Kolkata has always been a favorable market for the real estate industry. Real estate, as we all know, forms a pivotal part of the Indian economy. Much of the growth of the overall economy is dependent on flourishing real estate sectors across cities. However, the industry has been witnessing a rapid slump all throughout last year. Demand for real estate projects has dwindled to unthinkable proportions in recent times.
Why has this happened? This is mainly due to a combination of factors which have triggered a collapse in customer demand in the industry. The real estate industry has been hit by lack of governmental regulations and policies that were deemed favorable for the industry. Alongside, the high prices of land have also acted as a trigger towards the increasing of overall prices of property across cities. Property prices have swelled to unmanageable levels. Earlier, the real estate industry thrived on the basic principle of greater demand as opposed to supply. There was a need to fulfill the housing aspirations of millions. However, with the sudden increase in prices, the mass has turned its back on the real estate industry at present. Everyone is cautious about investing his/her hard earned money in real estate these days.
With regard to investments, Kolkata still remains a good market with regard to NRI investment and property acquisitions by individuals from other cities. These investments are fetching good returns owing to sudden appreciations in overall value of properties across major areas of Kolkata. However, it is the end user segment that is giving developers sleepless nights. End users are reluctant to buy property at this time and for the first time, supply far outstrips demand, with unsold inventory piling up with real estate companies. To add to these woes, Kolkata is witnessing the same price syndrome which is making the public turn their backs on mainstream real estate projects.
In spite of the slowdown in the real estate sector at large, as mentioned earlier, the prices of land have been increasing at an unprecedented rate all across Kolkata. This is having a chain effect on the housing prices in Kolkata, taking them into uncharted territory across major areas. Areas which are considered posh and premium localities have seen an increase in land prices to the tune of fifty percent which is staggering to say the least. Overall demand has gone down but prices of land are rising on the back of steady demand courtesy outside investors and high net worth individuals. Semi-urban and urban areas have not seen many townships or affordable housing projects recently.
At a recent auction of land by the Housing Infrastructure and Development Corporation or Hidco and the KMC or the Kolkata Municipal Corporation, buyers witnessed the spiraling prices for the first time. The highest land deal in Kolkata this year was successfully concluded when a 2 acre plot right on the EM Bypass was sold off for a mindboggling INR 115 crores! The biggest land deal earlier was taken to be the INR 135 crores received for a 3.35 acre EM Bypass plot. Alongside, the Rajarhat IT Township recently saw an INR 51.3 crores deal for a 2.5 acre plot on which a retail complex and office are slated to come up pretty soon. These deals indicate at the rising prices of land in the city and the effect on the costs of housing. According to market sources, the mainstream public will feel the pinch as developers will have no option but to hike housing prices considerably owing to their own rising costs of land acquisition. Alongside, the new land acquisition act, if passed, could also lead to a further rise in prices for properties in the city.
According to a realtor in Kolkata, Santosh Rungta, the overall value of land in Kolkata has gone up by a mindboggling fifty percent and this impact will be felt on most of the upcoming projects coming up in good localities. Demand remains steady for high priced land surprisingly while the supply of the same is dwindling steadily. Alongside, demand is not being met by the creation of new townships in major areas according to him. Sudden price rises of land are not new to the state. West Bengal witnessed huge surges in prices in and around the year 2009 and government agencies made pots of money by selling off land in premium areas.
The KMDA or Kolkata Metropolitan Development Authority, Hidco and the Kolkata Municipal Corporation have okayed deals which are estimated to be worth more than INR 18, 000 crores which is indeed a staggering sum in these times. This involves about 5, 250 acres of land in just a little more than two years. KMDA has in reality signed deals more than INR 800 crores with city based real estate developers in just one day! This is fascinating to say the least and just goes to illustrate the current situation prevailing in the city. Townships are facing hurdles like the ULCA or the Urban Land Ceiling and Regulation Act of 1976. There is a limit on vacant land which can act as a constraint. Godrej Properties is one of the prominent conglomerates who had appealed for a reconsideration of the ULCA. However, the urban development minister ruled out any repeal and instead, announced permission for land purchases beyond the fixed ceiling in case thirty percent is kept for the low income housing sector.
According to the managing director and chairman at the PS Group, Pradip Chopra, prices have remained quite steady in the city and the market will remain steady for quite some time now. Kolkata real estate sector was earlier driven by mainstream customers but investors rule the roost these days. There has been a slowdown in the commercial real estate sector with very low rates of occupancy across major office areas and Sector V. According to Pradeep Sureka, the Sureka Group Managing Director, the commercial real estate market has not been growing in comparison to the housing sector. Prices of office rentals have not gone down according to him.
No comments:
Post a Comment