Thursday, May 7, 2009

Small towns hold big promise for India's housing boom

For two years, Ratnesh Gupta, a software engineer with IT major Birla Soft, has been trying to fulfil his dream of buying a house of his own, either in the national capital or in Chandigarh. But his budget of Rs.2.5 million (Rs.25 lakh) was making it beyond reach.



Now, he has finally zeroed in on his dream house, though he has settled for Rudrapur, a small town in Uttarakhand. In the process, he has joined thousands of house hunters who are buying properties in smaller cities, fuelling a housing boom in them.

Rudrapur is among a host of towns like Almora, Bhiwadi, Neemrana, Haldwani, Meerut, Moradabad and Karnal that have started attracting new home buyers, bringing a lot of cheer to the realty industry that is otherwise facing one of its worst crises in decades.

"My budget was very small to buy a house in Delhi or even Chandigarh, my native place. Even a one bedroom apartment was not available in a decent colony. Now, I will own a decent house and also manage to save some money for other investments," Gupta said.

"In Rudrapur, a two bedroom apartment is costing me Rs.14.6 lakh (Rs.1.46 million). It is within reach. And I feel it is a very good investment proposition for future as the city is opening up for development," he told IANS.

"The main reason for realty development at these places is that metros and even many big cities have become overheated and oversaturated," said Anuj Puri, chairman and country head of global realty consultancy Jones Lang LaSalle Meghraj.

"Property prices in larger cities have gone beyond the reach of the middle class. So people are looking at new destinations. Prices there are reasonable, where the pace of development is fast and it makes for good future investment," Puri told IANS.

"Land at these smaller places is still available at reasonable rates. Industries are coming up. There is overall development. So real estate companies, so also investors, have very good future in these places."

According to Jai Mawani, head of real estate with global auditing and consultancy major KPMG, smaller cities in India offer a huge potential, making them the most happening places for real estate development now and for the future.

"But there is no empirical basis yet to establish the actual market share of these towns in the overall realty sector as it is still unorganised," Mawani said.

The Planning Commission, which estimates a shortage of 22.4 million dwelling units in the country, says some 80-90 million new units will need to be created over the next 10 years to adress the demand, a majority for middle and lower middle income groups.

Interestingly, rather than the big players, the smaller developers are the ones that are benefiting from the realty boom in smaller cities and towns, which have shown no sign of being affected by a slowdown that has otherwise gripped the country's realty industry.

"The slowdown, in fact, is helping us. The big developers are staying away from these cities. They are selling land to smaller players so that they can raise cash for bigger projects in large cities," said Mahim Mittal, managing director, Shivkala Developers.

Take Rudrapur. The town has good connectivity, with Pant Nagar Airport just 11 km away. Delhi is 254 km away, the famous Jim Corbett tiger reserve is 95 km away and a drive of 60 km takes you to the popular hill station of Nainital.

Developers say that in the past two years, more than 100 plots in Rudrapur have been sold to employees by companies like Tata Motors, Bajaj, Escorts, Voltas, Britannia, HCL, Nestle, Parle, Dabur, Hewlett-Packard and Kores India.

"Nearly $2 billion investment has gone into the real estate business in Rudrapur," said Mittal, adding this would go up once the overall realty market in the country stages a recovery.

The story is similar in towns like Meerut, Moradabad, Manesar, Bhiwadi and Neemrana. For them the unique selling proposition is the proximity to the national capital. Another attraction is they fall along the dedicated freight corridor project.

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