Spread of the realty pie

Written by Mona Mehta | Updated: Aug 31 2008, 06:07am hrs
Post inflation woes, investors community including high net worth individuals (HNWIs) have recently started shifting their focus from investing in high-end properties in Mumbai, Delhi, and, thereby accelerate strong concentration in markets such as Kolkata, Bardhaman, Durgapur, Shiliguri and Haldia in order to buy high rise apartments. As a result, real estate majors are looking at converting factories and bungalows into high rise apartments based in West Bengal, Haldia and the respective markets in Kolkata.

According to Avrajit Kar, vice president marketing, South City Projects, The number of investors in Kolkata and its suburbs is expected to increase from 20% to 30% within a year as the realty prices in Kolkata are more economical compared to that of other metros, including Mumbai. For instance, an apartment in Baliganj area in Kolkata is priced at Rs 4,000 to Rs 6,000 per sq ft as compared to Rs 10,000 to Rs 15,000 per sq ft in posh Bandra/ Mumbai. As a result of an increasing number of people investing in real estate in Kolkata, Kar added that Kona Expressway area, Bantala area and Rajarhat are going to be the new satellite cities of Kolkata. Besides, Gurgaon, National Capital Region of Delhi, Pune, Hyderabad, Chennai, Bangalore, Goa, Chandigarh are considered growing markets for investors. Mumbai-based K Raheja Property is planning to enter eastern part of India, especially, Kolkata to set up high rise apartments apart from other Tier II and III cities. DLF and Unitech are planning to set up high rise apartments near Kona Expressway, Bantala area and Rajarhat.

Meanwhile, Merlin Group in Kolkata is planning joint ventures, tie-ups for developing properties in Chennai. Besides, Diamond Group, Fort Group in Kolkata too are planning high rise apartments in Kolkata and Chennai. Not only that, Emami Realty is also planning to develop properties down South. Says Ravi Ramu, director, Puravankara Projects, Due to inflationary trends, we are now looking at speeding up development of high rise apartments in the South. With a land bank of over 125 million sq, the group has over 20 mn sq ft residential and commercial space currently under construction. Included in this are on-going residential projects amounting to 18.30 mn sq ft with a total of 11,010 homes. According to industry experts, developers across the country are selling apartments with a by invitation tag, offering super-premium apartments only to ensure that the complex developed by them is inhabited exclusively by like-minded people belonging to the higher strata of the society.

Following the global trend of handpicking apartment buyers, South City Projects, which has developed the tallest residential towers and largest functional mall in eastern India, has developed the Bel Air, which is expected to be one of Kolkatas most prestigious addresses and can possibly become a trend setter in this segment. Located in the heart of posh Alipore, Bel Air offers 4 BHK apartments, pent houses and duplex and covers an area of 1, 87,000 sq ft at and over Rs 5 crore per apartment. Kar said, We are looking at acquiring more land for development of high rise apartments apart from converting bungalows into high rise apartments. According to Anuj Puri, chairman & country head, Jones Lang Lasalle Meghraj, There has been a moderate-to-medium slowdown overall. Retail investments have shown a sharper decline than institutional investments. Financial institutions are finding it attractive to enter projects at reasonable valuations in the current market situation. Retail investors in residential property probably need to wait and watch till after Diwali to get good value.

Mumbai, Delhi NCR and Pune would have been the best investment options three years ago. The returns were about 30% per annum. Despite the current slowdown, returns are likely to be between 20% to 30% per annum, if an investor holds on for the long term. In the short-to-medium term, they will be considerably lower, Puri added. Provided that one does not pay excessively for a property, and further provided that one holds it for a sufficiently long period, thereafter exiting at the right time, returns will be the same. Only the time-frame for these returns has changed not the potential. It is now a matter of holding power and investor maturity.