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Noida – Residential Dynamics and Outlook

NoidaResi1536

Over the last 2 decades and more especially over the last 10 years, NOIDA has witnessed transformation from being a satellite town of Delhi to a self-sustaining city with sound social and physical infrastructure. The growth has been primarily driven by increased activity in IT/ITeS and Industrial developments within the city over the past 20 years.

After coming into administrative existence in 1976, initial growth in Noida was primarily driven by manufacturing and support services. However, over the last 2 decades, the region has witnessed IT & ITeS led growth and emerged as an alternative to Gurgaon as a cost-effective office destination.

Residential real estate dynamics

In the decade gone by, the growth of Noida has been primarily propelled by the value proposition it presents both for office occupiers and house buyers. The city has witnessed consistent infrastructure upgrades in terms of road and penetration of MRTS (Metro lines), which has been a major catalyst to buyer’s interest across all areas of the city.

Emergence of Noida as a major city with thriving residential segment has primarily been the story of the last 10 years with launch of over 1.92 lac housing units. The two halves of the last decade exhibits contrasting trends. The city witnessed major activity over the first 5 years of the last decade (2010-2014) accounting for ~ 70% of the organized new age residential supply of the city, with average quarterly launch of ~  7,500 units and average quarterly absorption of ~ 6,500 units. During this phase the capital value exhibited growth at a CAGR of ~ 12%. After this 5-year period, the region witnessed a slump in real estate activity with dip in launches as well as absorption. The effect got more pronounced post demonetization i.e. in the years 2017 & 2018, where in the average quarterly new launches dipped to ~ 500 units. During this period, most of the absorption has been in form of secondary purchases, while absorptions even in primary markets were either with projects closer to completion or with developers of repute.

With regards to capital values, the residential segment has not returned much over the last few years. The capital values over the last 2 years, has clocked moderate growth at city level (CAGR ~ 3%), with some outliers being present in form of launches by reputed players, who have been able to command premium in the region, primarily on the basis of their execution track record.

Trends to watch out for

Owing to significant existing unsold stock ( 31 months to inventory) coupled with impact of COVID 19, the region is expected to witness resistance in terms of capital value appreciation. However, marquee and premium positioned projects from reputed developers will draw attention of larger pool of buyers and might be the outliers in terms of demand and capital values that they achieve. The demand can be expected to be driven mostly by end-users, which in turn would imply larger share of absorption to be directed towards projects closer to completion or deals in the secondary market.

The fundamental drivers of residential growth such as increased leasing activity and in turn employment, improvement in road and metro infrastructure, upcoming airport, etc., would imply consistent demand in the residential segment. With operational metro line along the Noida Expressway and increased employment options along the expressway, the micro market can be expected to account for most of the launch and absorption.

 


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Ashutosh Kashyap

Director

Advisory Services

Gurgaon

Ashutosh leads the consulting practice at Colliers International focusing on North and East India region, with dedicated platforms for developer and occupier consulting. With over 11 years of experince, he has worked across different facets of real estate such as development advisory, funding, financial services, infrastructure, banking, and research in India.

As a consultant, Ashutosh has advised prominent developers, funds as well as other stake holders of real estate sector on pivotal aspects such as market entry strategy, optimal monetization strategy, advisory on transit oriented developments, bid advisory, product mix advisory, financial feasibilities, investment due diligence, techno-economic viability, technical due diligence, etc.

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