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Trends
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The Upward swing in the reality prices which started in 2004-05 will continue in
07. 2006 was a really good year for all reality investors with prices rising in
some areas by almost 70 to 80%. Ahmedabad on a whole witnessed a price increase
of around 40%. The trend will continue this year also.
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The western part of Ahmedabad is seeing lot of reality development. The Satellite
and Vastrapur areas are almost exhausted even though you see one or the other Schemes
coming up every second day.
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Quality housing options, mega townships and SEZ projects, resurgent demand and a
strong GDSP growth will be the highlights this year. There is no looking back as
the housing stock continues to grow to replenish the thriving demand of the middle-income-group
(MIG) and higher-income-group (HIG) demographics segment. The year that will shape
up as the most challenging year for investors as only wise-minded will step into
realty pie. Stubborn decision making seems to be the motto for this year as panic
has no room. Outlook for 2007 looks promising in the housing sector. However, the
commercial sector seems to be in for some tough times ahead. Drivers that will directly
impact the shaping of the realty market this year:
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 Land Prices
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Many are waiting for a correction in the land prices as the current land prices
have practically made it difficult to acquire land and develop. Most of the schemes
in the pipeline are those for which land was pre-acquired in 2004 or before. If
the land prices stabilize, the market outlook looks very positive for this year
as well as next year, especially in the hosting sector. However, the current investment
trend in the city suggests that it may not be worthwhile to wait for a correction
as this could be a distant dream for those scouting for land.
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NRI-NRG INVESTMENTS
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Non-Resident Gujarat’s have been favoring the housing sector as investments keep
pouring in from the overseas. Realty sector in the US and UK has offered internal
rate of return (IRR) of as low as about 8 to 12 percent as against a very lucrative
opportunity to tap into the Ahmedabad Realty, which gave an average IRR of 35 percent.
This year more investments are expected in the housing sector from the NRI-NRG segment
as other global markets are already witnessing a slowdown in the economy.
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METROPOLIS SATURATION
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Cities like Delhi, Mumbai and Kolkata have witnessed steep price appreciation in
both, land markets as well as the housing market.
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The bigwigs of reality feel that these prices are unsustainable and are not willing
to pump the money back in the same market with confidence. Ditto for investors who
back the developers in these cites. In such a scenario, they are looking at Tier
II cities of Gujarat such as Ahmedabad, Surat, Rajkot etc to park their investments
– the fact that these are not saturated makes them to be safer destinations. If
the prices in metros continue to rise, more investments are expected in Ahmedabad
and other cities of the state.
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MORE IPOS FOR
THE REALITY SECTOR
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Listed companies which recovered their investments last year by going IPO and others
waiting to get listed this year by going IPO and others waiting to get listed this
year promise to create more land banks and investments in development projects.
These companies eye Gujarat as a vital destination for making investments as they
see more promise in the sector than the local players. Cash rich IPOs hope to dominate
the SEZ, townships and retail sectors of the market, pumping fresh supply in the
market this year. As more companies follow the IPO trend, more public money will
get pumped into the reality markets.
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Local reality scene is still ‘plastic’ – durable(feasible projects), lightweight
(small projects still viable) and cheap (affordable), compared to other metropolis
and mega cities of the country which have migrated to the Gold & Platinum status.
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GOVERNMENT STRATEGY
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Lucrative investment policies such as the newly introduced “Township Policy” (on
verge of being finalized) with incentives for developers as well as space buyers
will work as a catalyst for the current realty boom. With the government stressing
on pro-development climate in the state with proposed ‘Parking Policy’ and ‘Street
Vendors Policy’ which are intended to revitalize the urban setup and alter the retail
and commercial markets of realty, new ‘Jantri’ may have to wait for a longer time
before implementation. The ongoing / recently concluded ‘Vibrant Gujarat’ Summit
too has some major surprises in store for all investors this year, thus laying foundation
for the road ahead this year.
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REPEAT CUSTOMER
OF QUALITY BUILDERS AND DEVELOPERS
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Unlike the retail consumer goods ‘buyers, realty markets display a higher ‘brand
loyalty’ as their investors and buyers line up to back up new developments by their
trusted brand. It is rare to have repeat customers in realty market for the lower-income-group
(LIG) and lower MIG housing sectors. However, brands catering to the highly affluent
classes have enjoyed the services of their loyal customers. Many who bought high-end
residential flats of their reputed (brand) builder have also bought farm houses,
weekend homes and land plots from the same builder (brand).
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These builders have also succeeded in lapping up their customer’s foreign alliances
to invest in their properties. The growing affluences of this investor-customer
group suggest that quality builders (brands) and developers will not face challenge
in marketing their developments in the year 2007. This activity will in turn keep
other players interested in the market.
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