Where to invest in Real Estate?
While the prices are
falling, the property in metros is still expensive. The good news is
that small towns and cities are emerging as complementary investment
destinations. Smaller cities and large towns directly connected to tier
1 and 2 cities are becoming hubs because of the increased economic
activity. Cities like Nagpur, Ahmedabad, Chandigarh, Jaipur and Coimbatore,
which were earlier considered attractive because of their proximity to
large cities and metros, are today seen as hubs themselves.
Affordability
is one of the most important parameters (see Affordability in Smaller
Cities). However, continuing to rely solely on cost savings will not be
sufficient to ensure long-term growth. Contrary to perceptions, our
research indicates that the level of risk in some smaller cities is no
different from that in the metros. For example, Chandigarh, Kochi and Nagpur have levels of real estate transparency similar to those in bigger cities, says Puri.
While
smaller cities still account for a relatively minor proportion of real
estate activity (21% of modern offices and 34% of shopping malls), the
potential of these tertiary markets is evident because of 41% of the
country's wealth.
Also, given the government's renewed push to speed up infrastructure projects, many new avenues will be opened just because of locational advantages, and an early mover at the right location will make gains over the next threefour years, adds Sahni.
Checklist: New Markets Vs Established Markets | ||
Parameters | Established Markets | Smaller Cities |
First-mover advantage | Not necessary | Critical |
Location within municipality limits | Critical | Not necessary |
Deal size | Medium to large (Rs 25 lakh or more) | Small (Rs 5-6 lakh or more) |
Developer commitment | Preferred | Strongly preferred |
Developer track record | Important | Critical |
|