Could South Indian Cities emerge as India's Downtown, similar to how South Mumbai relates to Mumbai or South Delhi to Delhi? Let's consider the rise of the Southern region.
A Silent Crusader
For a considerable period, South India has been a key player, quietly but resolutely constructing and reinforcing real estate development, making itself increasingly attractive to stakeholders, and solidifying its position as a desirable destination. The improvement regarding clarity and market insights for the South Zone's property sector is allowing cities including Bangalore, Chennai, and Hyderabad to occupy prominent positions on the global real estate stage – a status that previously only Mumbai and Delhi enjoyed.
Office Spaces on the Rise
South Indian cities host almost 45% of the nationwide office accommodations, a total of 140 million square feet in these locations. Projections indicate an 8% compound annual growth rate (CAGR) between 2012 and 2016. This rate is less than the forecasted national growth of 11%. The figures suggest that southern cities, especially Bangalore and Hyderabad, demonstrate sound approaches for managing office space in the medium term. They tend to favor premium construction over rapid expansion. This helps maintain their share of India’s office stock within 37%-40%. Also, one anticipates the South Zone's vacancy rate to reach 16% by the close of 2012, noticeably lower than the national rate of over 20%.
Retail Sector Dynamics
Retail spaces are seeing robust demand. However, this demand tends to lean towards thriving shopping centers or popular high streets since these have improved patron traffic and higher conversion percentages. It’s expected that mall inventories throughout southern cities could possibly exceed 40 million square feet by 2016’s end; vacant properties should demonstrate a drop from 2014 peaks, falling shy of the national 20.5% average.
Residential Market and Affordability
South India’s home market closely embraces lower costs. Over the prior couple of years, developers priced more than 80% of recent launches at under INR 4,000 per square foot (USD1 812 per square meter). Consequently, South Indian locales have shown resilience over numerous quarters, juxtaposed against decreases to sales volume documented in Mumbai along with NCR-Delhi.
Across India, interest focuses less on Tier I cities but increasingly more on Tier II. The southern region mirrors such trends, which sees secondary hubs taking shape within Kochi, Coimbatore, Vishakhapatnam, and Mysore, that are persistently striving for higher milestones.