A few weeks ago, an 8,000 square feet duplex apartment in south Mumbai's Mahalaxmi area reportedly sold for a whopping Rs60 crore, or Rs75,000/sqft, unprecedented by the standards even for India's commercial capital known for its expensive real estate. In another high-value deal that brought cheer to the real-estate sector this year, Unitech struck a Rs 1,000-1,100crore deal for office space in Gurgaon.
Mumbai and Gurgaon are the largest and fastest growing real-estate markets accounting for 30-35% of the country's total realty market. And now the BJP, which won the assembly elections in Maharashtra and Haryana, has jurisdiction over both for the first time.
With the party in power at the Centre as well, real estate experts expect a greater synergy in policies to drive the growth of the real-estate sector in these two markets, which have seen a significant slow down since 2011 as a result of slowing economic growth under the UPA-II and continuing high interest rates.
"The BJP government at the Centre has already made it clear that there will be special impetus given to infrastructure growth in the country. Now, with the BJP getting the mandate to form the governments in Maharashtra and Haryana as well, the infrastructure growth in these two states is set to follow the same trend," said Santhosh Kumar, CEO, Operations & International Director of real-estate services firm JLL India.
Underscoring this optimism was the Centre's announcement, within days of the assembly election results coming in, of an easing in the FDI norms in the construction sector. The Centre's announcement in its July budget of tax incentives for Real Estate Investment Trusts and Narendra Modi's dream plan to come up with 100 smart cities have also given the sector cause for hope.
The earlier state government, say consultants, had failed to ease the procedural delays that had hampered the sector. "Timely approval from various local bodies, delay in environmental clearances, high-land costs, lack of infrastructure and high rate of interest were some of the main issues," said an analyst with real-estate research film Liases Foras.
"The major bottleneck for real estate markets in these two cities was the complex and lengthy approval procedures. Developers in both markets are largely cash-strapped and need sufficient flow of funds to come up with new supply," said JLL India's Kumar.
As per estimates, Mumbai will get an additional 30 million sqft of office space worth around Rs700 billion by 2018, and Gurgaon around 20 million sqft valued at Rs 200 billion. In the residential sector, with migration from smaller cities to these cities, around 1.5 lakh new residential units worth around Rs 2,000 billion are under construction in Mumbai; and in Gurgaon, around 80,000 homes valued at Rs 500 billion. The two cities also have several large infrastructure projects in the works such as the Navi Mumbai International Airport at Panvel, Mumbai Trans Harbour Link, Mumbai Metro expansion, while in Gurgaon the expansion of the Mass Rapid Transit System.
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