Saugata Maitra, Senior VP - JLLM
For example, residential sale rates in Essel Towers, Gurgaon increased from around INR 5000/- per sq. ft levels in 2006 (which is when the Delhi Metro was announced) to around INR 9000/- per sq. ft range towards the operational phase in 2010. In comparison, other areas displayed a more reticent increase of 40-50%. 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. 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.
