In the last couple of months, rentals of central and suburban business districts of Delhi (CBD & SBD), comprising areas such as Connaught Place and Nehru Place, have touched all time highs.

On the other hand, for the first time in the last half a decade or so, commercial rentals in the satellite towns, comprising Noida, Gurgaon and Faridabad, are showing signs of a slowdown in growth. Experts are attributing this slowdown to mainly two factors—an over supply of commercial space in the satellite towns and the impending develop-ment of a new SBD in Delhi itself, at Jasola.

Rentals in the CBD are about Rs 325 per sq ft per month now, and have gone up by 7-8% quarter on quarter (q-o-q) basis and by 50-80% on year on year (y-o-y) basis.

In the SBD, rentals have witnessed a considerable increase of about 15-20% q-o-q and 50-70% y-o-y and is close to Rs 250 per square feet per month.

In case of the satellite towns of Noida and Gurgaon—at about Rs 40-50 per square feet per month and Rs 100 per square feet per month, respectively—rentals have remained stable q-o-q and have increased by 30-40% y-o-y.

Going forward, there could also be correction in certain NCR markets. For instance, in case of Noida the total commercial supply estimated in 2007 is about 5.6 million square feet.

According to a report by real estate consultancy DTZ, “this is far in excess to the projected absorption of 3.3 million square feet and, hence rentals should fall or, at best, remain stable.”

“In the next 5-6 months, we expect the growth in rentals to stabilise. In some cases, there could be minor corrections as well,” says DTZ India director Vivek Dahiya. According to brokerage firm Realty Realtors MD Harinder Singh, the overall growth in the Delhi and NCR rental market in the next one year will be about 20%, as against a 50-60% growth registered over the last one year.

On the other hand, Jasola in South Delhi is expected to see develop-ment of slightly over 2 million square feet of commercial space, almost 75% of which has already been booked. Prominent companies in the area include DLF, developing 7 lakh square feet property, TDI with about 1.5 lakh square feet space, and Omaxe with 1.5 lakh square feet property.

The Delhi Development Authority (DDA) is likely to auction some more commercial plots in Jasola later this year.“Jasola will attract much more interest from MNCs as well as retail chains as compared to the neighbouring Noida or any other satellite town in the NCR, because of being situated in Delhi. Proximity to some posh locations of south Delhi, Noida and Faridabad will act as a further catalyst to the demand,” says TDI MD

According to Omaxe chairman Rohtas Goel, this slowdown will only be a temporary phenomenon. “While a lot of commercial activities will gradually shift to areas inside Delhi, such as Jasola, the feared over supply in the satellite towns will also only last till one year and will get absorbed. There will obviously be minor corrections,” he said.
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