Track2Realty Exclusive: Real estate markets across the country have the uniform pattern of being speculative if the given market is high on the wish list of investors. On the contrary, end-user driven markets are always modest in appreciation but nevertheless carry genuine appreciation and provide a level playing field to all the stake holders, including the buyers.
However, the property markets of Gujarat, most notably the cream of the market in Ahmedabad and Vadodara, defy this conventional wisdom of economics in the real estate. These markets have traditionally been high on the wish list of the investors, yet have never been speculative by any stretch of imagination.
What makes Gujarat property market so realistic and different from the rest of the country? Analysts believe the property market dynamics of the region can not be disconnected with the overall economy of the region. The pockets of affluence are always balanced by the cost conscious spending habits in the state, and that reflects in the property market as well. That may be the reason that unlike other property markets, the residential developments in the state are not at the cost of each other in terms of various projects meant for different class of people.
Of course, the focus is nowadays shifting towards the luxury and other high-end projects but not at the cost of compromising with the mid-income housing or even affordable projects. There are all kind of residential launches, often in the same micro-market and the thrust is more on the project amenities in the high end projects than a mere developers’ playing on the land competence in the name of over-glorified terminology of ‘location, location & location’.
Dhaval Ajmera, Director, Ajmera Realty & Infra has a point when he says with steady demand being noted for affordable housing segment, residential developers have now recognised the prospective evolution of this sector. They have been imparting concentrated development for upper mid and luxury segments, where the market is appreciating in the last decade due to the arrival of many affordable projects.
“It is a realistic market at a time when property markets across country are speculative. The current momentum for investment in the city is quite stable, but it is temporary as the Ahmedabad’s potential is strong and is based on real and concrete growth. It will soon resume the progressive path. Looking at the current scenario for Ahmedabad, the future yield will be high, making investors compliment their investment,” says Ajmera.
Property watchers in this market maintain that the property rates here are still realistic as compared to other cities which bode well for investors and developers. This is often seen as a strange paradox at a time when the state in general and cities like Ahmedabad and Vadodara in particular are witness to increased focus on industrial and other economic activity. Various industries in and around the city is fuelling demand in Ahmedabad with IT giants such as TCS and Info City entering the city.
Manan Choksi Regional Owner, RE/MAX India, Gujarat says affordable may be going slow but is a steady segment of housing here. There is a strong demand and even though sentiments are low, people are still buying. Most of the people are first home buyers and depend on home loan. So, the slowdown in property market has not really affected the market.
This buying trend may reflect that the property market is not different from other parts of the country, yet the fundamental question here is how realistic is the market at a time when property markets across country are speculative.
“Ahmedabad market has been always been investor driven. The people have excess capital and they park it in properties. Even then the prices don’t fall and the market is not very volatile like that in other parts of the country. This shows that it is a realistic market,” says Choksi.
Well, since the investors in these markets are mostly local people who are not investing in the property for short-term trading, the market is not speculative either. Most of the Gujaratis are investing beyond one house for long term capital appreciation or to park money in a safe investment instrument. There are hardly any outside investors in the state pumping money for speculation.
Moreover, most of the developers in the Ahmedabad or Vadodara are either the local residents or the Gujarati builders who have tasted the perils of speculative markets in Mumbai and other regions. So, they are quite conscious of the fact that the short term speculative buying may provide liquidity to the developers in the immediate term, but often takes the project out of the hands of the developers. This kind of strategy often misfires to the developers who are then forced to strategise their marketing plans as per the wishes of the investors or the under-writers.
Hence, this realisation helps the developers to maintain a stable trend, something that may be a case study for the developers operating in other highly leveraged markets. In a nutshell, the property markets of Ahmedabad and Vadodara are uniquely poised today in the sense that these markets are pretty high on the wish list of the developers, yet not speculative in terms of its rental yields or capital appreciation. These are the markets meant only for either the end-users or the investors who have a long gestation period in mind.
As a matter of fact, even at the worst phase of economic slowdown between 2009-2011 when the property markets across India either corrected a bit or maintaining rigid price by the developers led to piled up inventory, this bearish cycle was weathered so very well over here. There has been no significant crash and inventory hangover has again never been a reality in this part of the world. That probably defines the resilience of Gujarat property market very well.
