South India Realty
The major cities of South India have gone through a major transformation in recent times. Bangalore, Chennai, Hyderabad and Kochi have already made it to the list of emerging real estate market. And with smart cities initiative around the corner, the southern India is set to become the hub of Indian real-estate, finds out Rahul Trivedi.
When we talk about realty market of South India, affordability is one of the distinct features especially for residential properties. Due to this the South India real estate has shown some fortitude as compared to the realty of Mumbai and Delhi-NCR. Echoing the affordability and end user quotient, J. C Sharma, Vice Chairman & Managing Director, Sobha Limited said, “The Southern markets rank high on residential affordability when compared to its western and northern counterparts. It is driven by the end users and the property prices are based on the demand and supply dynamic. Therefore, developers respond better by filling the demand gap and maintaining realistic property prices. In contrast, Mumbai and NCR markets are dominated by investors who speculate and influence the property price.”
As per QuikrHomes, to clear the unsold stock in NCR would take on an average of 70 months, while in Bangalore it would be take about 41 months. On an average, the unsold stock in the southern cities vary anywhere between 40-45 months, while in northern and western cities, it is in the range of 55-70 months, indicating a stark contrast.
While Bangalore recorded the maximum new unit supply, it is interesting to see that increased office absorption coupled with improving infrastructure has significantly helped Hyderabad to attract lot of real estate investments. Also, the southern region is embracing the shift from Tier-I to Tier-II cities like Vijaywada, Coimbatore, and Mangalore. Vijay Agrawal, Director, Equirus Capital, an investment banking firm added, “The Southern market primarily dominated by affordable and mid-market segment apartments and gated communities has been resilient and showing good growth signs across the states of Andhra Pradesh, Telangana, Karnataka, Kerala and Tamil Nadu.”
The cities such as Bangalore, Chennai and Hyderabad are witnessing hectic development activity driven by the IT industry and manufacturing sector. The majority of the cities recorded maximum supply in the mid-segment, Chennai and Hyderabad saw decent supply in the luxury segment as well. Apartments dominate the property spectrum with tier-I cities showing decent supply of plots and tier-II cities a healthy supply of villas and row houses. As per Varun Manian, Managing Director, Radiance Realty, the market in South India has evolved from being conservative market to one that is quickly adapting to global standards. He said, “Till a decade ago, high rise apartment buildings were rare, but today there are developments across the region that are as high as 40 stories. Moreover, South India leads the industry in terms of having organized and long term players who are more prepared than their counterparts in other regions to implement the RERA regulations.”
Jayendra Krishna, Head – Sales and Marketing, Raffles Residency points out that the end users are now more informed and they make a well researched choice. This has created a healthy competition among the developers and hence the product offering is a lot more evolved and matured. “Developers are doing a lot of value addition. There are clients who come and ask what tiles are being used? What make are these and if they will be installed with paper thin joints? So it’s an informed customer which we are interacting with,” he commented.
The Growth Trends
Raffles Park
In the commercial segment, the southern markets have witnessed the absorption of more than 10 million square feet. Bangalore has been frontrunner in the retail revolution. Due to lack of retail space in primary high streets such as MG Road and Brigade Road, retailers are opting for secondary high streets in Jayanagar, Indira Nagar, and New BEL Road. Developers are focusing on malls with over 650,000 sq. ft. of built-up area.
The commercial office leasing trends in Bangalore clearly reflect that the city is topping all others in terms of space and job creation. IT, ITeS and retail are driving employment creation in the city. Bangalore is expanding in all directions, and with almost all phases of the metro on track in terms of deployment, Bangalore has emerged as one of the best investment destinations in the affordable, affordable luxury and luxury segment housing segments.
Quikr Homes
Chennai, on the other side has seen rise in the residential property prices. The appreciation today is almost three times of the prices of 2007. However, Sharma feels Bangalore and Hyderabad are doing better than Chennai in the residential segment and Chennai is likely to see a revival in both new launches and sales volumes as the year unwinds. “According to recent report by EY, Tamil Nadu, Andhra Pradesh, Karnataka and Kerala broadly comprises of 21 per cent of the Indian population. Over the years, these states have transformed themselves to become robust centres for the service industry, with a strong focus on the manufacturing sector for industries. Close to 50 per cent of the total number of SEZs in India are housed by these states. IT remains on the top, followed by biotechnology. Bengaluru is the hub for these two sectors and is witnessing a constant influx of workforce, willing to buy or own a house.”
The infrastructure projects like Metro Connectivity and Peripheral Ring Road Project too are adding to the potential growth of Bangalore and Chennai. The completion of Outer Ring Road and Metro is a major driving force behind the growth of realty sector in Hyderabad.
The Potential & Challenges
The Government’s initiatives of developing cities into smart cities and HRIDAY (Heritage City Development and Augmentation Yojna) have given a great push to the sector. This would also increase the penetration of the developers into Tier II and III cities. As of now 16 Southern cities have been listed to be developed as smart cities whereas five cities have been marked as HRIDAY cities. Sharma stated, “The announcement of ‘Smart Cities’ initiative by the Indian government has given fillip to the business activity in tier-II and tier-III cities like Thrissur, Davanagere and Kakinada. This will help fuel the growth of real estate in these regions.”
Factors driving growth in major cities of South Indi: Quikr Homes
While, Smart cities’ initiative is aimed at addressing the issues of infrastructure, land use planning, transport, urban design and architecture holistically, the increasing input cost, difficulty in raising project funding and lack of transparency are some of the challenges. Sharma opined, “There have been positive developments on economic and policy front but, there are issues such as lack of skilled labour, quality raw materials and slow approval process that delay the projects and escalate costs implications for the developers as well as the buyers. Therefore, it is imperative for the government to introduce Single Window Clearance.”
With Bangalore, Chennai and Hyderabad are already making their place in the global real estate map, the tier- I and II south Indian cities too are likely to gain pace with the development of Smart Cities down South. The major reason behind the growth of realty market in the Southern part of the country is the correct price & product match, buyers focus and greater transparency.
According to Agrawal, Mysore, Visakhapatnam, Coimbatore, Kochi and Thiruvananthapuram, are the next major real-estate destinations in the region but, factors like disputes over land acquisition, multiple taxation points, high approval cost and FSO cost are impediments to the growth of the real-estate sector.. Krishna also gives place to cities like Kochi, Coimbatore, Mysore, Vizag and Visakhapatnam in his list of upcoming realty markets. Whereas, Manian feels cities like Vijayawada, Amaravathi and holiday destinations such as Coonoor, Kodaikanal are also the emerging realty markets. “These areas are backed by infrastructure projects like airport expansion, National Highways upgrading and setting up of economic corridors among other initiatives. As a developer we are also looking forward to participate in the contribution of the smart cities but clarity is still required as to the definition and the time frame,” he added. Krishna corroborated, “The current government initiative could be termed as pilot project, but eventually all the cities and towns will have to be developed as Smart Cities or Towns.”