Archive for August, 2010

A new master plan for Kochi

August 1st, 2010

A new master plan for Kochi city, thought about 10 years ago, is only now beginning to take shape. But there are doubts if the plan will be able to deliver the goods. An important question is how the plan is supposed to help a city saddled with congested roads and haphazard growth.

“The growth of the city has been unimaginable,” says K.J. Sohan, Chairman of the Standing Committee on Development of the City Corporation. Had the plan taken shape 10 years ago, public transport and housing would have got an impetus.

Water-supply is a major problem facing the city now, he says. Water sources should be public property. A good portion of the waterfront areas in Kochi is in the hands of private developers, he says.

The councillor says the topography of the city will help evolve a wonderful waterway, which, if integrated with the road and rail transport systems, will decongest the roads.

Transport

Mr. Sohan speaks of transit-oriented development in his report on the “Transport system for the people of Kochi.” The transport corridors should back high-density growth in a city area. There should be a surcharge on such type of growth to meet the transport costs, he says.

There is no city in the country that has such a network of waterbodies as Kochi does. These link the suburbs to the city, Mr. Sohan says. In fact, Kochi boasts three national waterways, which, however, remain unutilised for public transport. The National Waterways Authority of India promotes only cargo transport through these waterways, he says. Boats are so obsolete and the water-transport infrastructure so crude that people find road transport much safer and faster.

He says the master plan, for projected growth up to 2025, can give a direction to the city’s development, especially with focus on transport mechanisms and infrastructure.

Over the past 10 years, nearly 25 apartment complexes with over 10 storeys each have come up in the city, he says. A master plan would have gone a long way in determining the water-supply and power requirements of the city. Zoning of residential, commercial and industrial categories help specify the needs of water, power and transport facilities in a given area.

The development of the city has taken place along the railway line from north to south, but with only two over-bridges connecting the two areas separated by the tracks, the entry points into the city has become choked. This points to a lack of spatial planning, Mr. Sohan says.

The recent changes in the building rules have been good in limiting the built-up area according to the road width. Huge constructions will now move out of the city area, he says.

The blueprint of the master plan will be notified for the people to raise objections.
News Published Under:  The Hindu

Commercial realty on the rebound?

August 1st, 2010

The commercial office space sector is looking up in Chennai. Buoyed by stronger economic fundamentals, the Chennai office market has seen a fair amount of activity over the last two quarters. In a sign of the improving sentiment, take-up of space has increased and rental values have bottomed out in most markets. The worst may be behind us.

Net absorption totalled 1.8 million sq.ft in the first two quarters of 2010. This is a growth of over 38 per cent compared to the first two quarters of 2009 which saw an absorption of only 1.3 million sq.ft. This increase is primarily due to the demand arising from companies expanding and upgrading to better quality premises. Grade A office rentals levelled out for two consecutive quarters, suggesting that the market is at the bottom of the cycle. The first two quarters of 2010 saw increased market activity, although due to high vacancy levels, rentals remained stable.

The sluggish leasing, uncertainty and falling rentals seen in 2009 have been replaced by a more stable office market. Many buildings with significant vacancies recorded improved occupancy rates. The office vacancy rate increased to 28 per cent marking nine consecutive quarters of increased vacancy. Total stock in the market stands currently at 38 million sq.ft., with 11 million sq.ft. of vacant space.

Major transactions included TCS e-serve, Igate, CTS and IBM expanding in DLF IT SEZ, Tata Teleservices buying space in Prince Infocity 2, Reliance Communications leasing space in India Land Tech Park, Nokia Siemens Network leasing space in Pacifica Tech Park, Neptune and Force 10 leasing space in Olympia Tech Park, Franklin Templeton leasing space in RMZ Millenia, Iopex leasing space in Ambit IT Park and Hapag Lloyd and Amazon leasing space in S P Infocity.

The self-correction phase has started with developers slowing down construction and changing usage of their office projects. IT Park developers who offered aggressive terms such as lower deposits and more rent free periods were able to attract prospective tenants. With rentals having corrected by 20 per cent to 30 per cent in most micromarkets from the peak seen in first quarter 2008, many corporates and IT/ITES companies are using this opportunity to

consolidate or relocate to better quality buildings at lower rentals or sale values. This window of opportunity for corporate occupiers is likely to be extended till end of 2010.

The yield levels stabilized at 10.5 per cent to 11.5 per cent.

The overall outlook is positive for the next two quarters and should see rentals further stabilising across micromarkets.

A continuing improvement in the economy suggests that demand for office space will increase in the next 12 months, but the huge vacancy will keep prices in check. Leasing is expected to see an upward trend in the next two quarters with both enquiry levels and transaction velocity picking up. The absorption for office space in Chennai in 2010 is expected to be around 3.5 million sq.ft.

Demand for SEZs

The stability in rents and low operating costs should help Chennai regain its position as one of the most preferred IT destinations in India. The demand for SEZs is expected to go up considerably in the next three quarters given the uncertainties arising out of the implementation of the Direct Tax Code. Major IT SEZs such as DLF IT SEZ and Tata Realty’s Ramanujam IT SEZ in

Taramani are expected to see significant interest from occupiers.

The cost of project finance has increased dramatically, so there won’t be much speculative office development happening in the near future. Until the gap between buyer and seller expectations is narrowed, sales is not expected to pick up. Prominent new buildings due to be completed in the next six months include ASV Chandilya (500,000 sq. ft), TVH Agnitio Park (600,000 sq.ft.), Ascendas Phase 3 (740,000 sq.ft.) and Prince Infocity 2 (770,000 sq.ft.).

The State government needs to send out positive signals by marketing Chennai more aggressively across the world as a low cost outsourcing and manufacturing destination.

Although it is still early to say if the market is seeing a full fledged rebound, it definitely looks like a market recovery in terms of demand as developers and real estate consultants get busier. However, the basic problems such as high vacancy, low rent and low liquidity continue.

 

News Published Under:  The Hindu