Coimbatore market may have cooled down from the buoyant days of 2009 to 2011 but has not lost steam. Property prices have been stable last year, unlike the rise of 20 to 40 per cent seen in the past. Data from National Housing Board’s Residex Index show that the city’s index has risen from its base value of January 2007 to 184 in January-March 2013. This has been quite moderate compared to a rise to 310 for Chennai during the same period.
What may be in store for the property market? Stable growth, believe market participants.
The city’s weather is an attraction for many categories of buyers such as IT companies, retirees and foreign firms. It has good quality educational institutions, abundant water, thanks to water from the Siruvani river and two reservoirs and adequate infrastructure, including an international airport, hospitals and roads.
According to Rajesh Lund, Managing Partner, Srivari Properties, over 90 per cent of the buyers are end-users who plan to occupy the property immediately or at a later time. This helps keep absorption high and prices stable.
Who are the buyers?
The end-users who are buying fall in at least three groups.
Traditionally buyers in textile industry and MSME (Micro, Small and Medium Enterprises) manufacturing units. The IT sector has also been growing in the last few years and spurred demand from IT professionals, especially near Saravanampatty, which is the IT hub.
Coimbatore also has a big market for senior citizens, unlike Chennai where senior housing forms only 5 to 10 per cent of the total market. South Indians from Delhi or Mumbai are also choosing to buy villas in gated communities or apartments, to settle here. NRIs, especially those who are based in Kerala, have been a stable category of buyers and builders said that there is also interest from US-based NRIs, due to the weakening of rupee.
What is in demand?
Land and luxury property do not seem to be in demand.
IndiaProperty.com, an online property site, said that its data show that the budget preference is for villas in the price range of Rs 40 to 60 lakh and apartments costing Rs 30 to 45 lakh price.
Villa demand is robust with IT professionals, retirees and NRIs having a preference for these properties. Demand for smaller apartments is primarily from young IT professionals.
IN the senior citizen category, half of the market is for two-BHKs under 1,000 sq ft, says P.B. Anandapadmanabhan, CEO, Covai Properties. One-BHKs, under 600 sq ft, accounts for about one-third.
The demand is split equally between villas and apartments and price preference for apartments is around Rs 30 lakh and for villas at around Rs 40-45 lakh.
Among the various localities, Saravanampatty, Vadavalli and Avinashi road areas are seeing good demand compared to Pollachi or Pallakad road, according to builders.
How about commercial property?
Office space uptake is important to gauge prospects of job growth, which will help boost the residential market. Data show that office space demand for smaller spaces has been robust, while larger spaces have been slow to be rented out. Rental rates in Tidel Park were at Rs 25 per sq. ft for smaller spaces, as of February 2013.
IT majors that have operations in and around Tidel Park include IBM, HCL, Wipro and Bosch. Srivari Properties, which develops and rents commercial property, said that overall office rent growth was low last year but has improved this year.
Are there any concerns?
The improvement in the power situation has been easing concerns recently. Corporates are also likely to be attracted by the city’s overall affordability. The cost of doing business is 40 per cent lower in Coimbatore, compared to Chennai, says Jackbastian K. Nazareth, Group CEO, Puravankara Projects.
The city is also lacking in sanitation facilities. Work that is underway to lay underground drainage has been slow.
Also, there are many areas where the roads are congested, such as Mettupalayam road, Trichy road and area around Ukkadam. Coimbatore also falls under the Class III/IV Seismic Zone, which indicates moderate to high earthquake risk. Builders follow strict guidelines in construction to ensure that buildings withstand earthquakes, says Subramanian, MD, Ramani Real Estate of Coimbatore.
Is it a good time to buy?
IndiaProperty.com said that its Grahapravesam event in June had over 3,000 registrations, a possible indicator of buyer interest.
Builders are also optimistic and Puravankara said that Coimbatore’s share to the company’s construction area will increase from 7 per cent to 10 per cent with new planned launches.
Covai Properties indicated that demand for its senior housing has been growing 30 to 40 per cent every year. Large builders such as Sobha, TVH, Akshaya are also in the market along with established local builders such as Ramani, Srivari, Pricol and Covai Properties.
Property prices have not fallen and so far no incentive schemes have been offered by builders to attract buyers.
With many entrants, buyers could likely expect some good deals going forward.
However, builders felt that with cost of labour increasing 25 to 30 per cent in the last 6 months and cost of material also going up and no relief in land prices, prices are unlikely to fall in the near term.