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Oversupply to affect realty revenue
The number of information technology parks and special economic zones in the 21-km Old Mahabalipuram Road — popularly known as OMR — in Chennai has exceeded the demand in the entire IT industry in India. “It will be difficult for builders to raise finances for their other developments and in subsequent phases, projects will also be postponed,” Nipun Sahni, director and global head of commercial real estate at Merrill Lynch Capital, stated.
Two other plum areas that are likely to face the same fate, they said, are Lower Parel in Mumbai and Noida in the National Capital Region, both of which are hotspots for A-grade office space. Lower Parel has a ready office space of 4.5 million sq ft and will add a minimum 5 million sq ft by 2009, taking the total commercial space to 9.5 million sq ft. Of this, DLF, India’s largest realtor, alone will add 3.8 million sq ft through office space and a mall. Indiabulls Real Estate, Peninsula Land and Orbit Corporation are also busy completing their projects in the locality. To boot, top players such as DLF, Unitech, Emaar-MGF, Akruti City, Puravankara and others have expanded to states they were not present in, and have ended up in close proximity to each other, creating oversupply pockets.
What started as a building boom in 2007 across emerging markets such as Chennai, Hyderabad, Bangalore and Indore is a year later, a very different story thanks to the Reserve Bank of India’s rate hikes, the wealth-depletion effect of falling stock markets and economic headwinds.
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