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Kerala Another Bright Spot in India Real Estate

Dhruva Jyoti Chowdhury, Kolkata, India

Riveting the attention of both property developers and homebuyers recently, is

Kochi, the nerve centre of the southern state of Kerala in india.

Demand for large-scale apartment complexes is up and it exceeds supply now.

Apartment prices are up by Rs. 100 per sq. ft. while some estimate 20 per cent jump in
the last one-year alone. Similarly, land prices zoomed in places like Kakkanad from Rs.
30,000 – Rs. 80,000 to Rs. 3 lakhs. “The market is predominantly end user driven and not
speculative and that is one reason for a consistent growth in the demand for residential
property”, says Jacob Chandy, director, Southern Investments.

There has been a perceptible shift in trend among homebuyers from the days of
compelling necessity, to buying homes for self-occupation, to the analysis of multiple
options for viable avenue for investment. The Kerala Builders Forum boasts of 28
builders who have agreed to follow a common code of ethics. Property buyers are not
unduly worried over the new entrants to the market as they feel the demand is also
equally on the growth path.

In a swift move to support the sector, the government has been quick to reduce the
approval time for building plans from 7 months to just 2 months. This has been widely
welcomed by the property developers. The state government is marshalling efforts to
support the requisite infrastructure needed for the city.

Investment is trickling down from the traditional tourism and health related spa to
commencement of smart city, container transshipment terminal, fashion city and retailing.
What is more, entertainment sector is opening up in a big way.
The home loan market in and around Kochi has been estimated at Rs. 50 crore plus every
month with the market dominated by ICICI Bank followed by HDFC, State Bank of
Travancore and others.

The Greater Cochin Development Authority (GCDA) has sold land and generated Rs.
350 crore and with margin money plans to raise additional resources from the lending
institutions to fund infrastructure development in and around the city. Incidentally water
supply project has already been taken care of by the Japanese management team. On the
flip is the exorbitant stamp duty that is eluding the policy makers.

The demand for housing has been quite strong if the number of new entrants to the sector
and the projects under implementation are any indication. This has convinced developers
like Bangalore based Puravankara, Sobha and Brigade, Delhi based DLF and Dubai
based Emaar group to join the bandwagon. “The confidence level is high and the entry of
outside builders will bring in more quality and organised level of activity to the market
eventually benefiting the end users”, feels Gerald Pavamani, consultant, marketing to
Heavenly Homes.

Capital values for apartments in the city areas range from Rs. 1,500 to Rs. 2,000 per sq.
ft. and in areas like Marine Drive it touched Rs. 2,800 - Rs. 3,000 per sq. ft., whereas in
suburbs like Kakkanad it ranges from Rs. 1,300 to Rs. 1,500 per sq. ft. On the lower side,
budget apartments are available from Rs. 800 to Rs. 900 per sq. ft.

The entry of IT majors like Wipro and TCS has given a virtual boost to the demand for
housing. Wipro is talking about employing a 5,000 workforce in the next 3-4 years. Even
if 25 per cent accommodation is taken into account, 300 projects are needed in just 2-3
years for which there is no adequate supply or even a contingency plan. Additionally 5-6
IT companies are planning to make a beeline to the city now. “Rental market is expected
to get a boost and investment in residential property will become a viable option shortly”,
predicts G.S. Venugopal, managing director, Gokulam Engineers India Pvt. Ltd. This is
one reason for the entry of new players to the market. Even landowners are keen to enter
into joint venture development with established developers for a larger slice of the pie.

Yet another reason for the sudden spurt in demand is the returning NRIs from places like
UAE where steep rental levels locally have compelled families to return to India. The
migration of medical personnel has created a new wave of NRI demand for Kochi from
hitherto unheard of markets like London and Russia. The NRI demand has also pushed
the requirement for high-end market in the price range of Rs. 20 – Rs. 40 lakh.
A significant feature is that people are looking for health related amenities in apartment
projects where the maintenance cost is competitive and easy to manage, say realtors.
Commercial Property Mart:

The commercial property mart is yet to pick up momentum though Info Park is a major
complex and set to change the skyline of Kochi. A number of unanswered questions still
remain in smart city, according to market sources.

Retailing is on the upswing and Aerens is launching a gold souk in Vytilla. A wedding
souk is being planned on the main arterial Marine Drive where capital value is Rs. 8,000
per sq. ft. It is said that a number of jewelers have already invested in the units. With the
proposed entry of Lulu centre and KM Trading in Dubai, malls are the next in store to
lure shoppers. Not to be left behind in the race, entertainment sector too is poised for a
turnaround with Le Meridien's discotheque and a number of new players devising
projects and appropriate time to enter the market. “With investor sentiment scaling new
high, Kochi is undoubtedly poised for all-round development”, feels Col John K
Manavalan (Retd), director, RDS Project Ltd. confidently.

Kochi Residential Property Prices

Capital value (Rs per sq
Panampally nagar 1400 - 1800
Kadavanthara 1400 - 1800
Vytilla 1400 - 1800
Marine Drive 2500 - 3000
Vaduthala 1600
Off MG Road Rs 1800
Tripunithura 1200 - 1500
Kakkanad 1200 - 1500
Kalur, Palarivattom,
1100 - 1500
Thevara 1500 - 1800