Prices of land parcels have shot up sharply in the country’s top cities compared to the pre-Covid period as the residential property market has bounced back after many years of slowdown.
Land prices have shot up between 20% and 200% in tier 1 cities compared to the pre-pandemic period, according to a report by Dolat Capital last week. Gurugram and Hyderabad have registered the highest increase of over 200%, the report said.
According to Dolat, the increase in land prices is reflected in the average prices of apartments sold in Gurugram/Hyderabad where they went up by 19-79%.
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The report said MMR and Pune are the two markets to watch out for as prices went up between 20% and 70%, and inventory overhang has come down to a decadal low of 12-20 months and ready inventory share in total inventory for Mumbai/Pune is among the lowest (4-5%) and broadly in line with top performing markets of Gurugram and Hyderabad.
Consultants who deal in large land parcels agree that prices for both land and apartments have shot up in major cities.
“Before Covid, land prices were between Rs 30,000 and Rs 40,000 per sq yard in Gurugram, and have now reached Rs 1.25 lakh per sq yard. It has also reflected in the selling prices of apartments there,” said Mayank Saksena, managing director-land services at Anarock Property Consultants.
Saksena said new launches in the Golf Course Road Extension in Gurugram are happening at Rs 17000-23000 per sq ft against Rs 5,500-7,000 sq ft before the pandemic. On the Dwarka Expressway, the selling prices have touched Rs 12,000-14,000 per sq ft against Rs 3000-4,000 per sq ft earlier.
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In Hyderabad, besides prices, even the size of apartments are going up and the city is seeing luxury residential development in a way it has never seen before, Saksena said.
“Before Covid, the maximum inventory was two bedrooms of 1,200 sq ft and three bedrooms of 1,800 sq ft. Biggest was 2,400 sq ft. Now they are launching apartments of 7,000-10,000 sq ft, he said, adding that the developers are launching exclusive single apartments on each floor of high rise developments.
However, he said unlike Gurugram where land supply is controlled by the government, Hyderabad has good land availability and better infrastructure.
“In Gurugram, unless you have licence for development, the land does not have value,” he said
In Bengaluru, too, land prices have shot up sharply compared to the pre-pandemic period.
Prices of plotted developments and apartments have gone up from Rs 2,000 per sq ft to Rs 4,000 per sq ft and residential prices are touching Rs 10,000 per sq ft from Rs 5,000 per sq ft earlier, Saksena said
“Land prices in the CBD (Central Business District) in Bengaluru have touched an all-time high,” he said.
The rise in prices haven’t reduced the quantum of the land deals.
According to Anarock, the top 8 cities saw at least 68 separate land deals accounting for 1,656 acres in the first nine months of 2022. In the corresponding period last year, just 20 land deals for 925 acres were closed across these cities.
Developers agree that the growth in residential markets has led to rise in prices.
“There has been a general trend of increase in land prices post-covid which has primarily been due to improved sales velocity, increased sales price realisation, improved infrastructure and connectivity. The land price growth is also on account of paucity of plots with clear title and less regulatory hurdles,” said Sanjay Dutt, managing director at Tata Realty & Infrastructure.
For example, land prices in Dwarka Expressway have increased by 50%, Dutt said.
Dutt said the increase in land price and construction cost led the developers to hike the sales prices of their projects which was supported by the market on account of improved sentiments and end-user demand for quality residential units across various micro markets. “We have witnessed price increases of 10% in some of our existing projects in Gurugram,” he said.
Pradeep Aggarwal, founder and chairman, Signature Global, a Gurugram-based developer, said, “The real estate market in Gurugram and its micro-markets have witnessed exceptional growth in 2022, elevating it to the top of the NCR real estate destinations. In Gurugram, the demand for homes is increasing at a faster pace, driving up the prices of land.”
After the pandemic, people have started prioritising home ownership, which is fuelling the development of new residential projects as well as the demand for land parcels, Aggarwal said.