Investors across real estate segments – residential, commercial and land – are rushing into Gurgaon which saw large sales across financing and land acquisitions in excess of $1 billion, double that of 2015.
Last year, Gurgaon market attracted around $500 million in investments as investor were in a wait-and- watch mode towards outlook and an expected recovery.
While land accounted for 42.55 of the total investment pie, followed by refinancing of residential assets at 42.1% and core assets (rented office property) at 15.3% respectively, estimates CBRE South Asia.
“Owing to its cosmopolitan status and conducive environment, Gurgaon continues to evince active interest from real estate funds, local and international developers as well as corporates. It has always been the investment gateway to NCR due to its critical mass in real estate development and existing social infrastructure,” said Gaurav Kumar, managing director of capital markets at CBRE South Asia.
Gurgaon commands a lion’s share of office leasing in the NCR region driving significant institutional interest as well as investment commitments to capture the growth wave of increasing lease rents and high sale prices.
Some of the large transaction in Gurgaon includes M3M acquiring 180 acres of land from Sahara Group for $180 mn for a residential project. Tata Realty and Infrastructure acquired a 25-acre IT SEZ zoned land parcel from M3M abutting Sector 58 near Golf Course Extension for $60mn. Additionally RMZ/QIA purchased a 730,000 sq ft IT Park from BPTP located along the Delhi-Gurgaon expressway in Udyog Vihar for $180mn.
“Gurgaon is the potential market for office spaces in north India and assumes a prominent position in RMZ acquisition strategy. We have already acquired a marquee asset from BPTP which we have christened RMZ Infinity, Gurgaon. We are exploring both greenfield and brownfield developments as a way of expanding our presence in north India, which we hope to take up to at least 5 mn sq ft over the next three years in this Gurgaon micro market of NCR.,” said Arshdeep Sethi, MD -Development of RMZ Corp.
“We foresee constraints on new office supply side in the future, opening up tremendous opportunities to capture significant market share. Even valuations in the recent couple of years, especially in residential, have been depressed. This, combined with the limited number of office players in the market, provides growth opportunities in terms of returns and market share,” he said.
Prominent funds like Piramal Fund Advisors, Xander, JP Morgan, Altico Cpaital, GIC and Blackstone have either invested or are evaluating opportunities in Gurgaon. “We will look at last mile financing for projects in advanced stages of construction and sales. We will also evaluate and fund projects wherein credible corporate houses such as Godrej have tied up, under joint development arrangements, with existing land owners and developers to market and construct projects under their corporate brands,” said Sanjay Grewal, CEO for Altico Capital.
The fund recently invested Rs 50 Cr transaction with Noida based Lotus Greens group for a residential project. It had earlier invested Rs 450 crore for a Sports City project with the builder.
The city also has couple of million dollars transactions in the pipeline with DLF’s rental portfolio of office assets alone estimated to attract over $1-1.3 billion for a 40% stake sale. Ascendas-Singbridge, a leading sustainable urban and business space solutions provider, has also recently announced an investment of $ 400 mn to develop an IT office SEZ in Gurgaon.
“Gurgaon is the focal point of economic growth in NCR and the second largest office market in India with significant investments made by large multinational corporations. With over two decades of experience in India, we will bring our best practices to ITPG and provide best-in-class business space and asset management services in Gurgaon,” said Sanjay Dutt, CEO, India Operations, Ascendas-Singbridge.
Renewed interest from institutional investors has also prompted builders such as Vatika, Tata Realty, Hines and M3M to join hands with strong institutional investors to actively acquire strategic land positions within emerging areas of Gurgaon; a clear indicator of long term dividends from such investments.
“The past few years have been challenging for residential markets with stagnant off-take levels. In such a scenario, renewed interest by institutional investors is explained by several factors including current pricing for housing being at replacement cost levels, thereby providing limited downside risks for investments. Interest rates are at their lowest in the past five years,” said CBRE’s Kumar.
Multiple Chinese developers are evaluating Gurgaon as their first market for investment. Wanda, a prominent Chinese developer acquired 500 acres from the Haryana government for a green field industrial township.
In addition to the healthy investment activity over 12-18 months, the pipeline of future investments is even stronger. Institutional investors are bullish on the long term outlook with commercial office markets in overdrive and emerging areas of Gurgaon offering excellent residential development opportunities.