demand demonstrated within this category.
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