Kolkata: Real estate in is at the forefront again
Mar 2010:
Real estate in Kolkata is at the forefront again. After lying low for more than a year, property fairs in the city are witnessing an uptrend with increased footfalls and spot bookings that are here for real once again. Pundits would still prefer to call the signs of revival as "early days". However, with an unprecedented turnout in the last edition of Realty Expo, Kolkata's biggest property fair, the negative sentiment that had gripped' the real estate sector had somewhat eased.
If property prices are an indication to the uptrend, the first three months of 2010 has been good so far with a 7-10 per cent jump in residential and office space prices.
Realty experts point out that Kolkata has managed to avoid a major real estate crisis because prices here had never reached 'unrealistic' proportions. Kolkata's real-estate market is also relatively stabilized since the number of speculative investors here is much less compared with end-users. The proportion of end-users vis-A-vis investors is 70:30, says Mr Sanjay Chowdhury, Regional Head, Emaar MGF.
"Prices in some other cities had to undergo a correction because they were inherently over-priced. Prices in Kolkata never appreciated so much and have always been realistic in nature," he says. The Confederation of Real Estate Developers Association of India (CREDAI) claims that rental values for office space are appreciating as much as in the previous years and even the central business district (CBD) is witnessing a higher growth over the period by virtue of non-availability of Grade A offices vis-A-vis the rise in demand.
Rentals at the CBD are currently in the Rs 80-130 per sq.ft per month range. The Life Insurance Corporation of India, which is planning to build a 50-storey office building on the EM Bypass, a non-CBD area, expects to get a rent of Rs 150-170 per sq, ft when it comes up in a couple of years.
While the real-estate prices in Kolkata saw a steady rise rather than a sudden boom and bust which most other states witnessed in the first quarter of 2008. Prices at New Town, Rajarhat, were ranging between Rs 1,200 and Rs 1,700 per sq.ft when development started there a couple of years ago. And then the price gradually saw an upward movement towards the Rs 2,700-3,000 range with national level players (such as DLF and Unitech) entering the market, says Rahul Todi, Managing Director, Shrachi.
The nature of development forming joint sector companies with the Housing Board has also ensured that there is appropriate regulation in controlling volatility in prices, he adds. The comparative stability in the Kolkata market vis-a-vis other metropolitan cities in the country has also helped in countering some part of the losses incurred due to escalating raw material costs in steel and cement, which have increased by 15-20 per cent over last three years.
However, going by the overall health of the sector, it is estimated that Kolkata as a market will continue to remain healthy and it is one of the best markets for investment over a long term of 5-10 years, feel real estate analysts. Perhaps, an important factor to note here is that this time the recovery of the real estate sector in Kolkata is riding piggyback on an increasing investment in the residential segment.
Property developers are of the view that there has been a significant improvement in demand in the last couple of months. Pradeep Chopra of PS Group, said he had increased prices for one of its projects by Rs 200 per square feet to Rs 1,899 per square feet in the last one month.
Several real estate developers are also planning to launch new projects, which they have been holding for the last six months, which could be seen as a manifestation of demand revival. Another point worth noting is that when the economic downturn was at its worst last year, several property developers had started advertising freebies to attract customers. However, they are no longer pursuing the strategy.
Eden Realty, which is developing one of the largest housing project in south Kolkata, tried to woo customers by offering free car parking space with flats few months back. However, the response to the offer was lukewarm, and the realty company was no longer in a position to offer the scheme. The company claims that when it had initiated the scheme last year, it generated a lot of customer interest. Having stopped the scheme now, the customer interest has begun translating to sales.
Sensing the need for easier finance, rather than freebies, developers are now focusing on pragmatic tie-ups with banks. Thus, while earlier, many developers were paying pre-equated monthly installments (EMI) to banks for the customers, under interest subvention scheme, they were now refraining from paying the entire pre-EMI.
The realty community in Kolkata is hopeful that consumer sentiments are reviving bit-by-bit. People are probably realising that all those doomsday predictions are unlikely to impact India. While demand for projects across all formats - be it residential apartments, row houses, villas, plotted land, premium lifestyle projects, malls, office buildings and even IT parks - is picking up, the craze is for affordable flats priced at sub-Rs 20 lakh.
Property Market
The Kolkata market is considered as one of the emerging destinations for real estate markets and ideal for investment. It is believed that the city has attracted investors to pour in an estimated amount of Rs 30,000 crore to develop infrastructure.
'Elita Garden Vista' is just one of the Singapore real estate companies, which is developing luxury condos in New Town, Kolkata, which is spread over a 20 acre residential complex offering features like Wi-fi connectivity, a mega residential and commercial complex with several additional features like recreation club, health centre, enhanced security, underground parking lot, aroma garden, amphitheatre etc.
There are several other projects that have been proposed with an estimated investment of Rs 2,000 crore in addition to over Rs 1,000 crore invested in the previous year. The government is also promoting the growth of IT sector in the city and has already sanctioned land to various companies to set up their workplaces. There is great scope of development in areas like Rajarhat township, and it has been primarily allocated to promote the real estate development in Kolkata. Some of the multi national conglomerates like Zuri Hotels & Resorts which are promoted by syndicate investors are scrutinizing their opportunities in the Kolkata real estate market.
One can expect good returns (about 10-15 per cent appreciation) on their property in a span of six months. However, as per the market trend, it is advised to wait till the market picks up before selling any property. Since early 2008, the real estate market in Kolkata has been through a bump due to the global economic slow down, else it was going through a golden phase between the years 2005-2007. There is a prediction that the market will rise by more than 30 per cent in the coming 2 years which is definitely a motivating factor for the real estate fraternity.
Growth Drivers
A recent study by the Indian Statistical Institute has revealed that the Kolkata market has the highest per capita purchasing potential among all metros. Also the decline of real estate in cities like Mumbai and Delhi has given way to a tremendous opportunity for investors to explore in cities like Kolkata, where the market is still on the rise and has not yet reached its peak. Also various IT companies are looking forward to less expensive cities like Kolkata, where the cost of investment is less and hence there is great scope of growth.
Source: Mint | Back to Realty News