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Cold markets, sizzling properties

Money Today brings you a list of cities where you can find realty bargains which fit your budget and which offer tremendous scope for price appreciation in the near future.

Print Edition: October 16, 2008

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.

Visakhapatnam

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.

Coimbatore

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.

Nashik

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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