There was a time when every major Indian city had just one central business district (CBD) such as Fort and Nariman Point in Mumbai or Connaught Place in Delhi, and the areas around it were the most expensive residential addresses. As the distance from the CBD increased, the real estate prices shrunk with the far-flung suburbs housing the lowest-priced homes. All this has changed in the past few years, as India transformed from an industrial economy to a service economy, and key Indian cities became home to multiple CBDs — each creating its own preferred residential clusters.
Bengaluru’s journey from garden city to silicon valley of the East is symbolic of India’s changing economic environment — and the transformation of the country’s real-estate market. “Bengaluru’s CBD has moved from commercial areas such as Cotton Peth and MG Road to IT hubs such as Whitefield and Electronic City,” says Sunil Mantri, Chairman, Mantri Group, adding that every square foot of office space leads to the creation of three square feet of residential space. “Bengaluru’s residential market usually mirrors its office-market trends and is driven primarily by end users.” He further says that an estimated 90 million square feet of residential space — about 75,000 new homes — will be created in the next five years.
This trend is most visible in India’s commercial capital, Mumbai, where as many as four new CBDs have emerged in the past five years — Worli-Parel in central Mumbai, the Bandra-Kurla Complex, the Andheri-Goregaon-Powai belt and Navi Mumbai. “Where Navi Mumbai was considered the back of beyond till the turn of the century, its fortunes picked up after it emerged as an IT and software industry hub in the past few years,” says Devang Trivedi of Progressive Group, adding that the rate of Rs25,000 (around Dh1,395) per square foot for homes in the high-rises of Palm Beach Road in Navi Mumbai is today at par with some of the prime addresses in Mumbai. Similarly, though Powai is disadvantaged as a location vis-à-vis other parts of Mumbai, it still commands a price upwards of Rs40,000 per square foot and proportionately high rentals, thanks to the sustained demand from the thousands of professionals working in the IT and SEZ offices in the neighbourhood.
A recent study by Jones Lang LaSalle (JLL) India revealed that nearly 68 per cent of companies surveyed are planning to expand in the next five years. “These companies may prefer to shift to suburban locations because by doing so they will be able to reduce their real-estate costs and move into superior-quality projects, which are available at lower rents and offer modern amenities, car parking and safety,” says Anuj Puri, Chairman and Country Head, JLL India. This trend is visible in Delhi, where dozens of corporate houses have moved to areas such as Gurgaon, Manesar and Noida in NCR.
Typically, occupiers from the banking, financial services and insurance (BFSI) sector dominate the old CBDs due to their willingness to pay higher rents, whereas IT/ITES occupiers dominate the new CBDs due to the availability of larger office space and because the nature of their businesses makes them vulnerable to higher real-estate overhead costs. “Suburban locations are home to majority of office real-estate occupiers and will have a growing role in determining the performance of the country’s office market,” says Puri. The absorption of office space in the country totalled nearly 30 million square feet in the past couple of years, with suburban locations accounting for more than 68 per cent.
The smaller cities are also metamorphosing in unprecedented ways through the expansion of transportation networks. For instance, even before the metro rail link between Ahmedabad and Gandhinagar has sprouted tracks, a 10-million-square-foot development has been rolled out for the first phase of the Gujarat International Finance Tec-City (Gift City). “These big changes have not been caused by irrational enthusiasm, but out of necessity, given the influx of people and the needful creation of employment,” says Puri.
