Despite slowdown, Mumbai remains the most lucrative investment destination in India, says the second edition of Knight Frank India Residential Investment Advisory Report 2016.
In the report the top residential destinations across five major cities are evaluated and a comprehensive recommendation addressed towards the needs of the discerning homebuyer from an investment point of view over the next five years (2015–2020). The report also reviews the previously recommended destinations three years ago (in 2012).
Key takeaways:
- In Mumbai, Madh–Marve is identified as the top destination, with an expected price appreciation of 94 per cent, thereby emerging as a promising asset class for the next five years.
- Ulwe, the top destination of the MMR in the first edition of the report in 2012, scores second this time, with a 70 per cent price appreciation by 2020, while Majiwada–Kasarvadavali will experience a price appreciation of 59 per cent by then.
- New Airport Road, in Viman Nagar, is identified as a potential location, with an expected price appreciation of 63 per cent, thus moving Pune’s ranking up by securing third place, while Vishrantwadi is to witness a 55 per cent growth appreciation.
- Thanisandra and Panathur–Varthur emerge as potential residential investment destinations in Bengaluru, with estimated price growths of 61 per cent and 55 per cent, respectively, thereby securing positions in the top five ranking.
- Golf Course Extension Road and New Gurgaon emerge as potential destinations for residential investment in NCR, although NCR’s ranking has come down drastically compared to 2012 due to the overall real estate scenario bottoming out.
- Hyderabad makes its entry in the second edition of the report, with the Puppalaguda– Narsingi cluster emerging as one of the potential destinations for residential investment.
Mumbai (MMR):
- Madh–Marve emerges as the most lucrative potential destination, with an estimated price appreciation of 94 per cent in the next five years.
- Ulwe, still in the list of potential destinations as featured in the first edition of the report, continues to be the other top destination, with a 70 per cent price appreciation in 2020.
- Majiwada–Kasarvadavali, the next investment destination, is expected to see an appreciation of 59 per cent by 2020.
- The key drivers for the MMR will be employment; physical and social infrastructure; an arterial road network and the proposed suburban railway networks (metro and monorail), the Costal Freeway and the trans-harbour link.
Delhi (NCR):
- New Gurgaon has emerged as another potential destination, with the expectation of a price appreciation of 47 per cent.
- Golf Course Extension Road is expected to witness a price appreciation of 42 per cent by 2020.
- Delhi will continue to be a favourite among office occupiers; however, with limited scope for new supply, prices in the area will remain unaffordable.
- Gurgaon, which accounts for 53 per cent of the total office stock in NCR, will witness approximately 13 million sq ft of incremental office space by 2018, which will translate into more than 100,000 jobs, giving it an edge over Noida.
Pune:
- New Airport Road, in Viman Nagar, is to witness a price appreciation of 63 per cent by 2020.
- Visharantwadi, in the east, is expected to see a price appreciation of 56 per cent by 2020.
- Locations such as Hinjewadi, Wakad, Tathawade and Ravet failed to perform as per the estimated price appreciation three years ago, mainly due to the ample availability of vacant land in the vicinity. Nevertheless, it has performed better than the other established locations of Pune.
Bengaluru:
- East Bengaluru emerges as the top residential market, with Panathur–Varthur expecting a price appreciation of 61 per cent by 2020.
- Thanisandra, in the north, emerges as the top destination, with an expected price appreciation of 55 per cent in the next five years.
- Despite the presence of IT/ITeS companies, South Bengaluru witnessed a slackened price growth due to severe traffic congestion, a lack of substantial incremental employment opportunities and lack of infrastructure development.
- The industrial tag in the past and the launch of relatively higher-priced residential projects in select micro-markets presently are impacting the price momentum in West Bengaluru.
- The previously recommended locations of Hebbal and K.R. Puram witnessed mixed outcomes, with Hebbal showing a positive growth trajectory and K.R. Puram demonstrating slow growth.
Hyderabad:
- The Puppalaguda–Narsingi cluster is to witness a 41 per cent growth appreciation by 2020 owing to strong demand and restricted supply. Besides the existing 50 million sq ft of commercial office space in the adjoining areas, the additional 10 million sq ft that is expected to be added in next five years would potentially add another 125,000 employees to the demand base, further supporting price growth in this location.
- Uppal and L.B. Nagar in the east and Falaknuma in the south are also expected to see significant improvements in terms of connectivity through the metro; however, locations with comparable prices in the west will prove to be strong competition, as they are in closer proximity to the western employment hubs.
- The premium Banjara Hills and Jubilee Hills markets will see price appreciation as well; however, investment returns will lag as compared to their more affordable counterparts.
Dr Samantak Das, Chief Economist & National Director, Research says, “The residential sector in India is reeling under tremendous pressure since the last couple of years, with price appreciation in most cities not even able to exceed the inflation rate in the economy. In the next five years, we anticipate the residential price growth to remain muted on the back of delayed economic reforms, subdued demand and a lack of consumer confidence in the completion and delivery of projects. However, at Knight Frank, we strongly believe that any investment in real estate based on sound research can seldom go wrong, and there are ample opportunities to earn healthy returns even today.”
“We have identified 11 locations spread across Mumbai, NCR, Bengaluru, Pune, Chennai and Hyderabad that will provide the maximum price appreciation in the range of 41% to 94% in the coming five years. While Madh–Marve in Mumbai has been identified as the top investment destination, Ulwe in Mumbai and New A’irport Road in Pune have emerged as the second and third potential destinations respectively,” adds Das.
Mudassir Zaidi, National Director, Residential Agency says, “Real estate industry is cyclical in nature and we anticipate that we are at the end of the cycle of slow down. The wave of positive sentiments is quite evident and the recovery is getting stronger. With the real estate regulatory amendments, credibility and positivity is building up confidence in the minds of the investors who will sooner or later get drawn back into the market. The locations we have identified will benefit from the overall positive sentiments provided the recovery sustains and gets stronger in the near term.”
“The residential market demand in each of the selected destinations will be driven primarily by two factors – employment generation and infrastructure development. Madh-Marve (Mumbai), Ulwe (Mumbai) and New Airport Road in Viman Nagar (Pune) have emerged as the top, second and third amongst the 11 destinations identified, due to the factors cited above,” adds Zaidi.
