Dreaming big in smaller towns

Written by Preeti Parashar | Updated: May 31 2009, 06:23am hrs
With the real estate markets of metros and tier-I cities reaching a saturation point, realty developers are exploring new avenues for growth in the tier-II and tier-III cities, where demand still exists. Dubbed as the new emerging centres of growth, cities like Coimbatore, Vadodara, Bhopal, Nagpur, Panipat, Jaipur, Dehradun, Amritsar, Jalandhar and Lucknow are being portrayed as the new destinations for real estate development. As per the FICCI Ernst & Young Indian Real Estate Report, 2007, 11 Indian cities, where investment in the industry, including IT, infrastructure, and urban governance has improved the quality of life and prosperity of its residents include Surat, Chandigarh, Nagpur, Vadodara, Visakhapatnam, Jaipur, Thiruvananthapuram, Kochi, Nashik, Indore and Ludhiana. Here exponential growth has been recorded in the real estate sector, which is still continuing.

Contributing factors

The factors fuelling the growth of developers in these cities include lower construction costs, rising demand, changing lifestyle and increasing levels of disposable income. These cities also offer adequate land at reasonable prices alongwith physical and social infrastructure, making them preferred destinations.

For instance, buoyed by the growth potential of Jaipur, Mahindra Group has set up a 3,000 acre business city there with a 2,500 acre multi-product SEZ. Mahindra has already invested close to Rs 450 crore in the project and about 30 units including IT, engineering, handicrafts etc have lined up investment of around Rs 1,100 crore in the SEZ. According to Ashish Mathur, Head-business development and marketing, Mahindra World City, The project has an export potential of $1-2 billion year-on-year once fully operational. Since the cost of operations here are over 35% lower than anywhere else, many companies are setting up units here. Besides labour costs are also low and demand exists for such projects.

Changing scenario

In cities like Coimbatore, where only local developers ruled the roost till a year ago, more national players are entering the realty arena. In residential sector we have seen developments by Bangalore-based Shobha Developers and Puravankara Group. The luxury housing concept is fast becoming popular here. Six SEZs have been approved for Coimbatore with work going on at three sites, says a Jones Lang Lasalle Meghraj expert.

Even a recent entrant in northern regions real estate market Delhi-based Collage Group, has firmed up plans to add 3.3 million sqft of retail real estate space in cities like Kanpur, Dehradun and Bhopal besides Jalandhar where its first mall cum multiplex is near completion. An estimated investment of Rs 1,200-1,500 crore will go into developing various residential, hospitality and commercial projects. Out of the 3.3 million ft2 of total retail space, we are planning to develop about 3 lakh ft2 of space in Kanpur and 1.5 million ft2 each in Dehradun and Kanpur, says Vivek Srivastava, Director Collage Group. The group is also developing a residential project exclusively for the NRIs in Amritsar by the name of Collage Windsor Apartments offering 110 units, expected to be launched by the end of this year.

Emerging destinations

The real estate activity in Vadodara has picked up in the past two years with major realty players making it a hub for new projects. Rajiv Shiva from Gujarat Land & Estate, Vadodara shares, DLF is developing an integrated commercial and residential project at a prime location in city spread over 5.5 lakh ft2. Even the prices have shot up during this period and are now hovering around Rs 3,500-4,000 ft2 as compared to Rs 1,500-2,000 ft2 about two years back. With a SEZ from Suzlon, Sterling Biotech underway, Vadodara will witness huge commercial activity as well.

Though buyers had gone missing from the market, but Omaxe Constructions seemed upbeat about its projects in Ludhiana, Derabassi, Jaipur and Baddi etc. We are firm about our plans. Demand may be low but we are going ahead with five projects in North, said a senior official of Omaxe.

Small is the new big

Sleepy towns like Mandi Gobindgarh in Punjab; Muradnagar and Hapur in UP and Bhiwadi in Rajasthan are also emerging on the priority list of some developers.

Gurpreet Singh, CEO, AIPL Ambuja (alliance between Advance India Projects and Ambuja Realty Group) says, We are coming up with our first project Dream City in Amritsar and plans are being finalised for Mandi-Gobindgarh in Khanna (Punjab). We feel that the sleepy towns offer great potential for growth and the demand still persists as people want to change their lifestyle. For the next three years we plan to pump in Rs 1,200 crore in developing projects in Punjab across Amristar, Mandi-Gobindgarh and Mohali.

Moving towards Muradnagar and Bhiwadi, Ascent Buildtech is developing residential complexes in these cities. Suresh Gogia, Managing Director, Ascent Buildtech says, Under Hansmukhi projects, we are developing two residential projects in Dehradun and Jalandhar entailing an investment of around Rs 15-20 crore. Under Ascent Buildtech we are coming up with a five acre project called Satya Ville De in Ghaziabad with an investment of Rs 40-50 crore. Further we are planning to expand in cities like Muradnagar and Hapur in UP and Bhiwadi in Rajasthan. The projects will be spread over a total of 30 acre in these three cities.

With tier-II and tier-III cities buzzing with real estate activity, their citizens can expect to be on an equal platform with the metros in terms of lifestyle soon!