NBCC’s Commercial Venture In Nauroji Nagar, Delhi Sells For Whopping Rs 905 Cr; India’s Office Space Resilience Defies Global Headwinds in 2023

NBCC (India) Limited has successfully concluded its 22nd auction for the sale of commercial space in Nauroji Nagar, South Delhi.

The 223,000 sq ft commercial space was sold for a notable sum of Rs 905 crore, distributed among 13 different companies; notably, this commercial space is part of the World Trade Centre in Nauroji Nagar, New Delhi.

HDFC Bank had previously acquired 284,567 sq ft of premium office space in the same area for Rs 1,130 crore. This recent sale brings NBCC’s total commercial inventory sales to 23.92 lakh sq ft, amounting to a sale value of Rs 9,656.62 crore through open e-auctions.

The Ministry of Housing and Urban Affairs (MoHUA), Government of India, has entrusted NBCC (India) Ltd, a Navratna enterprise, as the implementing agency for the redevelopment of Nauroji Nagar, New Delhi.

NBCC has the authority to market the commercial space on a freehold basis; the generated funds from these transactions are earmarked for the construction of seven colonies in Delhi.

The ongoing development of the World Trade Centre in Nauroji Nagar is a pivotal component of the government’s comprehensive redevelopment plan.
The project, which had faced an 18-month delay due to a stay order by the Delhi High Court, resumed after the court lifted the stay in February 2021.

As part of the larger initiative, the government aims to redevelop seven housing colonies in Delhi, with Nauroji Nagar, Netaji Nagar, and Sarojini Nagar assigned to NBCC.

The total projected cost of the initiative is Rs 32,000 crore, with approximately Rs 12,000 crore expected from the Nauroji Nagar project and another Rs 20,000 crore from Sarojini Nagar.

The Nauroji Nagar redevelopment specifically envisions a 25-acre commercial hub, forming an integral part of the integrated business hub at Nauroji Nagar.

The hub will feature independent offices, direct connectivity to airport, railway, and metro stations, as well as retail outlets, food courts, and business centers.

Commercial Office Space In FY23-24
India’s office space demand has remained resilient throughout 2023, defying global economic sluggishness. The robust performance attests to the enduring strength of demand fundamentals, showing little impact from the prevailing global headwinds.

The country’s net absorption of office space was projected to reach 37-39 million sq ft by the end of 2023, on par with the figures recorded in 2022 and anticipated leasing activity acceleration in the final quarter positions the year to surpass the 2017-2019 average, as per an analysis by JLL India.

The initial three quarters of 2023 witnessed a net absorption of 26 million sq ft, equivalent to 68% of the entire 2022 performance.
Notably, a discernible trend towards quality is shaping demand dynamics, with a preference for properties owned and operated by institutional owners and established developers.

Rahul Arora, Head of Office Leasing Advisory and Retail Services, India at JLL, noted that the top seven office markets in India are poised to exceed 800 million sq ft by the fourth quarter of 2023, showcasing a steady rise from the 792.8 million sq ft recorded in September 2023.

Environmental, social, and governance (ESG) considerations have been central to decision-making in 2023, with a focus on energy efficiency, green initiatives, and net-zero commitments.

Arora highlighted the increasing importance of sustainability, evident in the rise of green-certified buildings from 39% in 2020 to 53% in September 2023 among Grade A office stock.

Despite a 23.9% year-on-year decrease in supply during the first nine months of 2023, the year-end is expected to witness a surge, reaching 47-49 million sq ft.

Samantak Das, Chief Economist and Head of Research and REIS, India, JLL, expressed confidence in India’s office market, stating that the country has stayed on course for remarkable performance in 2023, surpassing the pre-pandemic average.

Outlook In FY24
Projections for 2024 suggest a 20-22% increase in net absorption, reaching 45-47 million sq ft; the supply is forecasted to rise by 22-23%, touching 58-60 million sq ft.

India’s innovation-led ecosystem, abundant talent pool, and favorable policy initiatives will serve as catalysts for the flourishing office sector in 2024.

Das anticipates an accelerated establishment of research and development centers in India, with Global Capability Centres (GCCs) continuing to be major drivers of occupier demand.

The headline vacancy is expected to hover within the 16-17% range by year-end, with a robust supply pipeline of 55-60 million sq ft in 2024. While overall vacancy is likely to remain stable at 16-17%, core markets are expected to maintain single-digit vacancy levels.

Although there is a slight dip in space take-up by tech firms in the first three quarters, they are still projected to account for the largest share in gross leasing by the end of the year.

Meanwhile, other segments such as manufacturing, industrial, BFSI, and consulting, particularly through the establishment of GCCs, have strengthened their participation in leasing activity.

Impressively, GCCs hold a 54% share in active office space requirements across the top seven cities in India.