The closing down of more than 20 textile mills and 15 manufacturing units in the country in the last 6-12 months has led to creation of a surplus supply of industrial real estate. With more than 20,000 workers in the textile sector now jobless, demand for space around industrial belts has slowed down, and more supply is taking prices further south.
The rentals are down by 20-25 % in the industrial belts. It is estimated that more than 15 lakh sq ft of surplus area has been added in the market which is already depressed.
According to sources, with so much supply coming in and few takers, there are very few rental deals happening in the market. For the record, rentals in the Gurgaon industrial belt have come down to Rs 20-30 per sq ft per month from Rs 45-50 . Similar is the situation in industrial belts in and around Surat, Tirupur, Kundli, Panipat and Coimbatore.
Says Rakesh Vaid, chairman, Apparel Export Promotion Council (AEPC): “A lot of garment exporters are downsizing their operations and international market slowdown has dented the demand. We are not in a healthy shape and the government is contemplating withdrawing some of the sops given to us at the time of dollar depreciation. Crude prices are on a record high. To add to it cotton is very expensive. Indonesia and China have a very healthy growth rate but we will have to revise our target downward for this year. All these factors are sure to create some problem for real estate also.”
Many in the industry feel that slowdown in real estate in this sector will have major impact overall as many people park their surplus cash in these properties.
Says Pawan Swamy, MD (markets), JLLM: “The impact on the industrial real estate market is definitely there. Many industries are shifting operations to less expensive and more incentivised zones when they can no longer benefit from the economies of scale at their original locations . They leave behind considerable packets of prime land for development. Textile units, for instance, necessarily occupy considerable areas, further enabled with key utilities such as water and electricity.”
These factors have also put a dent on the fresh supply of industrial real estate. Even new plots which are being developed are not finding any takers in the market. Many small developers who are into this kind of development are find tough to sell the built up plots.
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With little supply in the central business district, Bangalore, India’s information technology hub, saw the highest demand for office space in the first quarter of 2008 at 5.14 million sq. ft. It was followed by the National Capital Region (NCR), comprising New Delhi and its satellite cities, with 2.2 million sq. ft. A report says though the demand for office space remained upbeat at 14 million sq. ft across India’s cities; around 15.54 million sq. ft of supply has come into the market in the same quarter. In both NCR and Bangalore, much of the limited supply was a result of large pre-commitments in 2007 that were delivered in the first three months of this year. The demand in Bangalore has been spurred by a number of new aero-engineering and logistics companies here. The problem here is, with huge demand for Grade A office space in prime areas and little supply, there is a problem of oversupply in peripheral areas like Whitefield and Marathahalli. In Mumbai 11% of the total projected supply of 2008 (19 million sq. ft) entered the market in the first quarter and most of these are in suburban business districts such as Andheri, Bandra-Kurla Complex and a special economic zone in Powai. Office rentals increased marginally at 6% with about a 7-9% rise in Bangalore and a sharp 24% growth in Pune. NCR rental values rose 2–4% in select micro markets while the commercial segment of Gurgaon saw rentals going up 3% with fresh supply in the quarter. Rental values fell in certain areas such as the IT segment in Noida, which saw a 4% fall due to fresh supply along with the existing vacant stock.For more view- realtydigest.blogspot.com
Is that correct through that point of view of mills?I am not satisfied please clear that point.