Noida Commercial Real Estate: An Opportunity for Investors

The recent reports released by JLL India and Knight Frank indicate that commercial real estate has grown in India in the year 2016 at a very steady rate. The report also shows an upward growth in PE investments in the real estate sector. Overall, the commercial real estate is out of the dark and promises a bright future ahead.

There have been many ingredients to this growth recipe. Steady lease rentals, high absorption levels, inadequate supply and global investor interest are some of them. However, one phenomenon which has scripted this turnaround of commercial real estate in last 2-3 years is the inclusion of global standards as a practice by Indian developers. With improved economy and political stability post the year 2013, investors around the world turned towards India. The growth story of logistics and e-commerce along with IT and ITes further filliped the demand. The result was an excessive demand for commercial spaces with global standards. Unlike the fragmented residential market, a few leading developers grabbed this opportunity and focused are building Grade-A office space in key cities. As per JLL India, around 38.4 million sq. ft of Grade A space is expected to be built in 2016, of which around 33 million sq. ft is likely to be taken up on the lease.

The multinational companies who are present in India as well as those who have recently entered to Indian markets prefer Grade-A properties; Noida is slowly gaining the limelight when such Grade-A commercial properties are concerned. Talking about the largest office leasing deals concluded In India in last few quarters, three out of ten happened in Noida. Tata Consultancy Services leased around 400,000 sq. ft. of office space in Okaya Tower at Sector 62, Noida. Vivo Mobile, the Chinese multinational technology company, leased around 250,000 sq. ft. of office space in World Trade Center at Greater Noida. Oppo Electronics Corporation leased around 160,000 sq. ft. of office space in ASF Synergy at Sector 63, Noida.

Noida enjoys a strategic location and acts as connect for Delhi with its immediate southeast markets. Cities like Agra, Mathura, Aligarh, Meerut, Jhansi, Kanpur, Lucknow etc. are connected with Delhi and Punjab through Noida. With Yamuna Expressway being operational, Noida has further strengthened its position as the commercial hub of Delhi NCR.

There is an increasing demand in the commercial real estate segment. With improved transparency, implementation of RERA, proposed GST, and many other global developments, the demand is expected to grow further. On the contrary, the supply to match this increasing demand is inadequate. It is, therefore, a perfect time to invest in commercial real estate. The segment has started rising; this growth is there to continue for many years.  

Indian commercial real estate 2016 vs.2017

India, popularly known for her never ending population and pollution, slapdash politics, democracy and diversity, is emerging as a hotspot for both manufacturing and investment. Our country has risen as a perfect business spot in the rampant global economic turmoil.

Infrastructure and real estate are two very crucial sectors for any developing economy. Stimulated by a number of positive factors, real estate sector has seen massive growth in recent times and proposed to grow further in coming years.

It is the second-largest employment-generating sector after agriculture and has contributed 7.4% to India’s GDP in 2014-15 as per the Economic Survey of 2015-16. According to industry analysts, among other sectors, real estate services (categorized alongside financial, insurance and professional services) registered an annual growth of 9.4%, accounting for about 23% of the quarterly GDP recorded for the period.  

Real estate ownership in India is fragmentary and is divided into organized players, unorganised players and small developers. All the sectors have immensely contributed towards the development of the sector as a whole with commercial sector being the foremost driver.

Assisted by the strong government policies and reforms, commercial sector has seen an upturn in the current year. Recent announcements in the sector such as RERA and the exemption of Dividend Distribution Tax (DDT) has boosted not only investors’ sentiments but also enticed huge foreign investment into the sector.

According to industry reports, here is the quick list of changes that took place in commercial real estate sector in 2016:

•     Office space leasing surpassed the 50 million square feet (msf.) mark in 2015 in the top eight cities
• Total FDI in the construction sector, from April 2000-March 2016 stood at US$ 24.188 billion.
• During April 2000-March 2016, total cumulative inflows in the construction development sector accounted for 8.4 per cent of total inflows into the country.
• This year we all have witnessed that the sector is moving from an investor-driven to an end-user driven cycle.
• Large number of MNCs and blue-chip companies were seen purchasing office space in both ready for fit-outs and under construction buildings in top most cities for self-use and investment purposes.
• Companies such as IT and ITeS, retail, consulting and e-commerce have also seen registering high demand for office space in recent times
• Private Equity (PE) investments from foreign funds in the Indian realty market increased at a Compound Annual Growth Rate (CAGR) of 33 per cent to US$2,220 million in year ending December 2015.
• Transaction sizes have improved in 2016, and commercial projects have attracted a substantial amount of capital.
• Delhi-NCR remained the biggest office market occupiers with 88 million sqft out of 110 million sqft of land.
• The Make in India initiative has helped to accelerate leasing of commercial property by the manufacturing sector, which has outpaced the Information Technology (IT) sector by registering two-fold increase in office transacted space in the first six months of 2016.
• The introduction of 100% FDI under the automatic route has attracted large number of foreign investors in to the sector
• With the introduction of the Real Estate Regulatory Act (RERA) and Benami Transactions bill in place, the risk factor formerly associated with the sector has been reduced up to a greater limit.
• The much awaited the Goods and Services Tax (GST) is all set to be implemented and the recent demonetization move to clamp down black money hoarders from the sector has brought transparency and correction in real estate valuations

India being accounted for half of Asia’s total office leasing itself substantiates the enormous growth of the commercial sector in the country. Commercial real estate is growing significantly, providing the much-needed infrastructure for India’s growing needs. The segment is expected to witness an upswing in 2017 with leasing activity improving in the country. The recent government’s policy announcements are believed to play strategic role in coming years (2017 ahead) in removing major inconsistencies from the system. The Indian real estate market is expected to touch US$ 180 billion by 2020.

Last but not the least, with demonetization move, the sector is proposed to see transparent dealings, leading to a very strong foundation for long-term growth. The organized segment is expected to gain strength with more emphasis on cashless transactions. Real Estate Investment Trusts (REITs) are likely to maintain positive earnings growth in the coming year. Hence we can see that, the government’s incessant focus to upsurge the comfort of doing business in India by introducing investor- friendly policies will definitely going to unravel the development potential of commercial real estate sector in 2017.

Noida, an Upcoming Commercial Hub of NCR

Noida has been witnessing the growth in the commercial sector over the last few years. The real estate sector of Noida is flooded with the upcoming properties, both residential and commercial. The number of people looking to invest in the National Capital Region, especially Noida is increasing by the day, city’s commercial real estate sector has witnessed an incredible growth in past few years. 

            

In recent times, the city has emerged as one of the most preferred destination for property investors in India due to its proximity to New Delhi. The city has witnessed large scale of commercial real estate developments. One of the reasons of such growth is the availability of big commercial plots in Noida at affordable price. Most of the big corporate houses are looking for 5 star facilities within their office and as a result developers are launching their commercial projects with all five star facilities, which are in much demand from national and international corporate houses.       

   

Noida’s Sectors 61, 62 & 50 are most preferred places to buy and rent property. All three of these sectors are located centrally within Noida and Delhi just 30-45 minutes away, and considering the kind of infrastructure these sectors offer, it is a complete package for an end-user.

According to industry reports, the commercial real estate in Noida has been performing well for the last few years, and hence, Noida alone occupies 36% or 2, 51,770 sqm of the office space. In Noida, the technology sector, with 60% share, remained the key driving force in office rentals space. Tech companies are continuing to fuel the commercial market growth and the city has emerged as the preferred IT and industrial centre.  

Noida continues to show positive sentiment, despite industry’s uncertainties. Many MNCs have marked their presence here across different domains like KPO, BPO, insurance, pharmaceuticals, automobile, manufacturing and FMCG. The city is an important transport and logistics node on the North-West corridor, and also an essential IT/ITeS destination in NCR second only to Gurgaon.

As a speedily developing satellite town, Noida’s good connectivity and full-bodied infrastructure riveted investors and occupiers to set up base in this market. The 24 km, six- lane expressway, connecting Noida to greater Noida, is slowly emerging as a new commercial corridor in NCR, whereas Delhi-Noida- Direct (DND) Flyway has added enormous value to the city’s commercial advancement.

Here is the quick list of factors proving Noida to be an upcoming commercial hub of NCR

• The city also supports robust social infrastructure, opening several fun and entertainment avenues to the vicinities
•  Excellent infrastructure, power supply, metro connectivity, Yamuna Expressway and improved roads coupled with skilled manpower has helped Noida to regain the market
•  With the launch of Yamuna Expressway and approvals of Metro to Greater Noida, the value of the area has also increased many folds. The value of both commercial and residential property has increased by 12-15 percent
• Companies such as SafeNet, IGATE, Genpact, Jubilant FoodWorks Ltd, NEC, Dell and Newgen are some of the major occupiers, with transactions ranging between 60,000–90,000 sq ft.
• Big MNCs and blue chip companies have also shifted their base location to Noida and Greater Noida, with transactions ranging between 60,000–90,000 sq ft.
• The affordable property rates ranging between Rs. 45–70 per sq ft offers this city an added advantage over similar locations in NCR.
• Greater Noida is emerging as a realty hotspot for commercial and residential properties.
• As the city is close to central Delhi and Noida, it provides a good residential solution to working people.
•  Besides, as a number of corporate houses have drawn out plans to start offices here, it will provide good employment opportunities to residents.
• A number of category organised players are entering into the commercial segment in Noida and Greater Noida.
• Good connectivity, a ready residential catchment and large land parcels are acting as enablers for the office market along the Noida–Greater Noida Expressway
•  The Noida authority has reserved approximately 3 lakh sq m of land for development along the expressway and has made allotments to 15 companies, including IT major Infosys, to set up campuses on one lakh sq m of land.
• The recent luxury launches are the indication that feasibility and viability of high-end commercial projects is now gaining traction in Noida
• There are more than 40 educational institutions, Planned Export Promotion Groups, Taj Economic Zone with Yamuna Express Ways which is further influencing the commercial market value in this area.

Undoubtedly, Noida has arisen as the commercial hub for people and investors who are looking to make fast bucks. There are so many projects in the pipeline which will have all the premium facilities and is targeting high net worth individuals and big corporate houses. Good connectivity along with plethora of other factors will definitely augment commercialization in the city. With government’s continuous effort to boost real estate and infrastructure in the city will definitely drive growth and deliver maximum to the citizens.

Noida: The city of Joy

India being the largest urbanized nation in the world is under the constant pressure of two forces- rapid rate of population growth and increasingly rapid rate of migration. Urban areas here have been recognized as ‘’engines of inclusive economic growth’’. Being economically and infrastructurally advanced, Noida has very closely observed the paradigm shift in the realty growth.

The smoothness of the landscape and the infrastructure govern the development of any city. The evolution of any city is defined either by its design (infrastructure) or by its residents (the first movers). Hence, they are the ones who give a definite outlook & shape in terms of urban planning and overall outlook of the given city. This has been the pattern of urbanisation and rise and growth of the cities across the world with India (especially Noida) being no exception.

In 1970, Noida, the New Okhla Industrial Development Authority, was set up as an industrial town to encourage small industries and as an outreach to Delhi’s lack of space for industrial areas. The reason behind this establishment is also to create a wider gamut to support the unceasing space requirements in Delhi, which had emanated due to increase in inwards migration and spiralling development levels. 

Noida, as a matter of fact, has witnessed a tectonic shift of realty during the last two decades led by the market forces. The city has also shaped up as one of those rare markets where the demand supply gap is much lesser than many other markets across the country. Great infrastructure, good road network and metro connectivity to all key destinations are the prime reasons that have enticed the buyers and investors to this area.

Noida has grown stupendously beyond an industrial extension to full-fledged modern city in past three decades. Today, it is one of the most trusted investment destinations in the country. The city boasts of an impressive development plan that includes access to international-level-retail facilities. It has ascended as an ideal land of opportunities for both business as well as investment. The number of people looking to invest in the National Capital Region, especially Noida is increasing by the day, city’s commercial real estate sector has witnessed an incredible growth in past few years.                      

Being a leading business and residential hub, Noida’s prime location has always attracted buyers and investors. The city has also emerged as a popular destination for corporate offices which used to flock to Gurgaon earlier. Big MNCs and blue chip companies such as Genpact, Goodyear, Reckitt Benckiser, HCL, Honda, Wipro, Escorts, Pepsi etc. have profoundly influenced the real estate value of the city. The city is also attracting large interest from young professionals from IT/ITeS sector, especially BPOs. From residential projects to integrated townships, commercial projects to swanky malls and mixed-use developments, Noida is throbbing with activity.

According to industry experts, to establish Noida as the hottest property hub, the industrial and commercial policies by GNIDA has helped in infrastructural advancement in the region and commercial actions have taken off in right earnest.

The emergence of Noida as a city with global standards had been a roller coaster ride. Noida, due to its proximity to Delhi, has developed into a land of myriad opportunities and demand for properties in Noida is soaring high. The city being accountable to increasingly well-informed consumers and investors, meeting their growing needs and professionally managing multiple projects, has shifted the commercial real estate game in its favour. With high end infrastructure and premium facilities, the city has become a rapid-developing real estate destination in comparison with other areas in Delhi/NCR. 

With massive infrastructure work in the pipeline, Noida will be in the limelight for progressive growth of residential and commercial hubs in near future and will continue to grow on the fast forward lane of prosperity.

Indian Commercial Real Estate Sailing high on RERA, GST and REITs

The year 2016, would be recognized as the year of many key decisions like GST (Goods and Services Tax), RERA (Real Estate Regulatory Authority), Smart City Projects, demonetization etc. and many more lying in the pipeline. Being one of the major contributors into the Gross Domestic Product (GDP) and connected to more than 25 allied industries, year 2016 had opened new windows for commercial real estate sector. Going forward in 2017 commercial realty market expects authorization of key policies and reforms that largely favors the segment.

Government’s current efforts to bring transparency in the sector have been implemented for improving the ease of doing business in this sector, as well as to boost investors’ confidence. Once implemented in the right spirit, these measures are likely to fascinate more institutional investments and FDI into the Indian commercial realty market.

Let’s look on to some of the reforms and see how they have benefited the Indian Commercial Real Estate Market:

Real Estate (Regulation and Development) Act or RERA: This act was passed in March 2016, covers both residential and commercial realty segments. RERA has the potential to bring in greater transparency, improve the bargaining power of the consumer (vis-à-vis the companies) and be a key enabler of genuine demand over the longer term. This indeed is a huge step towards solidifying the commercial real estate business in India.

According to industry experts, the Real Estate Regulation Act has boosted the sentiments in the commercial segment as the sector is expected to become much more transparent and organised which in turn will benefit all stakeholders.

Goods and Services Tax (GST): The amendment of this landmark Good and Services Tax (GST) has been India’s biggest structural reform in decades. It is expected that under the GST regime, there would be a smooth flow of credit and current restriction on construction related credits not being available for offset is likely to be removed.  This would help to reduce the project costs in the hands of the developer, and have a positive effect on rentals.

According to the industry experts, this landmark bill would reduce harassment which is there due to multiple taxes today.

Moreover, the GST regime is expected to impart greater transparency through market mechanism, it is imperative that real estate transactions forms an integral part of the proposed GST design. 

Real Estate Investment Trusts (REITs): The introduction of REITs is yet another game changing policy initiative by the Government.

According to industry experts, with huge potential in Indian commercial market REITs will facilitate investments into the country. Currently, around 229 million sq. ft of office space is REIT-compliant. Even if 50% of this space were to get listed in the next few years, experts are looking at a total REIT listing worth $18.5 billion. As India is witnessing a growth in its commercial assets, there will be more opportunities for REITs in upcoming years.

With a compelling need for additional funding mechanisms, the effort to allow REITs is yet another step towards the organised development of the sector.

The passage of GST and RERA have been one of the biggest highlights of the year that is sure to benefit the commercial sector in the long run. The commercial real estate sector has been continuously endeavouring to improve their stretched capital structure and with Govt initiatives industry has high hopes to retain its position as a bright spot in the global economy, with better growth prospects expected to support office space leasing in 2017.

Additionally, the policy announcements and reforms to recuperate the commercial real estate space, including the relaxation of Foreign Direct Investment (FDI) norms, introduction of 100 smart cities, direct and indirect tax benefits for affordable housing projects, the implementation of RERA, GST and Real Estate Investment Trusts (REITs) have helped in generating a positive outlook in the commercial segment. These reforms and policies are further expected to work towards enabling ease of doing business in the country, while supporting corporate entities entering or expanding their footprint across leading cities in India. 

Evolving Landscape of Noida Commercial Market

Indian real estate market has emerged strongly from the recent global downturn, and commercial construction have seen breaking numbers in the recent past. India is gaining eyeballs globally, which is a positive step towards the development of the country.

Riding on the momentum, Noida has become the hot-spot for commercial and residential properties with planned infrastructural advancement. With enriched infrastructure, world-class residential, commercial and educational facilities the city has not only engrossed maximum home-buyers but also big corporate, start-ups and PSUs. With high end infrastructure and premium facilities, the city has become a rapid-developing real estate destination in comparison with other areas in Delhi NCR.
To establish Noida as the hottest property hub, the industrial and commercial policies by GNIDA has helped in infrastructural advancement in the region and commercial actions have taken off in right earnest.

Recently, it has been observed that major conglomerates are shifting their offices in Noida and suburb. Companies like Wipro, Yamaha, HCL, and Vivo Mobile are happily doing their business from Noida. Vivo mobiles, which recently entered India market, has taken on lease large space in WTC Noida.

According to the industry experts following are the reasons towards this shift:
• Buying property in Noida and its suburb has become comparatively easier over the past few years.
• Following central government’s Smart City initiative, innumerable developers have entered the market and providing premium projects with large floor plates
• The authority too, has stepped in to complement developers’ efforts in a big way by allotting several institutional and commercial plots to increase commercial space in the city.
• Golf-course, engineering universities, b-schools, world-class hospitals, hotels, shopping malls and recreational parks have given the city an upmarket clientele.
• Noida’s connectivity to Delhi and Gurgaon, metro service and premium infra facilities enhance the commercial developments in the region.
• For more high-end developments, GNIDA is acquiring land from nearby villages like Itehda, Parthla Khanjarpur, Sabery and Haibatpur.

With the central government’s recent demonetization policy, there may be a dip in commercial property rates in the region. On the other hand, the move will definitely comb out the unorganized players from the market. An organised commercial market with established players like Godrej, Tata Housing, and WTC etc. reflects transparency and boosts investors’ confidence. With all these attractive changes and advancements, it would be really fascinating to witness the growth of realty sector and especially commercial development in Noida.