DRIVEN BY DEMAND FROM THE RETAIL SECTOR, THE GROWTH IN RESIDENTIAL REAL ESTATE COULD ACCELERATE
According to a report by propertyvertical.com, retail growth will not only push demand for commercial property but will drive demand in the residential segment as well. The report, commenting on the causal relationship between growth in the commercial segment and the demand for housing, asserts that rapid commercial development in Delhi and the NCR has led to a spill over of housing growth from Noida to Greater Noida. Gurgaon to Meerut, Bhiwadi and Ghaziabad to Manesar.
The report goes on to state that the next best bet for investors in the NCR is Manesar. Emerging as one of the biggest industrial hubs around NCR, Manesar has become an attractive investment destination. In fact, it is likely to be one of the biggest growth centres in the NCR. The report further states that it has all the ingredients of being the next commercial hub, after Gurgaon, with better infrastructural facilities and tax incentives. It is also likely to emerge as one of India’s major outsourcing hubs, with corporate entities like Honda, Baxter, Suzuki, Stanley, Mitsubishi, Nippon, Toyota and Maruti Udyog setting up shop here. Naturally, such massive corporate and industrial activities not only triggered the need for office space, but have also created a huge demand for residential properties from people who are employed here, and also from those likely to be inducted by emerging corporate sectors.
Ghaziabad, too, has received a major boost due to the Commonwealth Games 2010. There are major hotels with international standards under construction as also huge commercial malls, with some having hotels on top floors. These will be operational in areas like Indirapuram, Vaishali, Kaushabhi and Vasundhra.
The Metros is another development here and has certainly resulted in the appreciation of land prices along the route. According to the report, in the last nine months, residential property prices in Indirapuram have gone up from an average of Rs.1600 per sq.ft. to over Rs. 3200 per sq.ft. This clearly depicts Ghaziabad’s increasing popularity, which will certainly give boost to the commercial segment once residential properties are developed and inhabited.
Benefiting from Metro extensions, expressways, wider highways and release of land parcels, Delhi and NCR promise to be sought after destinations
REALTY REGULATOR FOR DELHI SOON
Announcing this perhaps for the umpteenth time, the Ministry of Urban Development has said that will set up a Regulatory Authority to monitor and curb malpractices in real estate activities in Delhi and the National Capital Region (NCR) area as also address the grievances of builders and developers, which will come into effect by early 2008.
Disclosing this at the Assocham conference on ‘Urban Land Markets & Finances’ held in Delhi this week, Union Minster for Urban Development Jaipal Reddy also announced that the proposed authority would work as a role model for other states to follow, particularly in view of growing real estate activities throughout the country so that the consumers get a fair deal.
OFFICE STAKES IN BIG METROS
Decline in the growth of office rental values in South Delhi is attributed to new supply that has entered the market this year. On the other hand, rental values in Mumbai’s Bandra Kurla complex rose by 22% from January to September 2007, marking it the fast emerging new central business district of the metropolis
Location | Current average office rentals | Average rental increase | |
| Rs/sq.ft./mnth | Q1 to Q3 2007 | Q1 to Q3 2006 |
| NCR |
|
|
|
CBD-CP | 317 | 20% | 76% |
South Delhi | 217 | 15% | 50% |
Gurgaon | 113 | 20% | 65% |
| MUMBAI |
|
|
|
Nariman point | 400 | 33% | 40% |
Worli | 400 | 33% | 72% |
Bandra kulra complex | 295 | 22% | 93% |
| BANGALORE |
|
|
|
CBD/OFF CBD | 70 | 19% | 31% |
Suburban | 48 | 14% | 21% |
Whitefield/Electronic city | 27 | 0% | 8% |
Source: Cushman & Wakefield | |||
Return on investment
The value of a plot of land in any particular location depends on what the government will permit to be done there, and on the success dynamics of the society in which the land is situated.
You cannot add to the value of land as you can to a structure - value derives from the dynamic community that makes the land desirable. Therefore, a plot's value will appreciate if there are developments in the vicinity to make this happen. Sometimes, investors purchase land based on anticipated value – something like a mall, multiplex or office block is scheduled to come up nearby If the anticipated development fails to materialise, or if the location does not receive water or electricity supply, the plot will fail to appreciate.
Land will also fail to appreciate if it is in danger of being taken over by the government for its own purposes.
No matter how good a plot looks, or how reasonable the price, one must check everything. The price may be low because certain legal sanctions or complications incurred during a previous ownership have rendered it a non-selling proposition.
Other factors to investigate.
Ø & nbsp; Availability of ground water
Ø & nbsp; Soundness of electrical supply in the area
Ø & nbsp; In case of residential land – avail ability of schools, colleges, medical facilities, domestic markets, public transport, etc.
Ø & nbsp; In case of commercial land – avail ability of retail outlets, post offices/couriers, telephone connectivity, other reputable commercial establishments in the vicinity.
Ø & nbsp; Availability or non-availability of the above will substantially influence the property's overall appreciation potential. Investment in commercial or residential land in an established growth sector with all of the above factors in place definitely makes a lot of sense.
Where are the best land deals today?
The most sought-after land for sale in India is in the metros. However, due to the extreme supply crunch, the rates are invariably completely out of reach for any but corporate or institutional investors. As a rule, the only ‘good deals' in central Mumbai, Bangalore, Delhi and Kolkata comprise of purchasing available plots at exorbitant prices and then cashing in on their immense appreciation potential.
For smaller investors, buying a plot in an upcoming suburb or a potential-rich Tier II or Tier III town is a far more feasible option – especially in context with larger plots, which are out of question in metros.
& nbsp; &n bsp; &nb sp; &nbs p; ; & nbsp; &n bsp; &nb sp; &nbs p; ; & nbsp; &n bsp; &nb sp; &nbs p; ; & nbsp; &n bsp; &nb sp; Courtesy: HT, 12th Nov. 2007
INVESTING IN LAND NEEDS DILIGENCE REAL ASSET
There is increasing interest in investing in land rather than constructed properties. This trend has merit, since land value appreciates while the value of a construction depreciates. In other words, buying land in a growth sector always makes sense. However, one should approach such land purchase with due caution and prior research.
Investment horizon
Purchasing land as an investment usually pays off only as a long-term venture, with a minimum holding period of between 5-10 years.
Safe purchase parameters
In general terms, it is definitely not safe to buy land without thoroughly acquainting oneself with the local market, and the legislative dynamics of that area.
Buying land situated near a housing scheme calls for extreme caution, since one may inherit the covenants and restrictions applicable to the housing scheme.
Ø & nbsp; While buying a plot as an investment, one should ensure reason able proximity to key roads and access to water and electricity.
Ø & nbsp; One should also acquaint oneself with the development plan for the chosen area – this can be established from the local administrative body.
Ø & nbsp; One should be very clear about what taxes one will incur and whether the plot has a permit for raising residential/commercial structures. Raising large structures is not an option on agricultural plots, which are cheaper and have a lower tax burden. If the plot is the agricultural kind, one should establish whether its status can be converted for construction purposes later on, or not.
Ø & nbsp; Before purchasing land, one need to investigate possible multiple ownership issue and zoning restrictions such as CRZ, NDZ etc.
Delhi Real Estate Witnesses The Financial Showers
New Delhi, the national capital of India is one of the prime cities in the country which has witnessed the economic development plans being drafted in the Parliament house to the effects that economic growth has spurred on the real estate and other service sectors in Delhi. Incorporated as one of top three investors’ choices for real estate investment in Asia, New Delhi continues to be one of the most competent and healthy competitor amongst the property markets across the region. And as investors and buyers make a beeline for acquiring the best chunk of real estate market, the finance sector in India has evolved as the possible gainers.
The banks in India which initially did brisk business with their saving schemes has now opted for the housing finance section as a more profitable business, since the real estate scenario in Delhi shows an upswing. The demand for properties in New Delhi touches new heights arising mainly due to the requirement for a large number of residential and commercial spaces as a large number of investors are seeking investments in the Delhi region or the nearby NCR areas. Delhi evolving as a popular investment destination for investors in the residential and the retail sector has lead to escalation of property prices many-fold and are still on the rise thereby making investment in the capital city of India a deal worth to be clinched.
But the bulk of disposable income generated by the employees in the corporate sector along with easy funding by every finance company in India has of late made property investments a not so formidable task. Easy loan facilities and a horde of finance companies offering some of the best deals and dipping interest rates have also been responsible for increase in Delhi real estate investments. Almost all the major financial institutions like ICICI, HDFC, IDBI and HSBC, to name a few have successful operational bases in the city making housing loans a competitive business. This competitive market has in some ways being beneficial to the consumers and if the trend continues, the real estate scenario in Delhi is bound to offer investment opportunities for buyers and developers who would want to capitalize on this growing opportunity. And if industry experts are to be believed, New Delhi is yet to see major transformation in the real estate market as the city gears up to remodel itself for the 2010 Commonwealth Games shedding its reputation of being a ‘walled city’ to a ‘World City’ of the future.