by Mr. Arvind Jain, Pride Group
In real estate investment circles, we
often hear the term 'spillover demand' or / 'spillover effect'. It is a very
important concept and serious real estate investors must have a clear grasp of
it.
Basically, the spillover effect in
real estate pertains to the impact that a certain event or / series of events
in a locality has on adjoining localities.
The term spillover demand is most
often used when a certain location is either reaching saturation point in terms
of development potential, has begun commanding high property rates because of
high demand, or / both.
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| Arvind Jain, MD, Pride Group |
When this happens, budget-bound home
seekers who are interested in this area because of its location benefits or / the
desirability of the neighbourhood are forced to look for options in the
immediate vicinity.
This is spillover demand.
This is a predictable process with
which both real estate developers and property investors are very familiar.
Developers / promoters study the
locality's surrounding areas and analyze them for possible land acquisition &
development potential.
Builders / promoters with sufficient
vision will have acquired surrounding land parcels well before the original
location has reached its 'popularity peak'.
There is an obvious 'first mover'
advantage for developers / promoters who sense and act on such opportunities
well before the actual spillover demand hits the ground.
Land prices tend to be lower, and the
available plots tend to be of larger sizes. This enables them to plan larger
projects at a future stage, which make for better brand positioning and also higher
leverage when it comes to influencing the overall development of the area.
However, there are also risks
involved.
The city planning & municipal authorities may be slow in providing
basic infrastructure like roads, sanitation & electricity and water supply
in the areas adjoining the parent location.
If this is the case, real estate projects
built in these areas will fail to attract home buyers & investors until the
locations themselves become viable.
In a best-case scenario, a developer
will have ensured that the city's development plan has indeed scheduled
infrastructure enhancements to the new location.
In Pune City, some of the prime
examples of spillover demand & infrastructure working together to
successfully raise the real estate profiling of locations are
Wagholi (spillover demand from Kharadi),
Dhanori (spillover demand from Viman Nagar),
Charoli (spillover demand from Dhanori, Viman Nagar and Kharadi),
Baner (spillover demand from Hinjewadi) and
Wakad (spillover demand from Hinjewadi and Baner).
Timely infrastructure has been the
common thread throughout these success stories.
Likewise, the demand for homes in
Mumbai spilled over from the unaffordable parts of the
MMR to
the Mira-Bhayander,
Vasai-Virar
and Kalyan-Dombivali belts.
However, Navi Mumbai has arguably been
the greatest beneficiary of the spillover demand from Mumbai, thanks to
superior infrastructure ensured by CIDCO. thus, the real estate market in
now-prominent areas such as
Vashi,
Koparkhairne,
Airoli,
Ghansoli and
CBD Belapur is perpetual boom mode even today.
About the author
Mr. Arvind Jain is Managing
Director at Pride Group
For Media Contact
Jay Kalghatgi
Client Interface - CopyConnect
Mobile: 93201 42248
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