It’s really the ‘real’ty factor!

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It’s really the ‘real’ty factor!
Anuj Punj, MD, Jones Lang Lasalle Meghraj draws a parallel...

For many even in the recent past, Maharashtra was all about another Mumbai. But, times have changed and despite the fact that another Mumbai is far from being, there’re alternatives... precious alternatives!!!

In India, as in other parts of the world, the vigour of the economy is mirrored in the demand for and price levels of real estate. Reserve bank of India has estimated that the real estate sector represents approximately 5% of GDP, being the second largest employer in the nation. Real estate can thus provide a glimpse into the marketability of a state.

To my reckoning, Maharashtra represents in this regard a unique market model – it is an amalgam of high business and, as a result, intense residential and commercial real estate activity. In fact, its operative trends are so firmly entrenched that we have not witnessed any significant slackening in the overall activity despite the economic pressures affecting many other Indian states. However, there is no denying that there has been an impact. The cities of Mumbai, Pune and Nasik would serve as suitable illustrators for the current scenario.

In Mumbai, affordable housing has become an elusive dream. Sky-rocketing real estate rate appreciation brought on by the continuing demand-supply mismatch have boosted residential home prices almost completely out of reach of the common man. However, Navi Mumbai – the new growth sector – offers options both for those seeking affordable homes and those who seek lucrative investment opportunities in the state. Pune benefitted for a considerable period from Mumbai’s unrealistic property price hikes. The recession in the US market has weakened the commercial and residential markets. The slump in the stock market has caused investors to start moving out. Second, home buyers are keeping away and end users are cautious in their buying activities, awaiting price corrections. Despite the generalised slowdown, developers continue to have holding capacity though.

Nasik, where the residential market has grown at a rather leisurely pace until 2006, suddenly began showing significant annual appreciation rates from the beginning of last year. Nasik had begun emerging as a realistic alternative destination for buyers who were discouraged by Mumbai and Pune’s high rates. It offered low entry costs and, at the same time, reasonably attractive appreciation rates. Another reason was the increasing presence of the IT/ITeS sector there. In recent times, Nasik has been witnessing rather healthy appreciation rates; because of its relatively late entry into the real estate stakes, it was insulated from the regressive dynamics currently prevalent in the rest of Maharashtra.

Despite the slowdown, Maharashtra remains one of the foremost contenders in the real estate sweepstakes. All sectors – residential, commercial, retail, industrial & hospitality – continue to show an upward curve in the long term.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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