Real Estate Chandigarh

Residential and Commercial properties in Chandigarh..

26 February 2007

Information technology ventures rush to smaller cities

Aim to cash in on first mover advantage

Tier-III cities are set to encore the bull run observed in real estate sector in metros and other cities as the real estate prices are touching a plateau in metros and tier-II cities.

These tier-III cities will see lot of investment as real estate developers, IT/ITES firms and new age retailers vying to cash in on the first mover advantage in these markets.

They are banking on the factors like low real estate costs, vast land availability, a large talent pool and rising quality of life for growth, says a report 'Emerging Growth Centres' by global property consultancy Knight Frank.

The report says that the growth of Indian rich and consuming class coupled with falling rates and other fiscal incentives on home loans has increased the risk appetite of the average Indian consumer.

This has further fuelled by increase in the size of 25-55 age group of earning population and increase in the size of urban population.

Increased liquidity in the real estate sector through there global real estate funds and private equity funds is transforming the realty scene in India, it says.

It lists cities like Chandigarh, Ludhiana, Lucknow, Jaipur, Ahmedabad, Goa, Vishakhapatnam, Coimbatore, Baroda, Guwahati, Bhubaneswar, Surat, Nagpur, Indore, Mysore, Vijaywada, Mangalore are expected to benefit from the new interest from the sunrise sectors.

Knight Frank India chairman Pranay Vakil believes that wherever the IT/ITES find cost-advantage and availability of English-speaking manpower, they would move to those places.

"To the extent the government gives support to the industry and to the extent the companies get English speaking population, the IT firms gravitate there," Vakil says.

Cities are primarily riding the bandwagon of real estate and retail growth based on the expansion of IT/ITES firms. For instance, Chandigarh is attracting many IT/ITES firms to its Chandigarh Technology Park (CTP).

Also a approved SEZ, CTP has attracted biggies like Infosys, Wipro and IBM.

DLF Group has developed DLF Infocity to provide spaces for the tech firms.

Though Real Estate Chandigarh does not have much to offer in terms of residential development, the report says that the peripheral areas including Panchkula, Mohali, Zirakpur, Dera Bassi and Nada Sahib are seeing a lot of development.

Ahmedabad is expected to attract a lot of IT/ITES firms since the cost of their operations are 40-45 per cent lower compared to the tier-I cities of the country.

With tax incentives, concessions and a FAR of 2.25, the city is expected to attract lot of IT/ITES firms.

Bhubaneswar is another destination which has been spreading its roots in IT. IT majors Infosys and Satyam are contemplating their expansion plans. Apart from Infocity-I, DLF is coming up with IT Park in Chandaka Industrial Estate. Genpact has also announced its plans to set up BPO SEZ in Mancheswar Industrial Estate. A bio-tech park is also on the anvil.

Vakil says though all cities don't have the propensity to consume, as the IT sector moves in, it would gives enormous disposable income in the hands of aspirational young consumers.

This would drive the growth in retail and real estate sectors, he says.

Ludhiana of Punjab is fast emerging as the retail hub.

The city is witnessing the development of 11 malls in different locations which are going to be operational in 2-3 years.

Large format malls like 4,71,000 sq feet Westend Mall are also underway in Ferozepur Road.

Pakhowal Road is seeing a lot of residential projects turning into retail and office destinations.

The report states that Lucknow would emerge as an ideal destination for integrated townships.

Big developers like Parsvnath, Halwasia, Rohtas, Eldeco and so on have started projects in the city.

KPMG executive director Jai Mavani believes that realty development is happening in the cities and areas which are near to proposed SEZs and industrial clusters.

For instance, Nagpur is seeing a lot of real estate development since it is touted as the logistics hub in the country.

"Developers will show exuberance in tier-II and tier-III cities. But if oversupply of real estate happens and if the macro-economic indicators do not keep pace, it will kill the market," Mavani says.

Underlining the trend, 'Urbanisation Bonus' report by Goldman Sachs also talked about population shift to townships and provinces near the industrial clusters.


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