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Highways fuel realty boom


Highways fuel realty boom

Last updated: June 17 2012
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  • Highways fuel realty boom

    The national and state highways, the arteries that form the mainstay of our pan-India transport corridors, are increasingly pulling real estate developers towards them.

    What are the factors that is leading to rapid development along these corridors? Let us examine this trend from the perspective of three stakeholders: the state (the regulator and the infrastructure provider), the real estate developer (supplier of developed spaces) and the consumer.

    The State

    The state is tasked with providing the basic infrastructure. However, infrastructure needs significant amounts of money for both development and sustenance. As capital generation with the state is getting exhausted, an alternative revenue source needs to evolve apart from direct revenue (toll tax collections) that would provide both capital and return.

    One solution in this direction is real estate development along the corridors — this has even been recognised in the Report of the Working Group on Central Roads Sector, Ministry of Road Transport and Highways’ 12th Five Year Plan (2012-17) as one such alternative revenue source.

    This has two clear benefits for the state: With road infrastructure development, accessibility improves, which encourages commercial/industrial activity — this over a period of time becomes a self generating and feeding cycle. It helps marketability of these corridors as possible real estate development targets which in turn can create significant revenue for the state entity managing the corridor. As the corridors develop, traffic increase helps improve toll collection and improves return analysis of these projects — this encourages private participation.

    Real Estate developer

    With bigger land parcels drying up in the larger cities, developers are finding it increasingly difficult to deliver larger affordable real estate projects considering that bulk of the demand lies at that price point.

    Developers are finding these corridors increasingly attractive for their larger format development (residential projects in integrated townships) as these corridors generally have incumbent industrial/commercial development, which has inherent residential demand. As accessibility is another cornerstone for these projects, the larger execution hurdle is diminished. Further, development along corridors also supports pricing of the project. This is the reason for the growing trend of developers who are building integrated townships along these arteries.

    THE Consumer

    Accessibility, availability of infrastructure and expectation of price increase would be amongst the key requisites for consumers other than pricing. They would generally find these expectations met in projects developed around these corridors.

    All this is clearly leading to a growing trend of real estate development along several corridors — in and around the National Capital Region these corridors are the National Highways 24 and 58, the Delhi-Jaipur highway wherein large scale real estate development (integrated townships or residential complexes) is being witnessed even 20-25 kilometres from the city.

    However, as this model gains popularity, cautious execution and planning cannot be overemphasised:

    Civic infrastructure development alongwith real estate is a must to ensure steady and sustained improvement in quality of life — power, water and sanitation, availability and frequency of public transport needs to mirror the pace of real estate development.

    Secondly, as private participation gains momentum, it is important that larger projects if committed/ promised need to completed to ensure consensus in adoption. The recent example of cancellation of the Jewar airport and its expected negative impact on the celebrated Yamuna Expressway will affect the confidence of the stakeholders. There are already reports of some real estate developers withdrawing their projects along the expressway and not paying their commitments to the Yamuna Expressway Development Authority leading to cancellation of allotments to them.

    Such events lead to growing reluctance of private sector to undertake/invest in large infrastructure projects that are linked to proposed developments by the state and central governments. This is not desirable considering that we have such a long way to go in developing infrastructure to enable higher growth.

    Highways fuel realty boom
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