Can im­proved road con­nec­tiv­ity lead to more af­ford­able hous­ing op­tions?

HT Estates - - FRONT PAGE - HT Es­tates Cor­re­spon­dent ht­es­tates@hin­dus­tan­times.com

Devel­op­ment of new in­fras­truc­ture, which con­nects the city cen­tre to a wider ge­og­ra­phy, is an ef­fec­tive tool to give a push to af­ford­abil­ity. Most projects in Delhi- NCR, Mum­bai and Ben­galuru are priced in the above ₹ 65 lakh cat­e­gory. While they are rel­a­tively af­ford­able, a ma­jor­ity of them are lo­cated in pe­riph­eral towns, away from the city cen­tre.

Given the con­straints of land pric­ing and avail­abil­ity, such low ticket- sized projects can only be un­der­taken in pe­riph­eral city ar­eas and im­prov­ing in­fras­truc­ture is there­fore para­mount, if they are to serve the pur­pose of pro­vid­ing a suit­able liv­ing en­vi­ron­ment as well as suit­able con­nec­tiv­ity to core city’s busi­ness dis­tricts, says a re­port ti­tled In­dian Real Es­tate: Com­pre­hend­ing the Vary­ing Speeds of Growth by JLL and CII.

In­fras­truc­ture projects im­pact real es­tate devel­op­ment at three lev­els – upon an­nounce­ment of the project, dur­ing the con­struc­tion phase and upon com­ple­tion of the project, says the re­port. The an­nounce­ment of an air­port has the max­i­mum im­pact on land prices, lead­ing to a 20% to 30% in­crease in prices.

The re­port also says that tierI cities such as Mum­bai, NCRDelhi and Ben­galuru record a rel­a­tively gentler ap­pre­ci­a­tion in res­i­den­tial cap­i­tal val­ues on an­nounce­ment of an in­fras­truc­ture project, as most likely the ben­e­fi­ciary precincts are al­ready es­tab­lished ones. On the con­trary, the ben­e­fi­ciary precincts in tier-II cities would re­act to such an­nounce­ments more sharply.

As in­fras­truc­ture devel­op­ment in big­ger cities in­volves a lot of com­plex­i­ties (big­ger cities face chal­lenges in ac­quir­ing land, re­set­tle­ment and co­or­di­na­tion be­tween mul­ti­ple gov­ern­ment agen­cies), the con­struc­tion pe­riod would typ­i­cally be longer com­pared to that seen in tier-II cities, the re­port says.

In­ter­est­ingly, the length of road con­struc­tion is known to have a di­rect bear­ing on real es­tate. How­ever, it is equally im­por­tant in po­ten­tially low­er­ing av­er­age house prices, par­tic­u­larly in ur­ban ar­eas. As road lengths in­crease, con­nec­tiv­ity im­proves across a wider ge­og­ra­phy thereby at­tract­ing new project launches at lower price points. This also has the ef­fect of re­duc­tion in prices in ur­ban ag­glom­er­a­tions, says a re­port.

The re­port says that the an­nounce­ment of an air­port has the max­i­mum im­pact on land prices. It can lead to about 20% to 30% in­crease in prices. This is be­cause airports usu­ally come up in ar­eas that are away from the city cen­tre where land prices are at a very low base.

The ap­pre­ci­a­tion in land prices is around 5% to 10% dur­ing con­struc­tion and 5% to 10% on com­ple­tion of the project. With huge ges­ta­tion pe­riod for its con­struc­tion, an­nual ap­pre­ci­a­tion is mod­er­ate un­til com­ple­tion of the air­port, the re­port says.

The ap­pre­ci­a­tion in hous­ing stock is around 8% to 10% at the time of an­nounce­ment of a road project, it is about 7% to 10% dur­ing con­struc­tion and around 5% to 8% on com­ple­tion of the road con­struc­tion project, the re­port says.

A Metro is routed through es­tab­lished res­i­den­tial and com­mer­cial ar­eas of a city. There­fore, the price ap­pre­ci­a­tion fol­low­ing the an­nounce­ment is gentler, al­though ap­pre­ci­a­tion picks up pace as the in­fras­truc­ture project nears com­ple­tion in an­tic­i­pa­tion of the ris­ing pref­er­ence for the area, it says.

Prices of res­i­den­tial real es­tate gen­er­ally rise by 10% to 15% on an­nounce­ment of the project, 10% to 12% dur­ing con­struc­tion and 15% to 18% once the Metro project is com­plete, the re­port says.

Also, the con­struc­tion of outer ring roads in cities ben­e­fits a wider ge­og­ra­phy and mit­i­gates spo­radic rise in prices of cer­tain precincts

There­fore, it is im­por­tant to in­crease the speed with which au­thor­i­ties de­liver and ex­e­cute in­fras­truc­ture projects. This will not only help de­con­gest cities, but also keep price af­ford­abil­ity in­tact. Cen­tral gov­ern­ment ini­tia­tives such as Smart Cities Mis­sion, tar­geted devel­op­ment of road projects and in­creas­ing land supply through re­forms in Land Ac­qui­si­tion Re­ha­bil­i­ta­tion and Re­set­tle­ment Act hold a lot of prom­ise and must be ex­pe­dited.

HT PHOTO

The an­nounce­ment of an air­port has the max­i­mum im­pact on land prices. It can lead to about 20% to 30% in­crease in prices.

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