Gujarat needs Social Infrastructure
Bakeri Group founded in 1959, is one of the oldest real estate developers of Gujarat. Pavan Bakeri, Managing Director, Bakeri Group feels that creation of high level service jobs in the state would promote the real estate market.
The realty markets of cities like Pune, Hyderabad and NCR have grown in last 10 years because of their burgeoning IT & ITeS sectors. In Gujarat, the IT/ITeS sector has not seen such growth due to lack of skilled workforce. This is the result of the past government policies of restricting English in Government schools and of setting up of private colleges and universities. Though Gujarat was always known as the manufacturing hub, but it doesn’t create white collared jobs that drive the demand for mid and high segment residential and retail real-estate.
Thus, the major challenge in Gujarat is the creation of service sector jobs in spite of the coming up of the GIFT City because you still have to figure out how to attract the talent? Having said so, in terms of project approvals and sanctions the state fares much better than other parts of the country. Another big project is Sabarmati Riverfront where lots of big companies are setting shop. These companies will bring in people from other cities of Gujarat such as from North and Central Gujarat. The project is centrally located in the city and is fit for both residential and commercial kinds of projects. It has the potential to attract national and even international real estate developers.
The consumer trends are shifting among the property buyers in main cities of Gujarat. Earlier, upper floors were not favoured but with exposure and changing lifestyle, home buyers, especially in a high-end project are willing to pay a premium to buy an upper floor apartment. They also ask for amenities in the project and choose a builder based on the reputation and track record.
What is the potential of Smart city development across Gujarat?
How do you define smart city? GIFT is a smart city with technology enabled infrastructure but it lacks social infrastructure because it takes years to develop. Therefore, people are reluctant to move there. The city is attracting lot of financial institutions from across the country but local developers are still not present there. Probably incentivizing startups and educational universities will help bring in local population to the GIFT city that will create a social buzz and attracting local developer to build there. The government has decided that only 5% of residential space in the GIFT-City could be sold to customers working outside it with the aim of promoting walk-to-work culture. But the developers want the government to allow the sale of more space to other customers.
The effects of RERA on Gujarat realty
There are two ways of looking at RERA. Firstly, it will remove the small time builders who are here just to make quick money consolidating the sector and making it more professional. Secondly, it will initially slow down the new supply, raising the property prices as new projects can be launched only after attaining all the approvals. The price of the projects will also go up as developers will not have access to customers money kept in the escrow account and will have to avail capital from financial institutions at high interest. Margins will be under pressure because the internal rate of returns (IRR) will probably go down as projects will take longer time to launch for sale.
The potential of the affordable housing segment
Revised definition & parameters of affordable housing is definitely a big move because now larger category of people come in the ambit who can afford a 60 square meter carpet area residential unit. Furthermore, the infrastructure status to the affordable housing has brought down the cost of construction finance for the developers. The big impetus in my opinion is the reduction in rate of interest for the affordable housing. The subvention of 3-4 percent, depending on the size of the house and buyers income will really boost this segment.
The mortgage interest rate of 5- 6 percent in place of current borrowing cost of 9 percent will be favourable for the realty growth as it enables more potential customers to buy and invest in real-estate. .
What are some of the major projects of the company?
The Group has developed more than 17 million square feet of landmark projects and more than 25 million square feet of plotted development. Bakeri City a planned township in Ahmedabad is a mid-segment and affordable housing project. While, Serendeep Mansion at Ghuma-Shela Road, Ahmedabad consists of customized bungalows landscaped gardens and abundant green patches. Likewise Serenity Proximus is a plotted development near Ahmedabad comprising plots starting form 313square yards. Sakar-IX Commercial Commune at Ashram Road, is an imposing 13-storey tall building having offices of 945 sq. feet onwards and entire floor up to 34000sqft. It is the only project which is connected to BRTS and Proposed Metro Rail project at Ashram Road.