This year's hot real estate destinations in India

April 15, 2008
This year's hot real estate destinations in India
For investment, emerging localities are preferable to established and
often saturated ones any time
By ANUJ PURI

IN Indian real estate today, the only constant is change. Hot
destinations of the last year are not assuredly the best options this
year, and the next year brings its unique set of emerging investment
destinations with it.

The reason for this state of flux is that the real estate boom is
causing many of the country's metros and even some of the previously
popular Tier II towns to saturate at an incredible pace.

Property prices there skyrocket beyond the reach of middle-income
home buyers, causing them to look a little further afield each year.
Investors observe these migration trends, analyse the magnitude and
scope of activity, and identify one or the other new town as the next
destination.

Information technology (IT) companies, which are now the primary
drivers in the Indian real estate market, are not dependent on
central business locations.

The crux of the whole outsourcing boom is that it makes more sense
for foreign-based companies to offload back-office functions and even
research processes to India than to undertake these in their home
countries.

However, what would necessarily be a CBD-based business function in,
say, the US, can be a non-CBD-dependent function in India.

After all, both the sellers and final buyers of IT-based products and
services are based abroad anyway. This means that IT/ITES
(information technology enabled services) companies can operate from
anywhere in India, as long as there is access to skilled manpower and
necessary resources.

The fact that such companies can benefit from the advantage of
cheaper real estate prices in smaller towns has led to the Tier
II/III city boom. IT/ITES companies catalyse every other sector of
real estate wherever they go, so the retail, residential and
infrastructure sectors soon start perking up in those localities.

A fundamental real estate investment mantra is that emerging
localities are preferable to established and often saturated ones.
Established areas eventually reach a peak in terms of appreciation
potential, after which the growth rate either slows down or stagnates.

Moreover, there is little scope for new market drivers such as malls
to find a place in saturated localities - meanwhile, prices remain
high.

This is not the best of scenarios from an investment point of view,
since optimal investment requires low entry levels and appreciable
growth within a realistic time-frame. Therefore, as one or the other
destination reaches its peak potential on all these counts, new ones
come into the limelight.

It follows that in 2008, we will be looking at an entirely new set of
hotspots in the Indian real estate market.

A few of these are given below, along with some vital statistics and
the basic reasons for their emerging high profiles on the Indian
property landscape.

* Vizag - Andhra Pradesh

Vizag's growth drivers are availability of land at cheaper cost vis-
à-vis Hyderabad, relatively lower cost of skilled manpower (as
well as lower attrition rates), improving infrastructure, and
considerable demand. The market also has less competition and project
costs are lower, leading to increased margins.
Meanwhile, overall purchasing power in Vizag is high. The upcoming
commercial and retail destinations in Vizag are Dwarakanagar,
Seethamadhara, Gajuwaka, Rushikonda, Anakapalli, Bheemili and
Paarwada.

For residential investment, the best areas now are Madhurawada,
Pendurthy, Parawada, Bheemunipatnam and the areas towards the
Anakapalli Corridor.

Property rates:
- Seethammadhara (1,400-3,000 rupees per square foot)
- Murali Nagar (1,400-2,200 rupees psf)
- Beach Road, MVP colony (2,800- 3,500 rupees psf)
- Siripuram (2,500-3,200 rupees psf)
- Parwada (1,200-2,000 rupees psf)

* Vadodara - Gujarat

Vadodara definitely ranks high among the emerging investment
destinations.

The prime residential areas are Alkapuri, Race Course Road, Old Padra
Road, Jetalpur, Akota and Fatehganj.

Property rates:
- Old Padra Rd (1,200-1,500 rupees psf)
- Alkapuri (1,900-2,300 rupees psf)
- Race Course Road (1,500-1,800 rupees psf)
- Fatehganj (1,300-1,700 rupees psf)

* Dehradun - Uttrakhand

Dehradun is seeing a gradual but definite boom associated with the
rise of malls in the region. Land rates are rising and there is
considerable infrastructure development. Another driver is the growth
of the IT sector in the region.

The State Industrial Development Corporation of Uttaranchal is
setting up a high-tech software park on more than 1,000 hectares of
land in Dehradun. Chatrata Road, Mussoorie Bypass and Sahastradhara
Road are the best locations for small to medium-sized investments.

Here, investors can expect between 10 and 12 per cent appreciation
over the next three years.

* Indore - Madhya Pradesh

Indore's real estate star is on the rise, and offers good investment
opportunities in projects with low entry cost that are located in an
area with good appreciation potential.

Property rates:
- Vijay Nagar (3,000-10,000 rupees psf)
- Bypass, AB Road (3,000-10,000 rupees psf)
- Rau (600-1,200 rupees psf)
- Gulmohur Colony (3,500-6,500 rupees psf)
- Green Park Colony (800-3,500 rupees psf)

* Nashik - Maharashtra

Nashik is displaying an increasingly buoyant industrial scenario,
with considerable growth expected in the IT/ITES industry.

Overall infrastructure and connectivity to Mumbai and other regional
towns is improving rapidly, lending increased credibility to Nashik's
real estate market. It is the vertex of the Pune-Mumbai-Nashik Urban
Golden Triangle.

The upcoming suburbs of Anandwalli (Gangapur Road), Indiranagar,
Untwadi, Aadgaon (off Mumbai-Agra Road) and along Pathardi Link Road
bear watching.

Property rates:
- Gangapur Road (1,200-1,900 rupees psf)
- Mumbai Agra Road (800-1,600 rupees psf)
- Agra Road (600-1,000 rupees psf)

* Guwahati - Assam

The capital city of Assam has witnessed a population growth of over
40 per cent over the last 10 years. This extensive population growth
has been responsible for a quiet revolution in Guwahati's real estate
market.

There is an upsurge in the retail sector, and outskirt locations such
as Khanapara, Zoo-Narengi Road, Basistha and Beltola are emerging as
the new residential destinations.

Current rates are between 1,800 and 2,500 rupees psf. The upcoming
Games Village at Sarusajai will add a new flavour to the residential
market along NH-37.

* Chandigarh - Union Territory

Though there has been a lot of speculation in Punjab's real estate
market, this joint capital of Punjab and Haryana states is among the
emerging cities that are seeing very encouraging real estate trends.

Chandigarh is India's first planned city, and it conforms perfectly
to the key parameters by which we judge a city's growth - property
market, people, physical infrastructure, social infrastructure, and
business environment.

Chandigarh scores high on these counts, especially in terms of the
potential of its property market. Its boom derives from the rapid
development taking place on its outskirts.

Some of these areas are:
- Panchkula (2,500-3,000 rupees psf)
- Mohali (1,500-2,500 rupees psf)
- Dera Bassi (1,300-2,000 rupees psf); and
- Zirakpur (2,700-3,200 rupees psf).

The writer is chairman and country head, Jones Lang LaSalle Meghraj