Over the last two decades and more especially over the last 10 years, NOIDA has witnessed the transformation from being a satellite town of Delhi to a self-sustaining city with sound social and physical infrastructure. The growth has been primarily driven by increased activity in IT/ITeS and Industrial developments within the city over the past 20 years.
After coming into administrative existence in 1976, initial growth in Noida was primarily driven by manufacturing and support services. However, over the last two decades, the region has witnessed IT & ITeS led growth and emerged as an alternative to Gurgaon as a cost-effective office destination.
Residential real estate dynamics
Noida’s Residential real estate has witnessed significant growth in terms of supply over the past 10 years. The region has witnessed new-age developments to the tune of ~ 1.9 lac units. The launch and absorption dynamics witnessed its peak over the 5 years period of 2010 to 2014, with the average quarterly launch of ~ 7,500 units and an average quarterly absorption of ~ 6,500 units.
After the 5-year phase, emulating the trend with most of the cities of India, the region witnessed a slump in real estate activity with a dip in launches as well as absorption. The effect got more pronounced post demonetization i.e. in the years 2017 & 2018, wherein the average quarterly new launches dipped to ~ 500 units. During this period, most of the absorption has been in the form of secondary purchases, while absorptions even in primary markets were either with projects closer to completion or with developers of repute.
With regard to capital values, the residential segment has not yielded much over the last few years. The capital values over the last 2 years, has remained moderate at the city level (CAGR ~ 3%), with some outliers being present in form of launches by reputed players, who have been able to command a premium in the region, primarily on the basis of their execution track record.
Trends to watch out for
Owing to huge inventory, which in terms of Quarters to sell is above 20, the region is expected to witness resistance in terms of capital values appreciation potential. However, marquee and premium positioned projects from reputed developers will draw the attention of larger pool of buyers and might be the outliers in terms of demand and capital values that they achieve.
With moderate expected returns, the demand can be expected to be driven mostly by end-users, which in turn would imply a larger share of absorption to be directed towards projects closer to completion or deals in the secondary market. With an operational metro line along the Noida Expressway and increased occupiers interest along the expressway, the micro-market can be expected to account for most of the launch and absorption.