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The rise and rise of realty prices
OWNING A piece of land was never more lucrative. Flush with funding from big-ticket builders, buoyed by the nascent retail boom and helped along by shaky bullion and stock markets, real estate in the City is on an unprecedented high.
OWNING A piece of land was never more lucrative. Flush with funding from big-ticket builders, buoyed by the nascent retail boom and helped along by shaky bullion and stock markets, real estate in the City is on an unprecedented high.
Over the last 18-odd months land prices within the City have witnessed a 15-20 per cent hike while real estate on the outskirts has nearly trebled in value, thanks to aggressive buying by building majors Omaxe and Sahara.
The property market’s bullish run extends across the board with commercial, residential and office space all reporting a surge in prices, albeit for different reasons.
Easy financing and an increase in nuclear families, apart from the entry of national-level builders, are the main factors driving the residential property boom. Land prices in prime residential locations have moved up to Rs 1000-1200 per square feet, and even up to Rs 1500 in certain cases, from an average of Rs 1,000 just a year ago. The hike has been even more remarkable in virgin housing territory.
A look first at commercial properties. The boost here has been prompted primarily by the sudden spurt in upmarket retail outlets and, to a lesser extent, by yo-yoing markets. Wary of fluctuating stock and bullion prices investors have turned to speculating in real estate.
Three multiplexes are already up and running, another couple under-construction and the high-rise committee recently cleared the sixth, to come up at 170, RNT Marg (Jhabua Kothi).
Adlabs and PVR have already made their City debut while the Ruia-promoted Phoenix Mills is eyeing a tie-up with an upcoming multiplex-cum-mall. And the mall juggernaut is not likely to run out of steam anytime soon.
“With players like Reliance diversifying into retail, the sector is poised for a major boom in metros as well as tier-2 cities. Malls provide the perfect opportunity to brands wishing to steal a march over rivals by setting up shop before their competitors arrive,” pointed out India Infoline Ltd Area Manager (MP-Chhattisgarh) Nitin Maheshwari.
Indeed, Nike, Adidas, Reebok, Ray-Ban and other global players with cavernous pockets have already snapped up practically every inch of top-drawer shelf space at the City’s malls. With commercial space at MG Road, RNT Marg and other business districts at a premium, retailers have been forced to scout for alternative locations nearby, pushing up land prices in these areas.
This has led to speculators buying land in and around the commercial areas in the hope of making a killing. So often has this happened that one begins to wonder if speculation is all that is driving the real estate boom?
“Speculative buying is certainly a factor in commercial properties where the figure may go as high as 50 per cent, but it rarely goes above 10 per cent in the residential sector,” avers State Bank of Indore Chief General Manager T A Padmanabhan.
This is, however, countered by Indore Property Brokers Association Secretary Rajendra Bhaiya, who feels, “there is no real estate boom as such. Land prices are riding piggyback on the sudden spurt in the retail sector in the City.”
Builder Ramesh Mangal agrees. “Once the novelty factor wears off footfalls at malls will drop and retail space prices will come crashing down.’’ When that happens ‘intelligently priced’ malls will benefit, says the builder whose firm, Deepak Colonisers Pvt Ltd, is building the Mangal City mall-cum-multiplex at AB Road.
“Rents at our mall hover around Rs 20-22 per sq ft as against, say, Treasure Island which charges its tenants up to Rs 150 for equivalent space. When, not if, the crunch comes, their tenants will have a much tougher time breaking even,” he declares.
Others, however, disagree. “Malls are no longer a retail site but have become a hangout joint cum recreational centre for youths as well as adults replacing the melas and gardens of old. To say they will just disappear is absurd,” stresses Town and Country Planning Joint Director V P Kulshreshtha.
As one moves away from the City centre to the outskirts the boom in real estate becomes even more evident. And nowhere is it more evident than on the Bypass Road at Agra-Bombay NH3.
Consisting of vast tracts of agricultural land just a few years ago the area has witnessed a complete metamorphosis over the past two years, thanks to building majors Omaxe and Sahara who, together, have pumped in nearly Rs 300 crore in the area to develop massive townships. Others, including DLF and Ansals, are queuing up and, according to some reports have already purchased land on the bypass, located around 12 km from the City centre.
The result - land around the bypass, which found few takers at around Rs 20 lakh an acre just a few years ago, today retails for as much as Rs 1 crore per acre.
A major portion of the credit must go to ‘Omaxe City’, a self-sufficient township spread over 89 acres and boasting swimming pool, sauna, steam, Jacuzzi, shopping complex and food courts, which has already elicited a tremendous response from consumers.
“Prices for the townships have registered a hike of Rs 100 per square feet since bookings began a week ago,” reveals property broker Rajendra Bhaiya. And with reports of Ansals and DLF also on the look out for land here, the prices continue to spiral.
But why spend hundreds of crores on a project on the outskirts when there’s plenty of residential space still available within the City centre? “Omaxe was originally aimed at catering to the white-collar, upper-middle class workers that will arrive in the City once the IT Park and the three special economic zones get underway,” says Omaxe Construction Ltd Assistant Manager Brijesh Aggarwal.
‘‘However, the tremendous response we received has led to a proposal to follow the present venture with three more townships. We have already purchased land at Manglia for one of these and are scouting other locations,’’ he declared.
Queried about the distance from the City, Aggarwal contends that this will not be an issue. “There are a growing number of nuclear families who do not mind relocating from the City centre as long as they are provided with all the amenities and quite a few luxuries,” asserts the builder.
And with housing loans easily available finance is not a problem either. So it seems going by the records. The State Bank of Indore alone has handed out housing loans amounting to over Rs 100 crore during the last fiscal.
So is the real estate boom going to last or burst? “That depends on whether stock markets continue to display the same volatility, whether the government lives up to its promises on the SEZs and the international airport and, most importantly, whether regulatory mechanisms are strictly implemented by the civic bodies to promote investor confidence.
