Mr. Saugata Maitra, JLL
India
It is an established fact
that scheduled infrastructure projects tend to increase the value of properties
in the adjoining areas. This occurs because the infrastructure project becomes
a part of USP for the developers or property owners. There have been instances
where property prices have increased 50% to 70% from the announcement of an
infrastructure initiative until the operational phase.
For example, residential
sale rates in Essel Towers, Gurgaon increased from about Rs. 5000 per sq. ft
levels in 2006 (which is when the Delhi Metro was announced) to about Rs. 9,000
per sq. ft range towards the operational phase in 2010. In comparison, other
areas displayed a more reticent increase of 40% to 50%.
Likewise, property values
increased almost overnight in and around Panvel, Kharghar, Ulwe and most
southern parts of Navi Mumbai as well as Mumbai’s eastern corridors which are
well linked to the announced international airport.
That said, property price
increases may not be a unanimous phenomenon across all property segments. Let
us take, for example, the announcement of a new railway station, Metro, bus
terminus or even an airport.
While the low-to-mid-income property segments
would definitely be positively affected, property prices in high-end
residential areas would be less likely to experience a steep rise with the
announcement of a major infrastructure project.
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Mr. Saugata Maitra,
JLL India |
The reason is simple – the
high-end segment enhanced public transport facility would not consider improved
public transport be of major significance for the former.
With upcoming
infrastructure like airport or metro corridors, other factors that may have a
negative bearing on the demand for and profitability of high-end residential
properties are increased noise and crowding.
On the other hand,
infrastructure projects like airports result in increased employment
opportunities in the logistics, hospitality and commercial sectors. Naturally,
low-to-mid income residential property demand increases because more people
employed in these sectors will need to
live in the immediate vicinity.
Therefore, one should take
a good look at the property appreciation dynamics involved before investing in
a certain property on the heels of a major infrastructure upgrade or / project
implementation announcement.
A proper assessment of the
demand drivers around a particular infrastructure project is of the essence to
establish the genuine investment potential in the vicinity on a case-to-case
basis. Generally, the ‘Real Estate Zone’ is already packaged within large
infrastructure projects to increase the viability. Investing in such zones,
maybe as a co-developer, is a good idea.
Factors To Consider Before
Investing In Property Around An Infrastructure Project..!
* Likely implementation
time-frame, including the phasing of significant modules
* Value drivers in terms of
logistic convenience, employment generation, increase in trade and business,
etc.
* The development and
land-use plan of the city or region, and how the particular project fits into
the larger development plan, earmarked growth zones, etc.
* Intending property buyers
are invariably confronted with a sudden rise in property rates because of the
announcement of an infrastructure project.
All in all, one should
develop a specific projection with regards to demand, supply and financial
viability in order to assess whether the premium is justified.
About the author
Mr. Saugata Maitra is
National Director (Strategic Consulting) at JLL India
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