KOLKATA REAL ESTATE ON ROAD TO RECOVERY
The infrastructure improvement, affordable housing and the gradually growing IT sector are some of the factors, leading to the steady revival of Kolkata’s real estate market.
BY : SREYASI MAITY
Kolkata, is well connected to different parts of India as well as South-East Asian countries via the National Highway 34, Kolkata– Delhi and Kolkata–Chennai Golden Quadrilateral Roads, and Netaji Subhas Chandra Bose International Airport. Over the past few years, Kolkata has witnessed significant infrastructure development. Now, with the real estate market in the main city area reaching a saturation point, fresh developments are taking place along the city’s periphery. The development of the metro and improvements in the road connectivity, have given a fillip to these peripheral areas. Business environment for real estate has also seen rapid changes with series of reforms. The issues around the West Bengal Housing Industry Regulatory Authority (WBHIRA), the State’s RERA authority, too have started settling down.
According to Harshavardhan Neotia, Chairman, Ambuja Neotia Group, the real-estate market in Kolkata is more realistically priced as compared to other metro realty markets like Mumbai, Delhi, Bangalore or Hyderabad. Also more corporatized developers are entering the market, thereby improving the transparency of dealing and quality of the offering.” According to a report, home sales in Kolkata have been a mixed bag over the first nine months of 2019. While branded real estate developers have seen steady off take and improvement in sentiment, smaller players and standalone projects are yet to gain any sales momentum. Affordable housing (below ₹50 lakh) continues to be the main draw. I foresee improved real estate growth in the next 3 years.”
CITY’S OFFICE MARKET
Being the only mega agglomeration hub of economic, political and business activities as well as the educational and cultural pivot of Eastern India, Kolkata has held enormous geopolitical importance for decades. Also, more money in the hands of the people because of the boom in the IT and ITeS sector appears to be significant.
Kolkata has seen a vast improvement in office leasing activities during the first three quarters of 2019. Office demand in Q3 was driven by engineering and manufacturing; and IT-BPM sectors with 21% and 17% share, respectively. Flexible workspace occupiers accounted for 13% of the quarterly leasing volumes.
Among the submarkets, Salt Lake contributed to half of the space, while Rajarhat accounted for a 26% share. The first three quarters of 2019 also recorded a significant rise in mid-sized transactions (above 20,000 sqft) compared to the same period in 2018.
Harsh Vardan Patodia, Chairman & Managing, Unimark Group & Founder Heritage Realty Group highlighted that Kolkata being the mainstay of West Bengal and East India, attracts business to set their operations here to reach out to the entire region. “The state has to create an ecosystem of development in terms of investment, social and physical infrastructure, to promote the creation of jobs, which will drive the housing market as well. IT sector is gradually increasing its footprint in the city and co-working segment, local and national brands are catering to the start-ups in the region. The changes may be slow paced, but are steadily making a difference in the Kolkata real estate for the better.”
EMERGENCE OF WAREHOUSING
To enhance its FDI potential, the state has undertaken several initiatives such as single window facility to avail state services, dedicated government departments to monitor and support busi-ness processes, sector-specific policies, incubator and monitoring centers for startups, incen-tives for tech, manufacturing and other sectors etc.
No wonder, among top eight cities, Kolkata has emerged as the fastest growing market in the country in warehousing leasing. As per the report by Knight Frank, Kolkata witnessed highest YoY surge, with 191 per cent in warehousing leasing volume of 4.7 million sqft in 2018. The clusters which saw highest growth are Dankuni and the suburbs, Durgapur Expressway and Old Delhi Road (NH19 [Old NH-2]), National Highway-16 (Old NH-6), Taratala Maheshtala and Madhyamgram Barasat.
STEADFAST RETAIL & HOSPITALITY
As per the recent industry survey, malls vacancy recorded a marginal decline q-o-q to 5.97%. While prominent main streets like Park Street, Chowringhee Road, and Hatibagan contributed extensively to the leasing activity in Q3, few retailers were also keen to explore spaces vacated by other brands in prominent malls like South City and Quest. Negligible mall supply getting add-ed over the last few quarters and very low upcoming supply by 2020, is also likely to affect traction in malls in the coming quarters.
Pradip Chopra, Chairman, PS Group said, “Kolkata being the cultural and intellectual capital of the country with vicinity to Bangladesh and other neighboring countries, there has been a sus-tained leisure and retail market in Kolkata. Malls and hotels are profiting from travelers coming to Kolkata for events, medical tourism, education and special cultural occasions.”
In fact, Park Street, one of the most prominent main streets, recorded rental development of 8% q-o-q, holding its popularity among retailers. Among the shopping center submarkets, South, East, and Rajarhat have recorded rental appreciation of 4-6% q-o-q sponsored by a fast churn in key, quality shopping centers. Rents are likely to see assist development, with proceeded retailer demand for space in those malls in the midst of limited future supply.
Siddharth Pansari, Director, Primarc Projects added, “There has been phenomenal development in Rajarhat. Both the Central and the State Government have ensured it truly lives up to the name ‘Smart City’. Various businesses including real-estate, hospitality, healthcare, education etc. are growing, riding on the scope this smart city has on offer.”
During Q3 2019 new launches grew by 19%. South Kolkata contributed the maximum to new launch addition maximum to new launch addition maximum to new launch addition with 50% share, followed by East Kolkata with a share of 32%. Nearly 54% of the launches during the quarter were in affordable category, significantly up from 34% in the previous quarter. Prices across most micromarkets remained stable or recorded nominal changes resulting in the city’s average price to remain stable at INR 4,375 / sq ft.
Apurva Salarpuria, Owner, Salarpuria Group of Companies offered a perspective, “The Ur-ban Land ceiling act which still prevails in the city poses multiple policy challenges. Developers operate with multiple companies and hence compliance and management bandwidth gets di-verted. Also this has hindered FDi flows into real estate in the city. However, given the inherent advantages of Kolkata being the largest city in the east, I think we have some good times ahead. There is consolidation happening in the industry and we will have fewer but more solid and pro-fessional developer groups in the next few years. Traditional industries like Tea, Jute, and Metals etc. along with a fledging IT industry are the key drivers of the local economy. The city is also emerging as an important education hub for people in the east. Extension of the metro rail and newer roads will improve connectivity and open up newer areas for development in the newer future.”
Moreover, government’s effort to boost the affordable segment has positively impacted the sec-tor in the city. With a good mix of mid-segment project launches, both these segments account-ed for 88% of the total launches recorded in Q3. With the likelihood of more launches in the af-fordable segment and buyer sentiments improving on the back of several benefits being offered by the government to this sector, sales activity may get a boost in the coming quarters.
Arya Sumant, Managing Director, Eden Realty Group was of the view, “There is a good de-mand for the affordable sector but it needs to be supplemented with some perks from the State Government along with registration fees and stamp duty. One window clearance for hous-ing/commercial/ retail projects is an absolute requirement considering the HIRA/RERA compli-ance. It would also be in the much need transparency in the sector and facilitate the promoters to realistically plan the project and its finances. Commencement of metro services in the proposed alignments is another important infrastructure that will give a good impetus to this sector.”
Rishi Jain, Managing Director, Jain Group said, “Kolkata is mainly an end user-driven market. Hence the factors – like the location, quality, and price of the projects continue to be the deciding factors of the city’s growth scenario. Kolkata continues to be one of the safest and steady cities in India in terms of growth and development. The city is known for its mixture of traditional along with modernity and with the advent of time and technology, has been proven to be amongst the best places to stay in the country. Hence, there is growing interest for investment in Kolkata. This is applicable for other East Indian cities like Bhubaneswar, Patna etc”
Abhishek Bhardwaj, Chief Marketing Officer, Shristi Infrastructure Development Corporation Ltd. stated “The city of Kolkata has grown many folds over the years. However, the growth has not been in a planned manner. The challenges include unregulated and unplanned development, violations in planning, waste management issues, environmental challenges, traffic congestion etc. The city’s real estate is slowly getting back on track after a temporary slump. The situation is definitely going to get better in the coming years.”
The cost of living in Kolkata is lower and there is a big gap between rentals of IT offices in Kolka-ta versus a Bangalore or a Hyderabad. This makes the city more attractive than before for IT companies. Also on the residential side, Kolkata is a sizeable market with demand largely driven by end users. Hence it tends to more stable than a Delhi or Mumbai market which is more volatile.
Indeed, favorable demographics, strategic location and improving business environment have driven up foreign investment inflows in West Bengal. International institutional in-vestors like The CPP Investment Board, Mirae Asset of Korea, couple of Japanese as well as Middle East funds are eyeing Kolkata’s real estate market to grab a slice of its retail, IT and logistics growth cycle.
Slowly and steadily, Kolkata is seeing an improvement in commercial and social infra-structure, combined with a stable residential market that predicts year 2020 to be a year of prosperity.