Project Monitor - - FRONT PAGE -

here is no get­ting away from the im­por­tance of in­fra­struc­ture as a cat­a­lyst for real es­tate growth. Es­pe­cially in terms of pub­lic trans­port and over­all con­nec­tiv­ity of ar­eas, in­fra­struc­ture is of para­mount im­por­tance. It is con­nec­tiv­ity that en­ables people to live in a city's fur­ther ar­eas and yet reach their work­places, and it is in­fra­struc­ture that makes life bear­able and dig­ni­fied in these ar­eas.

Many trans­port in­fra­struc­ture projects that have been an­nounced for Pune in the past are still hang­ing fire. With the ar­rival of the BJP into power, there are talks of the Con­gress­driven Jawa­har­lal Nehru Na­tional Ur­ban Re­newal Mis­sion (JNNURM) be­ing scrapped in favour of the ' 100 new cities' agenda.

Mean­while, a re­port on the planned Pune Metro was again sub­mit­ted to the PMC in 2010 and has not been ac­tioned ei­ther. Even while new al­lot­ments for its ex­pan­sion have been ap­proved by the Min­istry of Ur­ban De­vel­op­ment, other seg­ments of the city's Bus Rapid Tran­sit Sys­tem are un­der­go­ing safety au­dits be­cause of doubts that have been raised about safety on roads.

Pune's Ring Road

Nev­er­the­less, some of the gamechang­ing in­fra­struc­ture projects for Pune are very much on track, and are con­se­quently all set to boost the city's real es­tate mar­ket in var­i­ous key pock­ets. Var­i­ous fly­overs in im­por­tant ar­eas are on track, as are a num­ber of road in­fra­struc­ture projects. One of these is the am­bi­tious Pune Ring Road, which was for­mally given the green sig­nal by the state govern­ment ear­lier this year.

Aimed at decongesting traf­fic on the roads con­nect­ing Pune and the Pim­pri Chinch­wad Mu­nic­i­pal Cor­po­ra­tion, the Ring Road, which will be de­vel­oped on the time-tested PPP model, will in­ter­con­nect key thor­ough­fares such as the PuneNashik, Mum­bai-Pune-So­la­pur, Pune-Ahmed­na­gar and Pune-Satara high­ways.

Un­der­stand­ably, this and sim­i­lar in­fra­struc­ture projects are draw­ing a lot of in­ter­est from long-term property in­vestors, ex­pect­ing that these projects will

The true pic­ture

turn a lot of lo­ca­tions into in­vest­ment gold­mines. While the pos­i­tive ef­fect that trans­port in­fra­struc­ture has on ben­e­fi­ciary lo­ca­tions is a proven mar­ket dy­namic, property in­vestors need to un­der­stand where this ac­tu­ally works on the ground, and where it does not. Let us first take the hy­po­thet­i­cal case of lo­ca­tions in Pune that may even­tu­ally have metro sta­tions. While it is gen­er­ally as­sumed that property prices in these lo­ca­tions will rise as­tro­nom­i­cally, this is not nec­es­sar­ily a broad-spec­trum truth. It must be re­mem­bered that metro and rail­way sta­tions are es­sen­tially pub­lic trans­port nodes that in­volve mas­sive move­ment of pop­u­la­tion as well as en­gines and tracks that re­sult in sig­nif­i­cant noise pol­lu­tion.

The noise, de­bris and con­ges­tion caused by the very process of set­ting up such ter­mi­nals are only one side of the coin. The over­all safety of such a lo­ca­tion is also sig­nif­i­cantly re­duced. There are two rea­sons for this: one, vast num­bers of people from all back­grounds move through them on a reg­u­lar ba­sis, and two, labour­ers who ser­vice the func­tion­ing of these trans­porta­tion hubs tend to in­habit slum-like ten­e­ments in the im­me­di­ate neigh­bour­hood. These fac­tors have been proven to ex­ert con­sid­er­able down­ward pres­sure on the de­mand for (and there­fore val­u­a­tions of) prop­er­ties clos­est to these nodes.

It is only prop­er­ties that are lo­cated at a rea­son­able dis­tance from the chaos of such ter­mi­nals which ac­tu­ally show sig­nif­i­cant ap­pre­ci­a­tion, since they of­fer the com­bined ben­e­fits of in­creased con­nec­tiv­ity with­out the un­de­sir­able fall­out. This dy­namic is equally true for prop­er­ties lo­cated around air­ports, as well. End users look­ing at the pur­chase of homes will in­vari­ably fo­cus on ar­eas that pro­vide the ad­van­tages of the in­fra­struc­ture in ques­tion but also of­fer rea­son­able liv­ing com­fort. In­ter­est­ingly, while property pric­ing and cap­i­tal ap­pre­ci­a­tion tend to re­main sub­dued in projects im­me­di­ately ad­join­ing such projects for the above rea­sons, there does tend to be an in­crease in the de­mand for short-term rental op­tions in such lo­ca­tions, as many oc­cu­piers are less fo­cused on pro­longed res­i­den­tial com­fort and place more

value on fast tran­sit.

ROI driver

The en­tire sce­nario changes when we con­sider road in­fra­struc­ture such as the up­com­ing Pune Ring Road. Roads are the pre­ferred means of trans­porta­tion by ve­hi­cle­own­ing lo­cal in­hab­i­tants, and do not in­volve the move­ment of large masses of pop­u­la­tion at a sin­gle spot. Nor do large high­ways cause bot­tle­necks of tran­sient pop­u­la­tion; there is no rea­son for people to stop or other­wise con­gre­gate on these con­duits, which merely boost con­nec­tiv­ity. Nor does the ser­vic­ing of these high­ways re­quire sup­port per­son­nel to live in the im­me­di­ate vicin­ity. These fac­tors au­to­mat­i­cally raise the safety as well as the con­ve­nience quo­tients for people liv­ing in lo­cal­i­ties that lie along or are con­nected by ma­jor high­ways.

Pune's 90-me­tre wide, 170-km long Ring Road will sig­nif­i­cantly im­prove com­mut­ing as well as goods trans­porta­tion in Pune and the PCMC. Ar­eas like Charoli (which has the added ad­van­tage of prox­im­ity to the Pune Air­port with­out hav­ing it in the im­me­di­ate neigh­bour­hood) and other lo­ca­tions along the Ring Road will be eas­ily ac­ces­si­ble from the ma­jor ex­ist­ing em­ploy­ment hubs in Pune and Pim­pri-Chinch­wad.

The ben­e­fits that the Ring Road and sim­i­lar high­way projects bring to these lo­ca­tions, mi­nus the in­her­ent draw­backs of trans­port points such as metro and rail­way sta­tions, have a di­rect and very pos­i­tive cor­re­la­tion to the in­vest­ment value of res­i­den­tial projects lo­cated in these ar­eas.

To sum­marise, it is ad­vis­able to look be­low the sur­face when it comes to the hype that usu­ally sur­rounds the ar­rival of a new in­fra­struc­ture project. In terms of fu­ture in­vest­ment po­ten­tial, not all projects and the lo­ca­tions they im­pact are cre­ated equal. Lo­ca­tions ben­e­fited by new roads rather than other trans­porta­tion in­fra­struc­ture tend to do much bet­ter on the property mar­ket.



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