Real estate transaction volumes have been recorded as higher in the suburbs than in the inner city or in the city centres. The investors' swing from downtown areas to the suburbs can be traced to more than one reason, explained a private seminar on investment gaps in the Indian real estate market, held last week in the Capital.

At the seminar, Professor Geoff Marsh, London Property Research, explained that the inner city areas of the metros in India lack "funky" and big functional buildings of the type more favoured by multinational companies. Further, while the rentals are very high in inner city areas, the environment in these places is clearly on the decline. On the other hand, the suburbs have low rents, and adequate facilities like parking space.However, Marsh says he is of the opinion that there is hardly any investment gap in the inner city areas in the metros as far as office property is concerned. But he points out that a big gap still exists in the retail property market. With the residential market well catered to the high and middle income group in the metro cities, particularly Delhi and Mumbai, there is hardly any investment gap in this sector. But a gap does exist in developing properties for the lower income group and big shopping malls, like Shoppers' Stop in Delhi or Crossroads in Mumbai.

While the retail property market, including that for the lower income group, holds good potential for developers, developing properties for budget hotels, instead of five-star hotels, also warranted development, says Marsh. He notes that Indian metros have world-class five star hotels, but branded budget hotels in the cities are miserably lacking in amenities. The development of these properties are needed for sustainable economic growth.

A study by India Property Research, an arm of Chesterton Meghraj Property Consultants, shows that many multinational as well as domestic corporates are shifting their office premises from inner city areas to city suburbs like Gurgaon or Noida (Delhi) and Parel or Andheri (Mumbai) in both Mumbai and Delhi. In the suburbs, companies get large and flexible spaces with lower rentals. In Delhi, for example, office space rentals are as high as Rs 90-110 per square foot in the Connaught Place area, but they can be as low as Rs 50-80 per square foot in Gurgaon or Noida.

From the corporate viewpoint, what most Indian cities lack are warehouse facilities. And where such facilities exist, they are located at considerable distance from the city's airport or docks.

Again, industrial properties are not also profitably developed in the Indian metros, which still promise a very high rate of return on investment. This is so because a number of small manufacturers still prefer to operate from home in the absence of low-rent manufacturing sheds or workshops with basic facilities like electricity, water and transport.

Huge real estate investment gaps still exist in almost all the major cities in India, concluded the seminar. Nevertheless, Marsh says he would not advise foreign investors to commit themselves in India. The reasons he cites are the lack of transparency in property deals, planning permission integrity, lack of ethics and efficiency to legal recourse and, finally, lack of transaction data and other information.