Pace City Sector 37 Gurgaon: Commercial Property for Sale

Search for the price of commercial property in Pace City and the answers come back between Rs 3,077 and Rs 31,000 per square foot. That is a ten-fold spread, and it is not because the market is confused. It is because two completely different things are being quoted in the same units: a square foot of land and a square foot of building.

Separate them and the estate becomes legible. Here are the readings, each with its basis stated:

Nothing on this table contradicts anything else on it once the basis is attached. What it shows instead is two clean patterns, and a question a buyer has to ask before paying.

Small plots cost nearly three times as much per foot

A bare 2,700 sq ft plot is asked at Rs 19,444 a foot of land. A 22,604 sq ft plot with a whole building already on it is asked at Rs 7,079 a foot of land. The small plot costs 2.7 times more per square foot of ground, and it comes with no building.

That is the same pattern this research found at MVL iPark on NH-8, where the per-foot rate roughly quadruples as the unit shrinks, and it is worth stating as a rule: in this market, small is expensive per foot and large is cheap per foot. If your requirement can be met by taking more space than you need and letting the rest, the arithmetic is on your side.

The FAR question, which is the one that matters

Now the question. HSIIDC allows a floor area ratio of 1.25 on its industrial plots, extendable to 1.50 on payment of enhancement charges, and the state has announced raising the ceiling in HSIIDC estates from 150 to 200 per cent against appropriate charges.

Set the advertised built-up areas against the plots they stand on:

Both are above 2.00, which is the top of the enhanced ceiling, and well above the 1.25 to 1.50 an ordinary plot carries.

That is not proof that anything is wrong. Basements, and some mezzanine and service areas, may not count towards FAR, and a marketer quoting "built-up" often means every square foot under a roof rather than the sanctioned figure. But it is precisely the gap a buyer has to close, and it has to be closed on paper rather than by conversation:

• The approved building plan, and the sanctioned FAR on it.
• The occupation certificate, and whether it covers the whole structure or part of it.
• Any compounding order, if construction was regularised after the fact, and whether the charges were paid.

The reason to be strict about this is financial, not procedural. Floor area that is not on an approved plan is floor area a bank will not lend against, an insurer will price differently, and a buyer three years from now will discount or refuse. You would be paying Rs 3,077 a foot for something and Rs 3,077 a foot for something else.

What the land is actually allotted for

Everything above sits on top of the fact that governs this estate: Pace City 1 and 2 at Sector 37 are an HSIIDC industrial estate, and the letting side of this page sets out what that means for occupation. An HSIIDC plot is allotted for industrial use on conditions. Non-industrial use runs through a change of land use under the Punjab Scheduled Roads and Controlled Areas Act of 1963, on form CLU-I, and HSIIDC's estate management procedure provides for resumption of a plot held in breach of its allotment conditions.

For a tenant that is a risk to a deposit. For a buyer it is a risk to the whole asset, because resumption does not care who is paying rent. So before an offer: what is the plot allotted for, is your intended use permitted on it, and is the allotment in good standing with no notices outstanding?

The yield, and why it is high

Built floor area here lets at about Rs 12 to Rs 40 per sq ft a month. On the Rs 3,077 per sq ft built-up implied by the Rs 16 crore quote, a Rs 19 rent is a gross yield of 7.4 per cent and a Rs 40 rent is 15.6 per cent.

Double-digit gross yields do not exist in Gurugram commercial property by accident. This one is the price of three specific things: the land-use question, which can end an occupation; a narrow tenant pool, because the buildings suit workshops, labs and back offices rather than client-facing companies; and a hard exit, because your buyer must be someone who can live with the first two.

Read the number as compensation for risk rather than as an opportunity that others have missed, and it is a defensible purchase for the right buyer. Read it as free money and it is the most expensive mistake in this batch.

Where this sits against the rest of Gurugram

Rs 3,077 per sq ft of building is the cheapest floor area this research has found anywhere in the city. A small suite in Millennium Plaza off MG Road is asked at Rs 18,142, about six times as much, at a gross yield under seven per cent. On the letting side the gap is the same shape: Rs 12 to Rs 40 here against Rs 90 to Rs 140 on Golf Course Road.

Those are not competing options. They are different assets with different risks, and the six-fold price gap is roughly what the difference is worth.

What to settle before you pay a deposit

• Whether the rate you are quoted is land or building. The same estate quotes both, in the same units, at three times the difference.
• The sanctioned FAR, the approved plan and the occupation certificate, against the built-up area you are being sold.
• The allotment: use permitted, conditions, and whether it is in good standing.
• Whether a change of land use is needed for your use, and who is paying for it.
• Whether the quote is plus GST, as several in this estate are.

Frequently asked questions

What does commercial property cost to buy in Pace City, Sector 37 Gurgaon?

It depends entirely on whether the rate is quoted on land or on building. Bare plots are asked at about Rs 15,556 to Rs 19,444 per sq ft of land, while built floor area works out at about Rs 3,077 per sq ft on the Rs 16 crore quote for a 52,000 sq ft building, and Rs 9,333 per sq ft on a 3,000 sq ft factory unit. The ten-fold spread the portals show is these two bases mixed together.

Why is a small plot so much dearer per square foot?

A 2,700 sq ft plot at Rs 5.25 crore is Rs 19,444 per sq ft of land, while a 22,604 sq ft plot carrying a whole building is Rs 7,079 per sq ft of land, so the small one costs about 2.7 times more per foot of ground and comes with nothing built on it. The same pattern shows up at MVL iPark on NH-8, where the rate roughly quadruples as the unit shrinks.

What FAR is allowed on an HSIIDC industrial plot?

HSIIDC allows 1.25, extendable to 1.50 where the enhancement charges are paid, and the state has announced raising the ceiling in its estates from 150 to 200 per cent against appropriate charges. Two listings in this estate advertise built-up areas implying about 2.30 and 2.51 times their plot area, which is above even the enhanced ceiling.

Does that mean the buildings are illegal?

No, and we are careful not to say so. Basements and some mezzanine and service areas may fall outside the FAR computation, and a marketer using the words built-up often means everything under a roof rather than the sanctioned figure. What it does mean is that the approved building plan, the occupation certificate and any compounding order have to be read before money moves, because floor area outside an approved plan is area a bank will not lend against and a future buyer will discount.

What rental yield does industrial property here produce?

Floor area lets at about Rs 12 to Rs 40 per sq ft a month, so against Rs 3,077 per sq ft built-up a Rs 19 rent is about 7.4 per cent gross and a Rs 40 rent is about 15.6 per cent. Those yields are compensation for the land-use question, a narrow tenant pool and a difficult exit, not a mispricing somebody else has missed.

Can I buy here and run an office?

Only if the use is permitted on that allotment, or a change of land use is obtained. The plots are allotted for industrial use on conditions, a change of use runs through form CLU-I under the Punjab Scheduled Roads and Controlled Areas Act of 1963, and HSIIDC's estate management procedure provides for resumption of a plot held in breach. A tenant risks a deposit; an owner risks the asset.