Is Gujarat a promising realty market
Factors such as the expansion of the Gujarat Municipal Corporation limits, robust development of basic infrastructure and the growth of commercial and industrial hubs have had positive effects on the state real estate, but there are more challenges that need to be addressed.
In comparison to other Indian states, Gujarat has been relatively more proactive in enacting multiple infrastructure projects via the PPP model. With privatization of infrastructure, several ports, railways, roads, hydro-electric projects have developed over the years. The sound infrastructure growth has gradually propelled the overall development across the state boosting the real estate market as well. The most notable infrastructure projects to have enhanced the local real-estate in the vicinity are Delhi-Mumbai Industrial Corridor (DMIC), Dholera Special Investment region, Gujarat Finance Tech City (GIFT), Dahej Petrochemical & Petroleum Investment Region (PCPIR), the metro rail system for Gandhinagar-Ahmedabad and the BRTS (Bus Rapid Transportation System).Four cities of Gujarat namely Ahmedabad, Surat, Rajkot and Vadodara have been identified for the BRTS initiatives
Gujarat also enjoys the industrial legacy including textiles, cement, petrochemicals and diamonds). The ‘Smart City’ tag to major cities including Ahmedabad, Surat, Gandhinagar, Vadodara, Rajkot and Dahod is an added advantage. All these distinct features have collectively made Gujarat an attractive investment destination resulting in rapid urbanization and large migration.As Aajal Patel, Director- Marketing and Sales, Suryam Groupputs it, “The auto industries in Gujarat are creating tremendous job opportunities encouraging moving of people from other states to Gujarat. Combined with safety factor, the lifestyle amenities and the premium education & healthcare facilities availableacross cities have given a tremendous push to the residential segment in the state.”
Gujarat’s real estate market has a great capital value for the investors due to the presence of the key projects in the form of SEZs, financial products townships and IT & manufacturing corridors. The state is well connected, internally as well as externally through its elaborate transit systems, adding to its commercial value.
Gujarat is a robust residential market especially in affordable segment in several micro-markets across all major cities and has tremendous opportunities for re-development schemes.
Nearly 82% of the total new supply in the three cities including Ahmedabad, Vadodara and Surat since 2013 till date comprised apartments. Traditionally, these cities had buyers that preferred plots and bungalows. The change in preference was driven by rapid urbanization and a large influx of people from other cities.
Several buyers continue to prefer owning land and living on it. But their preference is also growing for living in gated communities. Thus, developers are seen to cater to such buyers by launching villas and row houses.Ahmedabad, Vadodara and Surat collectively saw supply of nearly 16,800 units in the villas and row houses categories with maximum supply in Surat.
According to Solicitor PareshJani – Proprietor, Jani& Co, “The businessman and wealthy investors who want to park their unsolicited money are investing in luxury real estate market of Gujarat. This is one of the main reasons for the thriving luxury residential in the state. Gujarat is now more of an investment marketand is less conducive for end-users. Not many real estate developers are building projects for the middle income group or first time home buyers. According to me any property in the state that is over the value of Rs. 50 lakh is meant for investment purposes.Affordable housing being built by Gujarat Housing Board for the LIG and MIG segments are economical and are subsidized. The private builders are constructing similar homes in the bandwidth of Rs. 40-50 lakh and by no means are affordable for middle class in Gujarat and just eyewash in the name of creating affordable housing.”
Balbir Singh Khalsa, National Director – Industrial & Branch Director – Ahmedabad, Knight Frank India is of the view that Ahmedabad real estate is largely a consumer driven market with major residential developments coming up in West Ahmedabad, in and around the SG highway. According to him, the affordable homes priced less than Rs 25 lakh form a significant share of the markettypically in the north and eastern parts of the city. ”
Putting things in perspective, Ar. Hiren Gandhi – Principal Architect, Hiren A. Gandhi & Associates, said, “If the real estate developers build products as per the market demand they will sell or else will stay lying as unsold inventory. The builders need to understand the micro market for which they are building and the home buyer’s profile. No-one can stop the juggernaut of Gujarat’s growth as the state is a land of entrepreneurs. In terms of real estate, not all the asset classes will do very well here, the developers need to understand the pulse of the market well and should act accordingly, which they are not doing right at the moment. Gujarati investor is very smart and seeks value for money. My advice for the developers is to understand the landscape and topography before constructing. Usage of right building material is also very important. For example, if customers want glass building then it is the cautious duty of an architect and developer to make them understand that it is not appropriate, healthy or energy efficient.”
Talking about some of the trends witnessed in Gujarat’s residential real estate sector, Kamal Singal, MD and CEO, Arvind Smart Spacescommented, “Integrated townships is emerging as a key category, where developments have everything from golf course to lavish clubs to entertainment zones for kids. Developers are also showing interest in the affordable housing segment given the Government’s push to this category and the inherent demand of such housing in India. With RERA implementation and the focus on accountability and transparency, customers now are shifting towards organized players in the market.”
Important Markets in the State
Ahmedabad is considered one of the big real estate markets after Tier 1 cities. Rapid industrialisation, well-planned infrastructure development including BRTS, GIFT city (one of the 1st Smart Cities in the country), expressways etc. add to its advantage. The city saw maximum real estate activity with the launch of approx. 71,000 units from 2013 till date. Interestingly, out of the total launches, nearly 76% constituted of apartments.The three micro markets in Ahmedabad that collectively saw new supply of approx. 14,800 units which is 21% of the total supply during the periodareNava Badaj, S G Highway and Bagodara
Surat is considered one of the three major nodes for infrastructural, manufacturing, financial and business development, Surat’s realty market has grown by leaps and bounds over the last five years. Rising commercial developments are driving the city’s residential market. The new launches in the city over the last 5 years comprised of more than 35,000 units including a mix of apartments, plots, villas and row houses. Interestingly, nearly 29% of the overall launches comprised of villas. This indicates the continued preference of buyers for owning land but a reversal in trend of living in a gated community. The three micro markets in Surat that collectively saw launches of nearly 8,000 units over the last 5 yearsincludeVesu, Palanpur Gam and Althan
Vadodara besides enjoying the political advantage, the city has fast emerged as an IT hub and boasts of excellent infrastructure facilities. Major infrastructural developments coupled with IT hubs and industrial areas have led to increased employment opportunities and improved connectivity. The DMIC also passes through Vadodara, making it a key destination for industrial investments. The city saw new supply of nearly 13,200 units since 2013 comprising apartments, villas, row houses and residential plots. The collective impact of policies including DeMo, RERA and GST resulted in a significant drop in new launches in 2016 and 2017. The three micro markets in Vadodara which collectively saw new supply of approx. 11,800 units are Ajwa Road, Waghodia Road and Vasna-Bhayli Road. These localities alone constituted about 87% of the total supply during the period. The areas include:
Smart City Plans
The construction of India’s first Smart city GIFT is on in full swing. In fact, GIFT One Tower and GIFT Two Tower are operational while Brigade Tower and World Trade Centre are under construction. Companies like TCS and Infibeam have already started their operations here. The BSE INX office is also operational in the Hiranandani Signature Tower.
The road connectivity has significantly increased with the opening of a new bridge over Sabarmati River. Construction of internal roads, over bridges and one under-bridge inside the GIFT city is in progress. Facilities such as district cooling system, waste management systems etc. have been there for almost 5 years now.
According to Singal, “On the back of large scale infrastructure initiatives, industrial growth and focus on good governance, Gujarat has emerged as a key real estate market. Not only are the major cities such as Ahmedabad, Gandhinagar, Baroda, Surat thriving, but even the smaller cities such as Jamnagar and Vapi have come up as independent growth centres. Gujarat Government is developing the IFC (International Finance Centre) in Gujarat – GIFT City (Gujarat International Finance Tec-City) is an under-construction central business district to be built on 886 acres of land. Additionally, Dholera SIR, the Gujarat affordable housing mission, the Kalpsar Project, PCPIR, DMIC, DFC, High-Speed Rail Corridor and various other mass transit projects across the cities are initiatives to boost the growth of Gujarat’s urban and industrial sectors.”
Sharing his perspective on Gift City, Utsav Shah, Director, Ducon Consultants, said, “GIFT City is progressing well but at a slower pace than expected. Local developers’ interest seems quite low. Certain policy level changes are needed to boost the development in GIFT CITY and further push is required for the banking and fintech segment.”
Santhosh Kumar, Vice Chairman – ANAROCK Property Consultants on an optimistic note said, “While the key cities such as Gandhinagar-Ahmedabad, Vadodara and Surat are already riding high on realty growth, the other upcoming cities include Dholera, Rajkot and Dahod. The ‘Smart City’ tag given to these cities will propel real estate growth here in the future. Once developed, the cities will create employment opportunities for a large number of people which in turn will boost the housing and rental demand.”
Challenges & Constraints
“There is no presence of large scale workforce of any top tech firm, finance consulting or IT firms and thus there is no large organized tech workforcewhich demands a large scale consumption of work spaces and mid-to-high scale mass residential schemes; like what we see in cities like Gurgaon, Bengaluru and Hyderabad. Therefore, leasing segment is quite slow. This I believe is one of the major challenges for the real estate developers in terms of the scale of operations and saleability,”feels, Shah.
“While the major cities in Gujarat have seen ample new supply over the years, the overall slowdown in the realty sector since few years dampened the spirit of buyers and investors alike. With rapid infrastructural developments within the state, developers launched several projects not just within the city but also along the peripheries of leading cities. As a result, there seems to be a demand-supply mismatch with plenty unsold stock in the markets. This definitely impacts the property prices which have seen a minor correction to the tune of 3-5%, added, Kumar.
According to Singh, “Low ready reckoner rate and government rate, speculation in land rates, lack of IT/ITES companies coming up in the state and hence less white collar jobs getting generated and ban on liquor are some of the reasons for reluctance of MNCs in setting business in Gujarat.”
Besides the hurdles evoked by threesome policies including DeMo, GST and RERA, the slow-paced Smart City project has kept the realty market relatively dull. While the realty market in the state has basked on the glory of its infra developments, it is necessary to expedite the Smart City project which in turn will boost the real estate market in the cities.
Scope of Growth
Gujarat is showing rapid advancements in all sectors, right from education, housing and commercial utilisation to entertainment and tourism. Besides this, the basic amenities like better sanitary conditions, electricity and water supply as well as efficient transportation system have provided a suitable background for the growth of the realty sector in Gujarat.
In the past few years, retail segment as well as industrial and warehousing sectors have seen reasonably good appreciation and rental growth. For instance, Vitthalapur GIDC near Viramgami is undergoing tremendous development and the land prices too are appreciating significantly due to several large manufacturing units coming up, along with it there is a genuine need for housing and dormitories in that region which can yield strong returns in the future.
But, the prospective growth of the real estate market in Gujarat will mostly depend on the proper execution of the multiple infra projectsincluding GIFT city, DMIC and the Dholera Special Investment region, to name a few. In terms of property segmentation, affordable housing is likely to drive realty growth here if the developers get their business strategy right.