Originally published in the Times of India on 14th November, 2011
Even as global economic slowdown and uncertainty in financial markets have battered the real estate industry countrywide, forcing a price correction in several markets, properties in Kolkata and Chennai bucked the trend with steady demand in affordable and mid-segment housing.
According to a study by global realty player Knight Frank, the residential sector in Kolkata is least affected by the economic slowdown among tier-I cities. Only Chennai fares close to Kolkata. In the other metros, the market has either shrunk or remained stagnant, leading to a supply glut.
The reason why Kolkata and Chennai haven’t been hit by the downturn is because both markets are driven by end users and not speculative investors. Builders, too, have been realistic in these two markets and not gone the whole hog to create a situation where supply is excess.
It isn’t just the prudence of builders that helped the two markets. Elections in West Bengal and Tamil Nadu earlier this year played a crucial role in constricting supply. The political flux that preceded and followed the election grounded construction activity for five to six months. The resultant delay in deliveries meant the supply crunch persisted, unlike other cities where a spate of new projects in a depressed market situation led to oversupply. Building material supplies had stopped for four to five months as a political realignment happened after the elections.
In Kolkata, fewer projects were launched in the first six months of 2011 compared to the pervious year, most of them located in the suburban residential pocket Rajarhat to the city’s northeast.
Nearly 28,000 residential units are under construction in Kolkata, of which nearly 7,500 units will be ready for possession by the end of this year. A bulk of supply is coming up in north Kolkatas Rajarhat,BT Road and Jessore Road and south Kolkata locations like Behala,Tollygunge and Maheshtala.
The spur in demand in the last two quarters has led to appreciation of project value by 11-12 % against the corresponding period last year. South central locations like Ballygunge and Alipore,where projects are priced between Rs 10,000/sq ft to Rs 15,000/sq ft,has witnessed an appreciation of 10-11 %.To the east,projects along the EM Bypass that are selling for Rs 5,000-8,000 have seen an appreciation of 11-12 %.Prices in suburban residential locations like Rajarhat,Behala,Garia and Maheshtala range Rs 2,000-4,000 and have gone up by 20%.