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.

Tata Housing | Ratan Tata: A Messiah for middle class

New channels and internet were abuzz with the talks of the new Tata ‘Nana’ housing project yesterday. It seems Ratan Tata has planned to tap the still neglected low cost product market (untapped in the sense that no known company has entered this sector). Be it the recently launched Tata Nano or the Tata Housing project at Boisar, about 120 kms from South Mumbai.
In a country like India, where we have such a large middle class, It is ought o the middle class deciding the future of a product in the market. It is the middle class which is going to make Tata Nano, a big hit or a flop and it was the same class which led to the record sales of Maruti 800. So, when you launch a product, you need to keep in mind this middle class. This middle class can also be easily divided into three categories: Upper Middle Class, Lower middle class and Typical Middle Class and lower middle class remains the biggest in number in the middle class segment.
So the products like Tata Nano and Tata housing are surely going to be a big hit amongst this segment, which lives in rented accommodations in these metros and dreams about having their own homes and obviously a car for the family. Ratan Tata has surely taken a big risk by entering this sector, but if it pays off, he will be become the best businessman ever, which India produced.
Which lower Middle class family can dream of having a home and car for just 5 lakhs, its like playing God and making their all dreams come true? With rents touching their all time highs, in normal circumstances, a middle class family pays around Rs. 3000-4000 per month for house rent and spends more than Rs. 2000 per month for commuting. So a family spends a total of around Rs. 6000 on housing and commuting. Calculating in normal mathematics, this family will spend Rs 5 lakh in around 83 months, if they pay same amount every month. But it is not the same, costs increase, inflation is always there.
For such a family buying a Tata house and a Tata car is going to be the first priority.