Property prices are melting. If you are waiting for them to fall neatly into your budget, prepare for a very long wait. Not that there is no correction, but the extent is limited. When the real estate party was on for the past 4 years, property prices rose by over 100%. Will they drop as much? Not likely.
So how do you invest in real estate when home loan rates are so high and prices refuse to drop? By looking for little-known locations where prices are still low or where they have shrunk by a chunky 20-25%. These untapped locations hold out maximum promise of appreciation as the real estate market of the metros, Tier I cities and popular IT destinations at the Tier II level are becoming saturated.
The real bargains are available in small towns targeted by big developers. In an Ernst and Young survey, almost 56% developers said that they will foray into Tier II cities and 20% find Tier III cities attractive. One such set of locations is “spokes”—cities that derive prosperity from nearby real estate hubs while offering affordable cost of living. Also watch out for big city suburbs.
“Poorly connected locations that fall on major planned roads are a good bet,” says Ambar Maheshwari, director, DTZ Debenham Tie Leung. Sanjay Dutt of Cushman & Wakefield, a real estate consultancy, says that property prices in small cities are still lower compared to those of big cities.
Tracking the IT industry’s movement to smaller towns is a good way to identify which ones will witness appreciating property prices. Look out for better infrastructure, proximity or connectivity to established real estate markets and creation of sustainable jobs. Even in bigger cities, pick areas where a major infrastructure project is being planned and give priority to investment corridors over micro locations. For example, if real estate development is taking place along a highway, locations along the same road will also benefit.
But don’t invest blindly just because prices are low. Deals in upcoming suburbs and smaller cities can be messy. “Many developers are booking flats in small towns without government clearances,” warns Maheshwari. So do your homework well before buying property there. We have made your work easier though. After some digging around, here’s a list of 8 small cities that may become property hotspots tomorrow.
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Appreciation in 2006-8: 30%
Likely appreciation in 2008-10: 20%
Where to invest: Simhachalam (Rs 1,200); Gajuwaka (Rs 1,300); Sujata Nagar (Rs 1,500); Duvvada (Rs 1,700)
*Prices per sq ft
Why invest: Till a few years ago, Visakhapatnam’s development was chiefly port-based. Now, it is gaining significance as an emerging IT/ITES destination. Its proximity to Hyderabad has made it an attractive alternative. Infrastructure projects like an SEZ, Pharma City and the container terminal will help sustain growth. The proposed mass transit system should decongest three busy traffic corridors.
Additional information: New residential projects will be mostly campus-style developments.
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Appreciation in 2006-8: 25%
Likely appreciation in 2008-10: 20%
Where to invest: Metupalayam Road (Rs 2,000); Avanashi Road (Rs 2,300); Perur Road (Rs 2,100); Trichy Road (Rs 2,000)
*Prices per sq ft
Why invest: Coimbatore is a key industrial town in the South with IT, textile, manufacturing and healthcare companies having a base here. It is also one of the most transparent property markets with genuine end-user demand. Among the major infrastructure projects that will support demand are the Bus Rapid Transit System along Avanashi Road, Mettupalayam Road and Tiruchi Road; road projects like an expressway to the airport and two new link roads connecting the roads to the suburbs. There is also a proposal to build a ring road linking Coimbatore with Salem, Pollachi, Trichy, Palakkad, Mysore and Udhagamandalam. An IT park is coming up where Wipro and TCS have already been allotted land to set up service centres.
Additional information:
• About 3,000 housing units that are under construction.
• Companies from Chennai and Bangalore are setting up operations because of low real estate prices.
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Appreciation in 2006-8: 35%
Likely appreciation in 2008-10: 20%
Where to invest: Nasik Road (Rs 1,700); Trimbak Road (Rs 1,600); Hirawadi Road (Rs 1,600); Gangapur Road (Rs 1,800)
*Prices per sq ft
Why invest: Nashik forms the golden industrial quadrilateral with Mumbai, Pune and Aurangabad. Since 2005, over Rs 11,000 crore has been invested towards improvement of its infrastructure. Projects like four-laning of Mumbai-Nashik highway and a new ring road connecting the Mumbai-Agra road to Trimbakeshwar will bring real estate growth to peripheral locations as well. Also, a special industrial zone is being constructed on 200 hectares for the several auto companies that have set up manufacturing facilities in the city. This will establish Nashik as the auto hub of western India.
Additional information: It is being touted by experts as the next Pune for real estate development.
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Appreciation in 2006-8: 30%
Likely appreciation in 2008-10: 15%
Where to invest: New Padra Road (Rs 1,600); Sama (Rs 1,300); Akota (Rs 1,500); Alkapuri (Rs 2,100)
*Prices per sq ft
Why invest: Vadodara’s good connectivity with Ahmedabad, Mumbai, Ankaleshwar and Surat should sustain demand among developers. A new ring road, expected to be completed by 2010, will decongest core city areas leading to a spurt in demand in established locations as well. The Vadodara-Surat national highway will link major industrial areas around the city and shift some demand from Surat where real estate is overpriced. The state government plans to develop the Vadodara airport as an aircraft maintenance hub for the western region.
Additional information:
• Projects to be launched by big developers next year.
• It is emerging as an alternative residential and retail market to Surat and Ahmedabad.
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Appreciation in 2006-8: 15%
Likely appreciation in 2008-10: 20%
Where to invest: Vambay Colony (Rs 1,600); Mangalagiri (Rs 1,500); Bypass Road (Rs 1,300)
*Prices per sq ft
Why invest: Vijayawada is an important link connecting the major industrial zones of Hyderabad and Visakhapatnam. Two national highways link the city to Chennai, Kolkata and Mumbai. The high-speed corridor between Hyderabad and Vijayawada, which is under construction, should improve connectivity further. The state government plans to set up a Hyderabad-Vijaywada–Visakhapatnam Growth Corridor to boost industrial growth. This is likely to create more than 20,000 jobs over the next five years. An IT park is being set up at Kesarapalli village. Also, the recent increase in flight services should pave way for rapid growth of the IT industry.
Additional information
• State government plans to construct 76,000 flats in Nidamanuru, Nunna, Kesarapalli and Kotturu Tadepalli areas on the outskirts of Vijayawada.
• Political debate for a separate Telangana region with Vijayawada as the capital. It will keep the city on the radar of companies and developers.
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Appreciation in 2006-8: 15%
Likely appreciation in 2008-10: 15%
Where to invest: Cuttack-Puri Road (Rs 1,600); Chandrasekharpur (Rs 1,300); Nandankanan Road (Rs 1,700)
*Prices per sq ft
Why invest: The city’s poor infrastructure, a major stumbling block for attracting investments, has been significantly improved. Projects like widening of the ring road (which provides an alternative corridor to NH 60), construction of 93 km of direct road connecting the industrially active port town of Paradip and six-laning of the Bhubaneswar-Chandikhol road will bring newer areas on the real estate map of the city. The services sector is also likely to create demand. IT majors like Wipro and TCS have already taken up space at IT parks and SEZs coming up at Chandrasekharpur and Mancheswar.
Additional information
• Being the seat of administration, the city should sustain demand for property.
• Bhubaneswar is expected to evolve as an alternative to Kolkata, the only big city in eastern India.
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Appreciation in 2006-8: 30%
Likely appreciation in 2008-10: 10%
Where to invest: AM Bypass (1,500); Khandwa Road (Rs 1,700); Vijaynagar (2,100)
*Prices per sq ft
Why invest: Indore is the commercial capital of Madhya Pradesh. It is centrally located and has an established industrial base. These factors make it an attractive real estate destination. To improve the connectivity between the eastern and western parts of the city, a corridor is being developed between the airport and the MR-10 road. The corridor will be developed into a commercial and retail hub which will increase housing demand in the adjoining areas. The planned BRTS project will improve intra-city transport. The government has also cleared a plan to build Asia’s largest auto-testing track at Pitampur near Indore for research and development.
Additional information
• The number of speculators has gone down sharply.
• Demand is shifting from high-end locations to suburbs.
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Appreciation in 2006-8: 20%
Likely appreciation in 2008-10: 20%
Where to invest: Haridwar Road (Rs 1,800); Chakrata Road (Rs 2,100); Sahastradhara Road (Rs 2,200) *Prices per sq ft
Why invest: The Supreme Court order banning new constructions in Mussoorie from 32 km uphill has fuelled demand for residential projects here. Upcoming infrastructure projects include an IT park, two SEZs being set up at Sahastradhara Road and a Pharma City at Selaqui Industrial Area. This should increase employment opportunities and demand for residential projects. The Jolly Grant airport is being upgraded for accommodating bigger aircrafts. This will improve accessibility not only of Dehradun but also of other upcoming industrial locations in the state.
Additional information: Performance of bigger markets like Delhi, Chandigarh and Jaipur will impact demand for Dehradun.
