REAL ESTATE is picking pace in WESTERN REGION

Maharashtra and Gujarat are key economic hotspots in India. Mumbai, Pune, Nashik in Maharashtra and Ahmedabad, Gandhinagar and Vadodara in Gujarat have shown immense growth in the real estate sector over the last few years. As per the economic survey 2020-21, Maharashtra contributed the highest share at 14.2% of India's nominal GDP. The western region has an immense potential to drive the real estate market with Mumbai, Pune and Ahmedabad playing a huge role.

Mumbai

Mumbai, the financial capital of the country, has for long been established as a trade centre. The city's growth started from the island city, expanding towards the suburbs and Navi Mumbai. The growth over the years has been led by swift infrastructure developments over the decades. The city has leading developers like Godrej, Lodha, Runwal, Piramal and Hiranandani, who have aided the creation of housing in the city. Mumbai Island city has a total of 976 registered projects out of which 76% are residential. Mumbai suburban area has 2,859 registered residential projects of a total of 3,882 registered projects.

Over the last year, steps were taken by Maharashtra Government, such as stamp duty cuts, residential property registrations aided the residential market in Mumbai. In 2021, property registrations rose 53% from 2020 and 20% from 2019 in MMR to about 242,000 units. Moreover, the implementation of RERA has infused increased confidence amongst home buyers. MahaRERA is one of the most efficient enforcement agencies in the country.

As per the current PMAY, around 2.2 lakh houses have been sanctioned in Greater Mumbai, of which around 45,991 houses have been completed. This covers a total investment of Rs 9,199 crore . About 1.7 lakh units have been commissioned in the Mumbai, Thane, and Navi Mumbai regions. While the demand is yet far higher than the supply in the affordable segment, timely implementation and achieving the target can be beneficial for the affordable segment.

On the office real estate front, Mumbai has about 118 million sq ft of Grade A office stock, accounting for about 20% of stock in the country. The city is home to leading financial companies with Bandra-Kurla Complex being the hub, followed by several other markets such as Andheri East, Navi Mumbai etc. The weighted average rentals of the city at Rs 138/sq ft per month, makes it one of the most expensive across the country.

After seeing muted demand for leasing due to the multiple Covid-19 waves, the office leasing activity has started picking up since H2 2021. Gross absorption for office spaces increased by 72% YoY in Q1 2022, with 1.3 msf of Grade A gross absorption. Rentals have remained stable so far but are likely to firm up from H2 2022 with increase in demand. New supply of office space remains muted and decreased 78% YoY. This was in the backdrop of the uncertainty following the third wave and increased vacancy in the quarter. However, with business confidence increasing, office supply is expected to increase, especially in Thane and Navi Mumbai.

While the city's real estate market is bouncing back now, the ease of living is also set to improve led by various infrastructure initiatives. Key upcoming infrastructure projects like Navi Mumbai international airport, Mumbai Trans Harbour Link (MTHL), and Mumbai coastal road project connecting South Mumbai to western suburbs are likely to have a favorable impact on real estate in the surrounding micro markets. With multiple upcoming projects, the demand for office and housing is likely to surge in Navi Mumbai and Thane, while allowing better living standards. Overall, the city renders a positive outlook for the real estate market driven by robust infrastructure projects and government support.

Pune

Pune, with diverse job opportunities and steady acceleration in leasing and housing demand, is a much sought-after city. The city, which is a prominent educational hub, has seen corporates flourishing over the last few decades.

Pune has been expanding since 2002, led by the IT sector. The city is conducive for businesses across technology, e-commerce, trading and manufacturing. Pune has around 60 million sq ft of Grade A office stock accounting for around10% share at pan India level, with stable weighted average rentals of Rs 74.9/sq ft per month.

In Q1 2022,Pune witnessed 4.8 times increase in office leasing with gross absorption of 2.2 million sq ft. Flex space continues to account for a dominant share at 47% in leasing volumes followed by e-commerce and technology. The city witnessed a robust supply of 3.2 million sq ft off-CBD East sub-market comprising Viman Nagar, Koregaon Park and others witnessed the highest demand and supply in the city, accounting for 36% of the total demand and 53% of the total supply. Overall, office rentals have remained range-bound across the city post-Covid-19. Considering the steady demand and supply, vacancy is expected to remain range-bound by the end of the year.

Post Covid-19, the city saw increased housing sales due to the rise in demand for units falling under Rs 45-75 lakh range. With an increase in demand, average property rates experienced a rise, compared to the previous quarter. Pune is likely to have active sales in the coming quarters owing to the smooth completion of existing under-construction projects coupled with robust job growth.

As per the current PMAY stats, around 1.3 lakh houses have been sanctioned, with about 96,723 houses completed. Timely completion and allocation of units will play a pivotal role in fulfilling the demand for affordable housing in the city.

As per MahaRERA, Pune comprises around 6,282 residential projects and 638 commercial projects. The state has received around 17,456 complaints out of which 16,586 are against registered projects. MahaRERA has been actively resolving the issues of homebuyers, which is leading to increased homebuyers' confidence and curbing the challenges faced by them.

Major infrastructure projects in the city include the recently inaugurated 12 km stretch of the total 32 km Pune Metro Rail Project connecting two prominent tracts in two metro lines - Garware College to Vanaz and Pimpri Chinchwad Municipal Corporation to Phugewadi. This is likely to have a positive implication for both commercial and residential real estate market in Off CBD West, CBD, Hinjewadi micro markets. The initiation of the Mula-Mutha riverfront development project is likely to bring a huge spurt in demand for the real estate sector especially in Baner, Hinjewadi, Kharadi, off CBD East and West.

In conjecture to upcoming infrastructure developments, improved business sentiments, and the resultant boost in job opportunities is heralding Pune into a more prominent market.

Ahmedabad

Ahmedabad's historic footprint in trade, and commerce, along well connected inter- and intra-city infrastructure makes it one of the most prominent locations for real estate development in the country. Companies across sectors in Ahmedabad have now laid their tracks towards expansion, welcoming young professionals with eclectic job opportunities.

The city is seeing a revival in the office sector post the three waves of Covid-19. The housing market remained strong in the second half of 2021 for Ahmedabad. North and west parts of the city are the major residential areas in the city. Plotted developments and gated bungalow communities are seeing a boost post-Covid-19. The hybrid working model and online education has boosted the demand for home ownership in affordable and mid-segment residential category. The demand for high-end luxurious houses has fast-tracked as people resort for spacious houses post-pandemic. As per the economic survey 2022, Covid-19 shocks failed to hit housing prices in the city. Prominent residential growth magnets include Vaishnodevi, Shela, South Bopal, Ambli and Gota.

Gujarat has the 2nd highest RERA registered projects in India. According to GujRERA, there are 3,117 registered projects in Ahmedabad out of which 1,274 are residential and 588, commercial. About 36% of the residential projects correspond to affordable housing segment. As per PMAY, the city has around 2.6 lakh houses which have been sanctioned, 2.1 lakh houses are under construction and around 1.6 lakh houses completed with a total investment of Rs 27,227 crore.

The demand for office space in the city is led by technology companies. Post Covid-19, the demand for flex spaces has surged owing to flexible leasing terms. The city still experiences a dearth in the availability of Grade A office buildings. Prominent office areas include Bopal-Ambli Road, Sindhu Bhavan Road, Science City Road and Corporate Road Extension towards Makarba.

The GIFT City (Gujarat International Finance Tec-city) has 3.6 million sq ft of commercial stock. Rentals here range from Rs 35-50/sq ft per month. It is an ideal destination for technology and BFSI companies. The announcements made for GIFT City and International Finances Services Centre (IFSC) in Union Budget 2022 including tax exemptions on ship-leasing and financing at IFSC will boost investors' confidence. New supply of almost 64 million sq ft of Grade A commercial space in GIFT city will give a huge boost in the sector and open avenues for investors.

The 39 km proposed Ahmedabad Metro Rail Project Phase-I covers the North-South corridor from APMC to Motera Stadium and the East-West corridor from Thaltej and Vastral. This will boost the connectivity throughout the city and induce high-density transit-oriented development. 19 local area plans have been proposed for western Ahmedabad. This shall increase accessibility, ease congestion, and which shall provide a boost to the real estate sector.

Continue to grow

Overall, the three cities have significantly grown over the last few years and will continue to play a pivotal role in the growth of the west region. Although growth in Mumbai Island city seems to have saturated, the ongoing infrastructure development in the peripheral areas is likely to spur growth. Pune and Ahmedabad are fast developing markets where business sentiments have significantly improved. The upcoming quarters will bring forth the true potential as markets have reopened and there will be a revival in demand. Additionally, these cities are seeing increased traction from emerging asset classes which will contribute to the growth of the region.

- Vimal Nadar

Senior Director - Research Colliers India

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