South a better realty market than North: Citigroup

NEW DELHI: The North-South divide in realty is catching attention with a report saying that market in southern parts is relatively better.

According to a research report by the global financial services Citigroup, South is a relatively better market than North on parameters like price environment and demand potential.

South also enjoys an edge in terms of potential benefits from ongoing infrastructure projects and lower supply risks, Citigroup analysts said after a three-day tour of key South Indian markets such as Bangalore, Chennai and Hyderabad.

However, Parsvnath Developers, a key North Indian player in the Indian real estate space, believes that the north is better placed than south and presence of national capital region (NCR) gives it a further edge.

NCR region consists of national capital New Delhi and its adjoining areas like Noida and Gurgaon.
   
"The demand of end user in North is more than South because per capita income is more in North India than South," Parsvnath Chairman Pradeep Jain said.

The NCR status is also a driving factor behind developing real estate market. "More than 10 states are supporting the real estate development in North," Jain said, adding such a widespread joint effort was missing in south.
   
International real estate consultancy DTZ also said in a recent study that some key southern cities could see more supply risks than some of their northern counterparts.

According to DTZ Research, the excess supply was estimated at 200 per cent in Chennai this year, measured in terms of percentage of estimated absorption, while it is estimated at just 20 per cent in Delhi and NCR.
   
However, DTZ estimates just 38 per cent excess supply in Bangalore and 33 per cent in Hyderabad, other key south Indian markets.
   
Analysts at Citi Investment Research, a division of Citigroup Global Markets, said that South has a higher demand potential being an IT hub and more reasonable property prices.
   
"South is a relatively better property development market than the North, particularly in the residential segment," the analysts said, adding that the benefits from ongoing infrastructure projects were yet to be discounted there.
   
"We see significant progress on infrastructure projects -- new airports and peripheral road network. This we believe will enhance value of development demand," Citi report said.
   
The analysts noted that IT and ITES sector would continue to remain a key driver for the South Indian real estate market as there was still no letdown in he demand for IT space, despite an appreciating rupee, and growing manufacturing activities in Chennai would add to the demand.
   
Parsvnath's Jain also said that development activities are picking up well in the southern markets also and there are significant growth opportunities ahead.

Besides, there is lesser speculative investments in the property markets in southern parts of the country, Citigroup analysts noted.
   
However, the spiralling land prices and their limited availability could pose a risk and the accelerating construction activities could also lead to some supply risks, Citigroup said.