Kolkata realty goes up but policy uncertainty affect projects

Vibrant cities for vibrant economy-VIII

By: Track2Media Intellisearch

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There is no doubt that the property prices in almost all the micro market of eastern city is going northwards, yet uncertainty looms large over Kolkata realty. There have been less transaction and even lesser new launches in the city, even when the state chapter of the Confederation of Real Estate Developers’ Association of India (CREDAI) demands ten satellite towns in the state. The real estate projects have been on a standstill as the developers are apprehensive of the policy of the Government post the change of power after 34 long years.

In the last one year, the city has witnessed fewer number of new project launches as compared to last year due to delay in approvals and clearances. Pradeep Sureka, Managing Director of Sureka Group and President of the Kolkata Chapter of CREDAI, says, “This year the new supply in residential segment has been significantly low as before the elections approvals had stalled and even now they are very slow.”

Sureka, like many other developers in Kolkata, is awaiting Government approval for his next set of launches. “Once we know the kind of land that we can purchase and their probable locations, we can go ahead with the projects. On an average, we are looking for 500-1,000 acre of non-agricultural land for housing development. Of course, if we are to directly buy land, the Urban Land Ceiling Act has to be removed,” Sureka pointed out.

Developers are also lobbying with the State Government for incentives to recover cost overruns. The three critical factors that will determine the Kolkata realty choice ahead are land availability, infrastructure readiness and ease of connectivity. Acknowledging the need to fast-track housing development in the state, the Urban Development Minister Firhad Hakim says the new Government required some time to assess the sector.

“We want to join hands with the industry but in a manner that is transparent. So far as infrastructure development goes, there is no two ways about the need for better infrastructure in New Town. Since we have shifted the township development authority from the Housing Department to Urban Development, we can apply for funds under the Jawaharlal Nehru National Urban Renewal Mission scheme,” said Hakim.

According to data by Jones Lang LaSalle India, (JLLI) only 4600 apartments have been launched by October 2011 as compared to 8900 in 2010. In the second quarter of 2011, the market witnessed the launch of four projects, offering only 711 new units which includes the costliest project, Atmosphere offered by Forum Group.

Though project launches have been few, the realty market unlike other parts of the country has witnessed a jump in prices by almost 15-20 per cent. Mayank Saxena, Managing Director JLLI, Kolkata says, “Post 2009, developers in the city focussed mainly on sub Rs. 20 lakh homes, but now everyone is building bigger projects and prices have increased substantially. Last year prices in Ballygaunje, were around Rs 13000-14000 per sft which has climbed upto Rs 16,000- 17000 per sft.”

Apartments in New Town, in the Rajarhat area on the fringes of Kolkata, is commanding a price tag of Rs 3500- 5000 per square feet (per sft), while in the posh Ballygunj and Alipore areas, prices are hovering in the range of Rs 12,000-17,000 per sft. In the upcoming area of the E M Bypass, developers are getting buyers to shell out between Rs 5000-8000 per sft.

Rahul Todi, Managing Director of Shrachi Realty, part of the Rs 800 crore Shrachi Group, says, “Prices have appreciated in the city center by 15-20 per cent. Prices have not increased in any other city but the prices have largely been driven due to demand-supply gap in the city. This year only 5-10 significant projects have been launched and we expect the situation to continue like this for next few months.”

Meanwhile, property analysts believe the IT/ITeS sector will continue to lead the demand for office space followed by telecom, pharma and financial firms. Industrial growth might spur office space demand from the manufacturing and engineering sectors.

Going forward, developers expect prices to remain stable as rate hikes and unsold inventories will dominate the market in 2012. Property consultants say real estate prices in Kolkata have begun to firm up. “The second half of the current fiscal (2011) has seen many more sales and bookings compared with the first six months,” said Kaustuv Roy, Executive Director of Cushman and Wakefield. “Developers are probably betting on property prices remaining firm for the next two-three years, by which time most of these projects would be ready for possession.”

As per the data released by Liases Foras, a real estate rating and research firm, the Kolkata residential market, at present, has 15,300 unsold units of which 42 per cent inventory hails from Rajarhat and 17 per cent each from north and west Kolkata. The research has been done across 66 locations in the city and its suburbs including Hooghly and Barasat.

Pankaj Kapoor, Managing Director of Liases Foras, says, “The Kolkata property market is the smallest in size as compared to other metro markets and the market is sluggish at the moment. Though rest of the city has very less unsold inventories but Rajarhat dominates the chart.”

The real estate market in Kolkata is still in a very nascent stage but prices have started to escalated and both Unitech and DLF who have projects in the city are reporting healthy sales for its launched projects. Information technology (IT) service sector has not recovered completely thus Rajarhat is witnessing more vacancy than the other parts of the city like Alipore or Ballygaunje, the hotspots for residential realty projects at present.

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