Experts say that rentals in the city have bottomed out and there might not be further reduction.
The millennium city of Gurgaon, considered to be the epitome of luxury living in northern India, has been catering to a large number of expatriates and high net worth individuals for the last one decade after several Fortune-500 companies entered the market and set up base here.
Since then, capital values and rentals in the city have only gone northwards. An investment in Gurgaon housing projects is considered to be beneficial due to two reasons: one, it provides good appreciation and, two, it also assures good rentals.
However, the situation seems to have changed now. Recent reports suggest that apartment rentals in Gurgaon have dipped by almost 20-30% in the last one year. The reasons cited for this slump are completion and handing over of new projects, the slowdown in job market, and commercial leasing.
Rohit Raj Modi, president of Credai-NCR, says that the mismatch in demand and supply of residential property is mainly to blame for this trend.
“Gurgaon is emerging as a hub for business excellence for Indian firms as well as MNCs, which escalated the cost of land and, thereby, ruling out affordable and mid-income house from the portfolio of developers. Thus, most of them started to focus on the luxury end of the market.
“Given the fact that the global business has seen a meltdown over the past few years, business houses still have not been able to cope from the aftermath of their destabilized businesses. Hence, high return on investment through rental basis nosedived again with the expansion of new corridors like Dwarka Expressway and Sohna Road, which opened up new areas for development and pulled the demand for rental housing further down,“ Modi said.
However, this might not be the end of the road for people who have invested in Gurgaon realty. Much to the relief of investors, experts suggest that rentals have bottomed out and there might not be a further reduction in rentals.
Rental values in Gurgaon are expected to remain stable in the near future and, as the housing supply that arrived in the market in 2013 has been consumed, demand may increase and so will the rentals around these properties.
Talking about the present trends and the future expectations, A S Sivaramakrishnan, head (Residential Services India) of CBRE South Asia Pvt Ltd, says that the present trend is expected to remain stable for some time.
“There might be a slight increase in rentals next year, but it is believed that the market will see another slump in 2016, when the ongoing projects near completion and would be handed over to buyers. Again there would be a mismatch between demand and supply and the rentals may come down then, owing to the avail ability of more units than what the occupiers are ready to consume,“ Sivaramakrishnan said.
However, these trends do not indicate that the property market in Gurgaon is heading for a slowdown. Experts say that Gurgaon has always remained, and will continue to remain, a favored investment destination for buyers as even now the rentals in the city are much higher compared to all other cities of the NCR. More over, with nearly 400 of Fortune-500 companies having base in Gurgaon, demand is here to stay.
Santhosh Kumar, CEO (Operations and international director) of JLL India, remains positive about the growth of the market and says: “Rentals have not peaked and it is definitely not a downhill trend.
The growth of infrastructure across the city will increase the demand for residential apartments, and therefore, rentals are expected to increase in the coming times.“
Modi advises Gurgaon developers to focus more on mid level housing, rather than on luxury segment units.
Source: Times Property, Dec 13, 2014