Real estate gaining heights

 

 

The greatest wars in the world have been fought over women... and land. Though we have not yet been able to decipher the topic called women, land is another story altogether. TSI gives you the rundown of the past, present and future investments in the sector and also gives you the tricks of the trade to make your full hand. K P Singh of DLF, Ramesh Chandra of Unitech, Pradeep Jain of Parsvnath, Shravan Gupta of Emaar MGF and thousand others who bought land for dirt cheap rates and made a mother lode will swear an oath for it. Now, the sector is making headlines everyday and has outclassed the new age mushrooming sectors like IT, telecom, pharma et al by a significant margin (return on investment). With rapid urbanisation in metros, which now seems to be percolating down into other two-tier cities, land prices have shot up with little or no risk in the offing. TSI scanned the real estate topology of India to find out the most promising real estate destinations.

Kerala

In Kerala, Kochi and Trivandrum are the main cities that are experiencing a boom in real estate. Real estate has also developed in other cities of Kerala like Thrissur and calicut, yet right now Kochi is a hot spot in real estate. With projects like the Smart City, Fashion City, International Container Terminals and LNG unit in the pipeline, Hightech City real estate business is booming in Kochi.

Land value have skyrocketted in tourism spots like Munnar and Wayanad. Even the price of farmland (paddy fields) has gone up 300 to 400 times. A significant phenomenon in the real estate scene in Kochi is the interest evinced by business groups from North Indian cities, and foriegn investors acquiring property here.

Karnataka (BEngaluru)

Real estate in Bengaluru, the ‘outsourcing Mecca’, has reached dizzying heights in recent years. “It is to a great extent, driven by the huge growth of the IT (information technology) and BPO (Business Process Outsourcing) industries,” says Padmanabha, an amateur land dealer, “There are a large number of Bengalureans who are employed in IT firms abroad, earning in dollars. Most of the IT professionals are investing in real estate here. The IT companies too are buying land in a big way. So the demand for plots of land went up with the boom in industries,” he says. But with the cost of a 30X40 ft plot plus home going for 5 million rupees in a good residential area, apartments have come into favour. Thus many apartments are mushrooming in every corner of the city. When it comes to plots the prices vary from Rs. 1000 to Rs. 6000 per sq. foot. Land prices in the city have gone up by three to four times, especially in the IT-corridor of Whitefield where prices have gone up from Rs 1,000 to Rs 3,500 per sq foot in the last two years. Farmers in big numbers are selling there agricultural land to scrambling buyers. According to INR News, a real estate web journal, “The commercial real estate segment in Bengaluru yields returns to the tune of around 10.5% compared to other cities like Delhi, which offers an average return of 8.5%. Nearly nine million square feet of land in Bangalore was absorbed for office space on lease last year”.

Apart from Bangalore, tier-2 cities like Mysore, Mangalore and Hubli-Dharwad have also witnessed a landscape-altering real estate boom . Real estate agents Imtiaz, Vasudev and Shridhar from Mysore, Mangalore and Hubli respectively, say the land rate in their cities has increased almost three times over the last two years. The Bangalore-Mysore infrastructure corridor promoted by Nandi Infrastructure Corridor Enterprise (NICE) has triggered the real estate boom in rural towns on the 150-km stretch between Bangalore and Mysore. “However, due to political instability in the state during the last two months, the real estate business is slowing down,” regret many land dealers.

Andhra Pradesh (Hyderabad)

The land rates on the outskirts have increased by about 100 to 150 per cent between 2005 and 2006. Most places fall under agricultural land category. The severe drought witnessed in the preceding years had all farming activities coming to a grinding halt, resulting in the prices plummeting sharply. Thus, the real estate industry in Hyderabad registered an unprecedented growth during the period 2005 and 2006. The grounding of works to improve the infrastructure like the Outer Ring Road, International Airport, Rs. 13,000 crore Fab city IT and ITES companies made a beeline for establishing their units here, contributed to the growth. The much hyped “genome valley”, meant for biotech companies has ended up in the hands of the land mafia.

But suddenly the activity has slowed down, particularly on the city suburbs and beyond, where plots and acreages had been sold like hot cake till the end of 2006. After a gallop for almost two years, the prices of real estate have begun to crash and the property scene is set to take a ‘U’ turn. There has been a dip in land dealings in the last couple of months and some analysts say that the property prices are undergoing the much- awaited ‘correction’. “I call it a cooling-off period in the city and suburbs, which had remained hot for two years,” Mohammed of Radha Realtors Pvt. Ltd told TSI. “The slump in the land dealings is a national phenomenon and is not confined to Hyderabad alone,” points out M. Murali Mohan, film actor-turned-real estate developer of Jayabheri Group. Despite the sharp escalation in the last couple of years, land and apartment prices are reasonable when compared to other metros, he told TSI.

“There is so much of development activity going on in the real estate field. The boom will pick up soon,” P.S. Reddy, president of the Andhra Pradesh Real Estate Developers’ Association, averred. “There is nothing like a bursting bubble; the present situation, where the small players have vanished from scenario, is good for the customer and also for the developer. The bulge during the last few years was not so healthy, since there is no corresponding match between the boom in land rates and growth parameters like construction activity and infrastructure development,” O P Ramachandra Reddy, the Managing Director of Obili Infrastructure Pvt Ltd, said.

West Bengal

First let us discuss the projects of the West Bengal Housing Board. This state government organisation has taken up a number of housing projects in the state, particularly in and around Kolkata. According to Mr. Deboprasad Jana, Vice Chairman of the Board, "The annual price escalation of the flats for Higher Income Group is normally 5.25 %. In case of the flats for Middle Income Group & Lower Income Group the escalation rate is 5 %. But in joint venture projects the government has no real control over the escalation in prices of HIG flats.

Let us consider some examples-

1. Himalaya Kanya of Siligurri-

In 2001 the cost was Rs. 1200 per sq. feet Now the cost is Rs. 1450 per sq ft

2.Dumurjala Lake View of Howrah

The initial price was Rs. 1300 per sq. feet. At present the escalated price is Rs. 1750 per sq ft.

3. Calcutta Green

The initial cost of HIG flat was Rs 19 lakhs. At present it is Rs 26 lakhs.

4. East Calcutta Township project

Escalation- Rs.5.4 lakhs to 10 lakhs .

5. Ruchira , E M Bypass

Price escalation from Rs 1350 per sq ft to Rs 1600 per sq ft

Mr. Goutam Deb, Housing Minister said, "Our aim is to serve the poor and middle class . That’s why we are giving subsidy for LIG flats and maintaining no profit no loss policy for MIG flats. Our only profit making project is HIG housing and the actual profit never exceeds 7-8 %.” The big real estate companies like Ambuja, Peerless, Shrachi, DCL, Bengal shelter etc. like to maintain their own policy regarding price rise. But the small local promoters are virtually out of the control. The rate depends on their whims. Clearly, West Bengal is on a roll when it comes to real estate prices. Gujarat (Ahmedabad)

Just 4 months ago, one developer group bought Kamaldeep Apartment, situated at C G Road, the most buzzing place in Ahmedabad. It is said that the developer paid from Rs 57 lakhs to Rs 82 lakhs to each flat owner. Today a sparkling commercial complex is being built here. Naranpura area was like an isolated dense forest two decades ago, but today it is a goldmine. An area of 400 sq. yards can yield almost 1 to 1.25 crore. The last one year saw the rates of land in areas on the outskirts area of Ahmedabad city like Bopal, Ghuma, Sheelaj, Godhavi jumping two to four times. Thaltej area had plot rates of Rs 12,000 to 14,000 just a year ago, but at present the rate has touched or crossed the Rs 25,000 mark.

“The intensity continues in the business of property, the difference is area. In one particular area saturation point does arrive after heavy buying. But as the rates start to fall more and more buyers jump into fray and intensity starts again. There are some places where rates came to a halt but after some time it resumes increasing,” says Deepak Vaswani of Venus Infrastructure Pvt Ltd. The new T.P. scheme introduced inside S-G highway is the hottest place. The last three months saw the rates in this area jumping by Rs. 2000 per sq yard. It's likely to increase further.

Rajni Varma of Hariom Associates echoes the same view. He says, “Real estate sector can jump to 50 percent in the next one year. If infrastructure facilities expand, zone R-2 and R-3 (S-G highway and Sardar Patel Ring Road) will witness a real boom. Development is at halt because of high rates and people are diverting towards Bopal, Sola, Ghuma and Gota.” On the other hand, areas in the proximity of state capital Gandhinagar are also most in demand. Just an year ago the rate was Rs. 175 per sq yard which has touched a level of Rs 900 at present. Nal Sarovar, situated at 90 kms from Ahmedabad is also hot spot. The rates in the area have reached to Rs 135 per square yard from just a level of Rs 35 per square yard. These trends had totally defied the belief that the deadly earthquake will destroy the property market in Gujarat. Instead we are witnessing the exact opposite. The prices of land are spiralling away. The people who invested just Rs. 10,000 a decade ago in these areas have became Crorepati.

The unprecedented real estate boom is not confined to the few states and towns and cities mentioned above. In fact, they are just a sampling of what exactly is happening to housing dreams across India. And the unprecedented boom that we see in real estate is not a bubble that will burst any time soon. Maybe at the top of the segment where house prices are in excess of scores of crores, an investor might find that the price has fallen by a few crores in the short run. But when it comes to middle class and upper middle class housing, the only direction in which prices will go is up, up and away.

There are four key reasons for this. The first is turbo charged speed with which the Indian economy is growing. GDP growth rates of 8.%% plus seem to have become the norm. This would automatically have a hugely beneficial impact on the real estate sector. The second is that middle class prosperity is genuinely expanding at a rapid rate. Talk to any professional in her late twenties and ask her about her monthly salary and you will realize she can afford to invest in a house. As India Inc. faces more of a talent crunch in the future, incomes will only rise and rise. The third is the ease with which middle class professionals can access housing and real estate loans. Despite interest rates rising over the last one year, banks still find housing loans to be the most profitable and safe form of credit. The fourth reason is the increase in number of overseas Indians who want to invest in a property 'back home'. TSI has given you the real dope, have you joined the fun bandwagon yet?