21 May 2018

1. Telangana is second hottest real estate market in India

Real estate sector is booming in the suburbs of Hyderabad, making Telangana the second hottest market for real estate in India after Gujarat.

(Source: Indian Express, 18 May, 2018)

Research View

Telangana is gearing up fast in economic growth and enticing investors focus to a huge extent. In our opinion, flourishing IT/ITeS sector in Hyderabad, favourable political environment, infrastructure enhancements such as metro rail project, road improvements and fast-track approval and building permissions are the primary reasons behind the growth and development of Telangana as a key real estate hotspot. The office market in Hyderabad witnessed a considerable slow down due to political uncertainties between the years 2010 to 2014. However, post bifurcation of Telangana state from the residuary state of Andhra Pradesh in June 2014, Hyderabad is going through excellent progress and is showing renewed activity in enticing various MNCs to set up and expand their office spaces. In 2017, major occupiers such as Deloitte, Amazon, Qualcomm, Microsoft, Service Now and Novartis made large-scale expansions in Hyderabad’s Secondary Business District (SBD) micromarket and the city recorded about 5.8 million sq ft (0.54 million sq m) of gross office absorption. Besides this, the state government is also in action to strengthen industrial base in and around Hyderabad with supportive policies like Telangana State Industrial Project Approval and Self- Certification System - Ts-iPass and initiatives for the establishment of industrial corridors. This, in turn, is likely to cause visible impact across all the real estate asset classes. According to Oxford Economics, Hyderabad should achieve 8.1% average annual GDP growth over the period 2018-2022. The forecasted economic growth is likely to be led by the pharmaceutical, biotech and IT/ITeS sector, and should further excite the real estate activities in coming years.

2. With major funds infusion, Railways' station redevelopment programme gets fresh lease of life

Indian Railways is set to spend INR 5000 crore on revamping 68 stations, intent on starting its ambitious station redevelopment project just before 2019 Lok Sabha elections. It will also rework the conditions for the private partnership to make the proposal more inviting for companies.

(Source: Moneycontrol, 11 May, 2018)

Research View

The modernisation of the Indian railways has been one of the top-most priority of the NDA government. The redevelopment of 400 railway stations has been a mega-project, which envisages the upgradation of the railway stations across the country to the level of modern amenities equipped airports. The railway authorities have been planning to carry out the development with the help of private public partnership (PPP) model, wherein the cost of the redevelopment would be incurred by the private enterprise partner, and in return, it will get the rights to commercially utilize the land abutting the railway station for a certain period. The redevelopment project has been on the radar since 2014, but despite multiple past efforts, it has only received a lukewarm response from the private enterprises as the private players saw low value in 45 years of adjacent land monetisation rights. Also, the strict sub-leasing related issues from the railways authorities forbade the private players from actively participating in this project. In a move to revive the project before 2019, the authorities have decided to infuse INR 5000 crore (USD 7.4 billion) for face-lifting overall 68 railway stations. They are also reworking on various rules and conditions related to the usage of the railway properties, which will make the project more financially feasible for the private participation. As per Colliers Research, this initiative is a welcome move to push the much-needed modernisation process of the Indian Railways. As the Indian Railways is widely considered to be one of the largest land bank owners in the country, we expect the commercial unlocking of the land will create opportunities for the real estate as the railways stations are often situated at prime commercial micromarkets of the cities.

3. Rs 3,513 crore approved by state for proposed Purandar airport

The state government gave administrative and financial approval of INR 3,513 crore for land acquisition for the proposed Purandar airport

(Source: Times of India, 10 May, 2018)

Research View

In line with the central government’s attempt to push infrastructure development in the country, the state governments are equally propelling towards this mission. The Maharashtra state government approved INR 3,513 crores (USD 540 million) for the development of an international airport named Chhatrapati Sambhajiraje International Airport in Purandar district. At a distance of around 15-20km from Pune city, the 2,376 Ha (23.7 million sq m) development is set to provide impetus to the adjacent technology park and industrial establishments such as Rajiv Gandhi Infotech Park, Chakan MIDC, Talegaon MIDC and Bhosari MIDC along with relieving pressure from the existing Pune airport. With a time frame of five years for a full-fledged development, we expect this to attract investors into Tier II and Tier III cities, thus releasing metro cities from further congestion and traffic. Pune recorded a total office demand of 3.5 million sq ft (0.32 million sq m) in 2017, accounting for around 8% of pan India office demand. We expect this development to boost further, not just the commercial real estate, but also other categories such as industries and warehousing, retail and residential developments in Pune and other surrounding Tier II cities.


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