By Tanuj Shori, As people move for better prospects, migration will play a major role in boosting real estate A lot of stories about saturation and dip in the real estate market of hubs like Mumbai, New Delhi, Bangalore and Chennai has been going around. While it is true that there is saturation to some extent, we do not believe that it is a cause for concern. Migration still plays a big role in these markets. There is enough movement of populace to these regions because of better paying jobs and lifestyle giving a boost to real estate. The capital appreciation in these districts is much more than compared to the rest of the country. There is an unwritten law that if you invest in Mumbai today, your money will double in the next two years. While, there is oversupply in some pockets of Gurgaon and Noida, once certain infrastructure developments like the Dwarka Expressway come through, the demands are bound to surge as we anticipate heavy migration from surrounding areas. Bangalore is growing especially in its north and the north-eastern belt in the past three to four years, thanks to the IT companies shifting there from Whitefield and the new airport that has come up. It is evident that the economics of these regions is still run by actual demand and supply rather than speculation. Mumbai and Delhi are also the two major hot spots for people to plow their cash into. Real estate is the only asset class left, thanks to the stringent government rules these days, where liquid cash can be parked. In fact we are already seeing a pickup in the Mumbai market. We predict that by the end of next year, prices in the city will see a hike of nearly 5.5 per cent in the residential market. The Mumbai Metropolitan Region (MMR), Airoli and Thane are already witnessing an upsurge in property prices. The walk-to-office culture that has seeped in the Bangalore region has found ground in Mumbai as well. These areas with large land parcels provide a great opportunity for developers to construct townships and business clusters. Markets like Pune, Bangalore and Chennai are also evolving because there is enough land supply around these areas. The dimension of these cities is circular, unlike Mumbai, which is straight. So even if one expands 5 km away from the main city, the travel time isn’t much, giving these areas much more scope for expansion. Because market conditions are tough, interest rates high and economy not growing at the pace it was expected to, builders have come out with innovative ideas to lure investors. With schemes like subvention, buy-back, etc., they are making India a very lucrative market. As an NRI doesn’t necessarily want to stay in the country, such schemes seem highly attractive from an investment point of view. Another way to look at this entire story has been presented by Hans Rosling, a Swedish public health professor and data visualisation pioneer. Rosling says that all of the world’s forecast 3bn population growth through to 2100 will be urban, of which, a third will be in Asia, while two-thirds will be in Africa. In economic terms the developed west will grow at 1 to 2 per cent a year through until 2100, while the rest of the world will grow at 4 to 6 per cent. This amounts to a startling global shift in the pattern of trade. On why real estate investors should follow global population trends, the reports goes on to predict that India will be the world’s biggest consumer, with its middle class spending $12.8tn a year, according to the Brookings Institution forecasts. The same report rightly puts forth the point that it is not just numbers but incomes that matter as well. Now, according to the Brookings Institution, the greatest growth in the middle classes is taking place in Asia. By 2030 there will be more than 3bn middle-class people in Asia. A strong middle class, growing economy and foreign interest will lead to an improvement in the real estate market of the country. According to Indian Brand Equity Foundation, India is witnessing significant interest from international investors in the infrastructure space. Many Spanish companies are keen on collaborating with India on infrastructure, high-speed trains, renewable energy and developing smart cities The government has unveiled plans to invest $137 billion in its decrepit rail network over the next five years. Prime minister Narendra Modi's aggressive approach to building infrastructure will unlock faster economic growth. As World Bank chief economist, Kaushik Basu aptly said, India will further improve its infrastructure in the next five to 10 years, becoming a major propeller of growth in the country. He further adds that India has lived through stretches of slow growth and we are going through such a period. We will recover from this and get back to a higher growth. The potential for growth is very high for this country. Also, the fact that better and improved infrastructure will have a direct impact on the real estate market. One can see a very definite work in this direction in all the metros. Mumbai’s new and spectacular International Airport, the Wadala-Chembur monorail, metro linking Versova-Andheri-Ghatkopar stretch, the semi-high speed train that was tested recently will reduce the travel time between Delhi and Agra by about 30 minutes, air-conditioned double decker express train between Chennai and Bangalore, Yamuna Expressway, the proposed Dwarka Expressway, etc. are all bound to increase accessibility to the big cities and hence, migration of population. Further on, smart cities are going to have a tremendous impact on India’s property market. The first and the most obvious being that with smart cities, additional land will be issued by the government for urban development and housing. It will guarantee more supply, and adversely affect the prices of property leading to their correction. Smart Cities will also bring more FDI in the country and will also lead to major job creation in the real estate sector. It will definitely help to revive the Indian real estate market and bring more investment from urban areas to a lot of small towns. (The author is co-founder of Square Yards) Source: mydigitalfc.com
