22nd May, 2023 - Gurgaon - sustained drivers for real estate action

Property Markets in Gurgaon India continue to perform well over the last few quarters. We delve into the functional and specific attributes that cause the flow of real estate activity in Gurgaon to be a sustained one as now all asset classes perform efficiently.

Gurgaon as a market is in breadth and depth an interesting one. One has residential tickets streaming from 2 Cr – 50 Cr.

On the office leasing front one has rents of starting 40 psf to 200 psf for grade B uptill grade A space in key submarkets.

Retail space besides the main malls and ambience mall, encompasses areas like galleria crosspoint for highstreets and all the way to small shops in golf course extension.

The main drivers of markets here are the following :

1)    Boom cycle in Gurgaon this term has been rather independent of other market cities in sequence. This means if in previous booms Mumbai or Bengaluru started first on the tracks, Gurgaon has had its own velocity pertinent to varied stakeholders across asset classes

2)    Structurally speaking even office leasing markets now see minimum supply on our yearly trackers a component of this being enterprise demand is strong

3)    Enterprise demand for office space in turn creates residential catchments and scope for deals in various segments

4)    The market is Gurgaon has a combination of speculative & end user driven fundamentals in fairly equal split now

5)    On institutions, FII and funds have picked up core assets, greenfield and continue to scout for latent potential in the asset classes of their preference

6)    Retail is in full flow as shoppers and customers of manufacturing cos find themselves in a good spot on choice in Gurgaon

7)    Disposable incomes from the middle end upwards have risen dramatically over the last 5 years even precovid

8)    Our trackers of market sentiment future forecast that flows into assets of property will sustainably run for the next 3-5 year period with good growth. Sentiment in this case is backed by strong fundamentals

So if capital values have moved the way they have over the last year or so, and continued enterprise demand for commercial space is on, we also ascertain certain natures of the demand side in terms of profiles to see where the money is coming in from :

A)    Corporate occupiers opt for both traditional & flex space in a diverse market offering to strengthen their real estate portfolios

B)    The portfolio offerings for commercial space now cater to both Indian & MNC, startups, large industrialists, SME, manufacturing cos, and tech driven firms besides BFSI.

C)    Real estate investors of residential assets stem from local demand, NRI HNI and UHNWI, companies and Funds to name a few

D)    Retail catchments have brought the fancied interest of small local chains, big name brands and mom & pop outfits in varied locations in Gurgaon

Our Property Portfolio Advisory for niche clients monitors movements in markets and portfolios of HNI and MNC assets since the last few years. Our experience of transactions across types since 2006 helps us really see how the market has really evolved. From a largely primary market driven we are in much more mature framework as secondary stakeholders benefit from gains on the market long and short.

Factors that will likely help growth of markets real estate for the next few years:

1)    Indian economy on the macros is on a strong footing. The talentforce we have is amazing

2)    Policy has been consistent and led growth of assets and business volumes over the last two years. Unless of a financial contagion across global markets we don't see India slowing down

3)    Supply demand mismatches continue as demand side chases assets and office space

4)    Most micromarkets report growth of between 6-10% in office rent yoy and residential from 10-30% .Sustainably the fulcrum segments are doing well

5)    A word in on residential rentals. We see no major supply to hit the market on a yoy basis in core offerings. This could represent a problem to tenancy. But as we're seeing tenants have turned buyers in more spread as an interesting phenomenon

6)    Again investment scope for FII in the city in commercial and residential space is large. They look long term 5-10 year bets

Biggest challenge to the eco-system may be infrastructure advances in remote areas. This is indeed of concern as the honest citizens must get their due for which government departments must ramp up efficiency in remote areas for basic amenities in Gurgaon.

Outside India too, At Future Gold we're seeing investment scope into the market at large a telling sign. Deal times are down. What we're seeing is steady growth year on year rather than exponential spikes in the property charts. This bears well for long term fundamentals.