The Hindu Business Line : Real estate market booming across board

THE real estate market in India has been doing exceptionally well for the past 10 months. While residential and retail prices have shot up, commercial prices in all major metros have been keeping pace with inflation, said Mr Anuj Puri, Managing Director, Chesterton Meghraj, an international property consultant firm.

Mr Puri spoke to Business Line about the the commercial, retail and residential markets in the metros. He said that prices in the commercial segment have kept up with the inflation rate — the lease price is between Rs 20 and Rs 30 per sq.ft. The main reason for this is the information technology (IT), ITES (information technology enabled services) and BPO (business process outsourcing) companies move to other centres if the price is too high in one city.

In Delhi, the boom in the IT and ITES has triggered development in Noida and Gurgaon.

But the retail space in Delhi has gone beyond sustenance levels, Mr Puri said. Land cost has shot up and one of the main reasons for this is "the way the Delhi Development Authority auctions are conducted," he said.

Mr Puri said: "The residential market in Delhi has gone over the top. Any further price increase will only make itunsustainable for the end-user." He said the high prices might not immediately affect the investor, who is a high net worth individual and will offload the property when the prices suit him. But eventually the high prices will also affect the investor because there will be no one to purchase at such high prices.

Talking about Mumbai, he said, the cost of development is spiralling, fuelled by the cost of land, though land cost is not as high as Delhi.

On the residential front, the land prices are going up but the sale prices are coming down. Mr Puri said this could be because margins of the developers are being eaten into. The second reason could be speculation by developers. The prices for Mumbai retail are achievable and reasonable, he said.

Mr Puri said real estate prices in Kolkata are the best. The residential market is still affordable. The IT boom is just beginning here, with the presence of companies such as IBM and Infosys, Mr Puri said. The price of real estate is still relatively cheap. On the retail segment, the market is set to boom. There are four malls operating in the city, he said.

He said Hyderabad is still a slow market with not much of new development happening in the city. Many national level developers or the "big boys on the construction scene" have not come into this city. The main problem in this city is that land is highly fragmented so title becomes a problem. In addition, there is the Urban Land Ceiling Regulation Act, which is still a problem here, Mr Puri said.

Land is only available on the periphery but there is no development there. On the other hand, the infrastructure in the city is good. The city needs something more than IT to propel its growth.

Mr Puri feels that it could be manufacturing or the city could be positioned as the centre for health.

In Chennai, since there are no large parcels of land within the city, retail malls are likely to come up on the outskirts.

Many developers are already planning malls in the suburbs. There are two malls coming up within city's limits, one on Nelson Manickam Road and the other on Radhakrishnan Salai.

The residential development is mainly in Velachery, East Coast Road, Old Mahabalipuram Road and Vadapalani, as these areas have moved up the value chain and offer good quality residential clusters.

The development in these areas is largely a spin off from the IT and ITES businesses on the OMR and Ambattur belt.

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