SAFE BETS FOR SHAKY TIMES
Key realty hotspots across India offer value as well as promise appreciation
When Pawan Ganguly ( name changed), 44, an executive with a KPO firm in Mumbai who lives in a one-bedroom terrace flat in New Panvel in Navi Mumbai, wanted to invest in property, two places came to his mind—Thane and Kharghar. While a home in Thane would take him closer to his office in Powai, and the place offered most of the services and amenities he had been looking for, Kharghar, already a planned area, was likely to see a steeper hike in value. He decided to invest in both the places, and he was not disappointed. He invested Rs 28 lakh in a Kharghar property in 2005, and says its value currently stands at Rs 90 lakh. It will
rise by another 15 per cent with the Navi Mumbai airport inching towards final clearance. He has yet to get possession of his home in Thane, but he is in no hurry. Prices have already zoomed there, from Rs 4,500 per sq ft in 2009, when he bought the property, to around Rs 8,000-9,000 per sq ft at present. “I invested Rs 65 lakh then, but can get more than Rs 1 crore if I sell it now,” he says.
Ganguly can rest assured as he has invested in a safe zone. The real estate sector in the country is quite diverse and swings wildly. It displayed extreme volatility during most of the previous decade. The early 2000s saw property market turning hot on foreign money and upbeat native sentiment, but the final years of the decade saw the retreat of the foreign money and ebbing of the sentiment. As tremors of the global financial crisis hit India, value of homes dipped 18 to 20 per cent in March 2009 compared to a year earlier, while office lease rental fell 25 to 50 per cent. Just when the market seemed to be achieving stability in 2012, came new threats such as high inflation and a slowdown in investment. Experts say the last two quarters have seen a tightening in the number of real estate inquiries. “Realty prices have gone up, but sales conversion has not happened as desired,” says Neeraj Bansal, who heads the real estate practice at consulting firm KPMG. Investors have become more selective in their purchases.
Consultants say that buyers in India need to do greater diligence before entering into property agreements. Ownership rights of the property, understanding the difference between usable area and saleable area in the absence of standardised definitions, completion of the project and receipt of the completion certificate, are things that buyers need to keep a close watch on. Buyers also need to look at the potential for growth in the area and the right mix of both residential and commercial development opportunities. As Bansal says, “Factors such as the investment budget, connectivity and potential for commercial development are key to an investment decision.”
While real estate has developed in most Indian cities in big spurts, infrastructure has lagged. Frequent traffic snarls, congestion and high noise and air pollution are common to all Indian cities. Satish Menon, who works with a publishing firm in Kurla in Mumbai, has a house there, but finds it more comfortable to live in neighbouring Chembur and commute to Kurla since he finds Chembur better planned. It also makes his occasional trips to Mantralaya and Nariman Point a lot easier, with the commissioning of the new Eastern Freeway from Chembur. “Better infrastructure would have made our emerging cities much better places to live in,” says Menon, who has given his Kurla flat on rent.
Despite the skewed development, a negative sentiment and receding investment, demand for homes in India will swell due to the relentless march of people from rural areas to cities. Even in an adverse economic climate, the right places with the right development will witness growth.
Just as Indian cities have been struggling with the lack of adequate infrastructure, foreign interest in India’s real estate sector has also taken a beating, as reflected in the drop in foreign direct investment ( FDI) in the segment in the last three years. FDI in real estate fell to $731 million in 2011-12 compared to $1.6 billion in 2010-11, and $4.1 billion in 2009-10. However, FDI into real estate in India is estimated to increase to $25 billion over the next 10 years.
Earlier this year, property consultant Jones Lang LaSalle released a study, ‘Emerging Investment Hotspots’, which lists residential and commercial locations that offer potential for investment. It defines a hotspot for investment as one that “is emerging as a self-sustained ecosystem with development at all levels”. This means that locations focused only on the residential or the office segment cannot fall in the hotspot category, since they will not be sustainable in the long run.
The hotspots include Noida & Greater Noida in the National Capital Region, Thane in Mumbai, Navi Mumbai, Whitefield in Bangalore, the southern suburbs of Chennai, Viman Nagar and Nagar Road in Pune, Gachibowli in Hyderabad and Rajarhat in Kolkata. Factors such as better infrastructure, connectivity, availability of developable land, adequate supply of quality services are common to all these investment destinations. For instance, Viman Nagar in Pune, with its proximity to the airport, has become one of the most sought-after neighbourhoods in the city, with prices ranging from Rs 6,500 to Rs 11,000 per sq ft.
Similarly, in Gachibowli in Hyderabad, which is located near Hitec City and has a high concentration of IT companies, the price of property varies between Rs 3,700 and Rs 6,000 per sq ft. Navi Mumbai, with good road and rail connectivity, is now attracting buyers of various classes. The IT industry changed the skyline of Noida, turning it into an investment hotspot.
More than being just valued property locations, these realty hotspots can also explain India’s current economic situation of overall low growth. India has vast growth potential which can be realised only when we can create the right kind of atmosphere. Just as a realty hotspot needs to be a self-sustained ecosystem with development at all levels, India too needs to boost manufacturing, enhance infrastructure and put emphasis on the right places for the depressed growth to pick up.