Kolkata stays Hot Amidst cooling Realty prices

June 23, 2008	(Be the first to rate this story!)  Loading ...
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The real-estate market in Kolkata has been largely unaffected by the soaring inflation and the US economic crisis, developers and experts say. While the sales and price figures in other metros and cities have shown signs of cooling down, the prices in Kolkata have increased by 7-10 per cent over the last four months.

In their opinion, the city has managed to avoid a crisis because prices here had never reached ‘unrealistic’ proportions. Kolkata’s real-estate market is also relatively stabilisedsince the number of speculative investors here is much less compared with end-users.

The proportion of end-users vis-À-vis investors is 70:30, says Mr Sanjay Chowdhury, Regional Head, Emaar MGF. “Prices in some other cities had to undergo a correction because they were inherently over-priced. Prices in Kolkata never appreciated so much and have always been realistic in nature,” he says.

Rentals for office space “Rental values for office space are appreciating as much as in the previous years and even the central business district (CBD) is witnessing a higher growth over the period by virtue of non-availability of Grade A offices vis-À-vis the rise in demand,” Mr Abhijit Das, Regional Head, Jones Lang LaSalle Meghraj, says. Rentals at the CBD are currently in the Rs 80-130 per sq.ft per month range. The Life Insurance Corporation of India, which is planning to build a 50-storey office building on the bypass, a non-CBD area, expects to get a rent of Rs 150-170 per sq, ft when it comes up in a couple of years, Mr D. K. Banerjee, Chief Engineer of LIC, said.

“Real-estate prices in Kolkata saw a steady rise rather than a sudden boom and bust which most other States witnessed in the first quarter of 2008. Prices at New Town, Rajarhat, were ranging between Rs 1,200 and Rs 1,700 per sq.ft when development started there a couple of years ago. And then the price gradually saw an upward movement towards the Rs 2,700-3,000 range with national level players (such as DLF and Unitech) entering the market, says Mr Rahul Todi Managing Director, Shrachi. The nature of development — forming joint sector companies with the Housing Board — has also ensured that there is appropriate regulation in controlling volatility in prices, he adds.

“Kolkata has been witnessing a steady growth in prices even in a phase of a downturn elsewhere. We have seen a growth of 7-10 per cent rise in prices over the last couple of months,” says Mr Pradeep Sureka, President, Confederation of Real Estate developers’ Association (CREDAI) Bengal. The rise in property prices over the last six months was 20 per cent as against 100 per cent over the preceding two years, according to Mr Todi. In the past six months developers have seen an average monthly sale of 10-12 units vis-À-vis 25-30 units being sold over the last two years, he adds.

Boom and bust elsewhere Some other regions have not been as lucky, according Mr Pradip Sen, Group Vice-President, Jain Group. “The worst hit States are Maharashtra, Delhi, and other national capital regions (NCRs) comprising Noida and Gurgaon. The sudden boom followed by phases of high inflation rates and crashing stock markets sparked off the domino effect on buying power, severely affecting the real-estate market there,” he says.

A property expert based in Hyderabad predicts that the real-estate market in India is going to face a downturn of 30 per cent over the next 18 months. Sale of residential houses has decreased by 25-30 per cent in Hyderabad over the last three months, he says. Sale of old houses has also seen a decline since people are more inclined to hold on to their property rather than sell at lower rates. “The prices in Kolkata are expected to go up by 20-25 by the end of this year,” Mr Sushil Mohta, Director, Merlin and South City Project, says. His own project, the South City at the Prince Anwar Shah road, will see a rise in price by 15-20 per cent by year-end, he says. The prices of apartments at South City have doubled since its sales began in 2004.

The comparative stability in the Kolkata market has also helped in countering some part of the losses incurred due to escalating raw material costs in steel and cement, which have increased by 15-20 per cent over last three years, Mr Mohta says. However, going by the overall health of the sector, “Kolkata as a market will continue to remain healthy and it is one of the best markets for investment over a long term of 5-10 years,” says Mr Das.

“We are at the end of a cycle where slowdown is for real. But given the robustness and fundamental long-term nature of demand, we will see the beginning of another cycle some time soon,” is Mr Todi’s take.

News Published Under:   Real Estate India, Kolkata, Property Prices |

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