The Hindu Business Line : Realty sector on high growth curve in West Bengal

The real estate sector in West Bengal never had it so good, and things are getting better by the day. This is primarily due to the unique and innovative public-private partnership model that has been put in place by the West Bengal Government.

The model, whereby joint sector companies have been formed with organised real estate developers in the private sector and the West Bengal Housing Board (WBHB) as partners, has helped unlock vast tracts of urban land, the development of which would otherwise not have been possible on account of urban land ceiling laws.

The cross-subsidy model provides for creation of housing stock for those belonging to higher, middle and even low-income groups. For housing stock for higher income groups, developers are permitted free pricing while for the middle-income groups, they have to be sold at no-profit-no-loss basis. For lower income groups, the housing stock has to be sold at lower-than-cost.

More players

While the evolution of the real estate industry has been gradual, it has lately attracted large foreign and domestic players and venture capitalists. It's growth has been propelled by the burgeoning IT sector in the State.

Says Mr Rahul Todi, Managing Director, Bengal Shrachi Housing Development Ltd, one of the eight companies that has formed a joint venture with WBHB: "Earlier, real estate was never considered a full-time, organised business. It was more of a past time of those whose main business interests lay elsewhere.

Besides, real estate developers lacked credibility in the eyes of the general public. Transparency and trust was also lacking. With organised and professional players joining hands with WBHB, the industry now is transparent and accountable. Consequently, its acceptability among the people has gone up."

According to Mr Todi, the cross-subsidy model has been very successful. Importantly, it has found acceptance across the political spectrum. His company has already executed projects valued at Rs 40 crore even as the value of projects under implementation has been pegged at around Rs 300 crore.

Spreading out

Interestingly, the real estate boom is not confined to Kolkata and its periphery, where the burgeoning IT sector is seen as the main propeller of demand for commercial space and housing stock.

In tier II cities such as Durgapur, Siliguri and Bardhaman, too, there is a growing demand for housing stock, commercial space and space for niche requirements of sectors such as retail, education, hospitality, medical, etc.

The PPP model has brought to the fore the latent potential in real estate development in smaller towns and cities. Bengal Shrachi is developing a 10 million sq.ft township in Bardhaman while Bengal Ambuja Housing Development Ltd is developing housing stock and retail space in Siliguri, Haldia and Shantiniketan. Bengal Shristi had joined hands with Asansol Durgapur Development Authority for Asansol and Durgapur.

Other factors

Besides the boom in the IT sector, several other factors are cited for the growth of the West Bengal's real estate scenario. They include access to quality housing - with amenities such as lounges, clubs, gyms, swimming pools, spas, etc - a growing middle class, double-income and nuclear families, high disposable incomes, access to easy home finance and upwardly-mobile lifestyles and growing aspirations.

"Seven years ago, the first-time home buyer was in the 35-40 age group. Today, he is barely 27-28," says Mr Todi, adding that "earlier the norm was one car park for every two flats. Today, it is the other way round."

In the commercial space, the accent is on large-format offices.

Says Mr Pradeep Surekha, President of Credai Bengal and Managing Director of Bengal Park Chambers, another joint venture with WBHB: "Given the strict guidelines of the Reserve Bank of India, raising debt will become increasingly difficult.

Hence, companies will have to go in for borrowings from the private sector and also seek equity participation from venture capitalists."

Recently, a New York-based fund, New Vernon, picked up a 50 per cent equity stake for Rs 30 crore in an infrastructure development company where his Surekha Group is a stakeholder. Besides developing housing stock and workspaces for IT companies, Bengal Park Chambers is also setting up service apartments for IT professionals in the Salt Lake Electronics Complex, the city's IT hub. According to Mr Sumit Dabriwala, Managing Director of Riverbank Holdings Pvt Ltd, Kolkata has emerged as a major "actual user market" where more people buy real estate for their own use than for investment purposes. He attributes the real estate boom "fundamentally to the rise in the real incomes of people". He, however, stresses upon the importance of what he calls `employment anchoring'. "You cannot sell real estate unless they are bundled with shopping malls, IT parks, etc". Mr Dabriwala's company is setting up a township - with dwelling units, IT park, hotels, malls, golf courses - spread over 260 acres of land at Batanagar at an estimated investment of Rs 1,800 crore.

Mr Dabriwala is sanguine that the "action in Kolkata is still to happen".

The balanced development of infrastructure, industry, IT and the services sector will only augur well for "the inclusive real estate development model adopted by West Bengal where social housing is also an integral part", he says.

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