Gaining the edge: Why smaller cities in Maharashtra are drawing investors
In Maharashtra, the real estate boom is heading to small towns. A boost in the affordable housing sector has broadened the market in the state. Young buyers, especially those with an eye on long-term investment are considering homes in cities that would otherwise have been written off as financial dead zones.
“Nagpur, Amravati, Nashik are attracting buyers for both residential and commercial real-estate,” says Pankaj Kapoor, founder and managing director of the realty research company Liases Foras. “The idea that only the cities with IT hubs are becoming realty hubs is changing. These smaller cities have different kinds of economies. They’re dominated by the automobile sector and local administrative jobs and hence are seeing increased real-estate activity.”
Data on property rates and new project launches show that Tier-2 cities in Maharashtra are expanding. A city-wise data report by Makaan.com, a property portal, marks nearly 93 localities in Nagpur that are showing an upward price trend.
“The city has offered returns of around 20% on the property in the last couple of years,” says Kapoor. “It has a Metro project taking shape and is seeing growth in the number of educational institutions.” The same growth scenario is playing out in other small towns, as the Mumbai Metropolitan Region and Pune face saturation and astronomically high prices.
The smaller cities are attracting young investors because they can buy a house here within a few years into a job and get consistent, decent returns through rents and sale. “The young buyer does not believe that big cities are the safest bet for sales and returns on investment,” says Santhosh Kumar, vice chairman at Anarock Property Consultants. “They research well and are investing in cities that are seeing a surge in economic activity and infrastructure development. The house prices are lower in cities such as Nashik and Nagpur, the cost of living is lower too. You get a house for Rs 30 lakh closer to the city’s centre unlike in Mumbai where cheap homes are so far, you will end up commuting for two hours.”
In Nagpur, the localities of Pratap Nagar, Amravati Road, Prithviraj Nagar and Wardha Road are shaping up, says Maneesh Upadhyaya, the chief business officer at property portal 99acres.com. “These localities are known to offer returns of around 15%. Rates here are expected to increase when the Metro project is completed in a couple of years.” He adds that Nagpur is seeing many more IT companies and BPO firms setting up their offices. The data by 99acres says that average prices for Nagpur have risen from Rs 3,600 per square foot in April 2015 to Rs 4,300 in June 2018.
Amravati is turning out to be a surprise pick. “Property prices are low (around Rs 3,000 per square foot) so it is the good time to take a plunge,” says A Shankar, COO for strategic consulting at realty advisory JLL India. “Many new projects are coming up and the infrastructure is developing.” He says that the key for a successful investment in Amravati is to choose the locality wisely. “The location should have a bus station in the vicinity, for instance. It should also have a hospital and a school close by.”
Information from 99acres also suggests that average property prices in Pimpri-Chinchwad near Pune have boomed from Rs 4,850 per square foot in April 2015 to Rs 5,350 in June 2018. “Nashik and Pimpri-Chinchwad have seen many more new launches and got a boost in sales for affordable homes because of availability of social infrastructure like malls and high-end restaurants, like neighbouring metros of Mumbai and Pune,” says Kapoor.
The growing localities in Nashik include industrial sectors of Ozad, Ambad, Sinnar, and Satpur. “These neighbourhoods are booming because of development textiles and pharmaceutical industries,” says Upadhyaya. Sanchita Naik, 31, a professor from Thane bought a 2BHK in a new affordable project in Pimpri near Pune last year. She expects fairly good returns on her investment in a couple of years. “The Pune Metro is on cards, the locality well-connected to Mumbai and Pune,” she says. “I hence expect many more luxury and affordable projects coming here and more end users buying homes.”