Tuesday, January 1, 2008

Anuj Puri of Jones Lang Lasalle Meghraj looks at the year 2008 for Indian real estate

In Indian real estate today, the only constant is change. Hot destinations of the last year are not assuredly the best options this year, and the next year brings its unique set of emerging investment destinations with it.

The reason for this state of flux is that the real estate boom is causing many of our metros and even some of the previously popular Tier II towns to saturate at an incredible pace. Property prices there skyrocket beyond the reach of middle-income homebuyers, causing them to look a little further afield each year. Investors observe these migration trends, analyze the magnitude and scope of activity, and identify one or the other new town as the next coming thing.

IT companies, who are now the primary drivers in Indian real estate market, are not dependent on central business locations. The crux of the whole outsourcing boom is that it makes more sense for foreign-based companies to offload back-office functions and even serious research processes to India than to undertake these in situ. However, what would necessarily be a CBD-based business function in, say, the United States, can be a non-CBD dependent function in India. After all, both the sellers and final buyers of IT-based products and services are based abroad anyway. This means that IT / ITeS companies can operate from anywhere in India, as long as there is access to skilled manpower and necessary resources.

The fact that such companies can benefit from the advantage of cheaper real estate prices in smaller towns has led to the Tier II/III city boom. IT /ITEs companies catalyze every other sector of real estate wherever they go, so the retail, residential and infrastructure sectors soon start perking up in those localities.

A fundamental real estate investment mantra is that emerging localities are preferable to established and often saturated ones. Established areas eventually reach a peak in terms of appreciation potential, after which the growth rate either slows down or stagnates. Moreover, there is little scope for new market drivers such as malls to find a place in saturated localities – meanwhile, prices remain high. This is not the best of scenarios from an investment point of view, since optimal investment requires low entry levels and appreciable growth within a realistic time-frame. Therefore, as one or the other destination reaches its peak potential on all these counts, new ones come into the limelight.

It follows that in 2008, we will be looking at an entirely new set of hotspots on the Indian real estate market. A few of these are given below, along with some vital statistics and the basic reasons for their emerging high profiles on the Indian property landscape:

VIZAG:

Vizag’s growth drivers are availability of land at cheaper cost vis-à-vis Hyderabad, relatively cost of skilled manpower (as well as lower attrition rates), improving infrastructure and considerable demand. The market also has lesser competition and project costs are lower, leading to increased margins. Meanwhile, overall purchasing power in Vizag is high. The upcoming commercial and retail destinations in Vizag are Dwarakanagar, Seethamadhara, Gajuwaka, Rushikonda, Anakapalli, Bheemili and Paarwada. For residential investment, the best areas now are Madhurawada, Pendurthy, Parawada, Bheemunipatnam and the areas towards the Anakapalli Corridor.

Property Rates: Seethammadhara(Rs. 1400 – 3000/sq.ft.), Murali Nagar (Rs. 1400 – 2200/sq.ft.), Beach Road, MVP colony (Rs. 2800 – 3500/sq.ft.), Siripuram (Rs. 2500 – 3200/sq.ft.), Parwada (Rs. 1200 – 2000/sq.ft.),

VADODARA:

Vadodara definitely ranks high among the emerging investment destination. The prime residential areas are Alkapuri, Race Course Road, Old Padra Road, Jetalpur, Akota and Fatehganj.

Property Rates: Old Padra Rd – (Rs.1200-1500/sq.ft) Alkapuri – (Rs.1900-2300/sq.ft), Race Course Road – (Rs. 1500-1800/sq.ft), Fatehganj – (Rs.1300-1700/sq.ft)

DEHRADUN:

Dehradun is seeing a gradual but definite boom associated with the rise of malls in the region. Land rates are rising and there is considerable infrastructure development. Another driver is the growth of Information Technology (IT) sector in the region. The State Industrial Development Corporation of Uttaranchal is setting up a high technology software park on more than 60 acres of land at Dehradun. Chatrata Road, Mussoorie Bypass and Sahastradhara Road are the best locations for small to medium investors.

The current rates begin at Rs 3500/square yard. Here will be between 10-12% of appreciation over the next three years.

INDORE:

Indore’s real estate star is fundamentally on the rise, and offers good investment opportunities in project with low entry cost that are located in an area with good appreciation potential.

Property Rates: Vijay Nagar (Rs. 3000 – 10000/sq.ft.), Bypass, A B Road (Rs. 3000 – 10000/sq.ft.), Rau (Rs. 600 – 1200/sq.ft.), Gulmohur Colony (Rs. 3500 – 6500/sq.ft.), Green Park Colony (Rs. 800 – 3500/sq.ft.),

NASHIK:

Nashik is displaying an increasingly buoyant industrial scenario, with considerable growth expected in the IT/ITES industry. Overall infrastructure and connectivity Mumbai and other regional towns is improving rapidly, lending increased credibility to Nashik’s real estate market. It is a vertex of the Pune-Mumbai-Nashik Urban Golden Triangle. The upcoming suburbs of Anandwalli (Gangapur Road), Indiranagar, Untwadi, Aadgaon (off Mumbai–Agra Road) and along Pathardi Link Road bear special watching.

Property Rates: Gangapur Road (Rs. 1200 – 1900/sq.ft.), Mumbai Agra Road (Rs. 800 – 1600/sq.ft.), Agra Road (Rs. 600 – 1000/sq.ft.),

GUWAHATI:

The capital city of Assam has witnessed a population growth of over 40% over the last ten years. This extensive population growth has been responsible for a quiet revolution on Guwahati’s real estate market. There is an upsurge in the retail sector, and outskirt locations such as Khanapara, Zoo-Narengi Road, Basistha and Beltola are emerging as the new residential destinations.

Current rates are between Rs.1800-2500/sq.ft. The upcoming Games Village at Sarusajai will add a new flavor to the residential market along NH-37.

CHANDIGARH:

Though there has been a lot of speculation on Punjab’s real estate market, Chandigarh is among the emerging cities that are seeing very encouraging real estate trends. It is India’s first planned city, and it conforms perfectly to the key parameters by which we judge a city’s growth - property market, people, physical infrastructure, social infrastructure, and business environment. Chandigarh scores very high on these counts, especially in terms of the potential of its property market. Chandigarh’s boom derives from the rapid development taking place on its outskirt areas.

Some of these areas are Panchkula (Rs. 2500-3000/sq.ft.), Mohali (Rs. 1500-2500/sq.ft, Dera Bassi (Rs. 1300-2000/sq.ft.) and Zirakpur (Rs. 2700-3200/sq.ft.).


Jones Lang LaSalle Meghraj

is the pre-eminent and largest real estate services provider in India. The firm services international investors, corporates and local clients who are growing rapidly, both in India and globally.

Jones Lang LaSalle Meghraj provides a strong and deep pool of management expertise with a staff of over 2800, and the largest geographic footprint across India with offices in ten cities. This gives the firm a matchless competitive edge. The company expects to exceed USD 100 million in revenue in the next two years. It represents a robust platform of service delivery, coverage and depth for clients. Jones Lang LaSalle Meghraj specializes in providing real estate advice to corporates and institutions who have either recently arrived in the country or already have an established presence.

Press Release
Arun Chitnis, Manager - Corporate Communications, Jones Lang LaSalle Meghraj

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