Realty price surge inevitable, say builders

Despite the promise of returns from escalation in real estate prices in the tier-II & tier-III cities across the country, investors were re-evaluating real estate as an asset class owing to rising risk profiles, speakers at a seminar here warned.

Rahul Varma, director of Bengal Shristi Infrastructure Development, a public-private joint venture developing integrated townships in tier-II south Bengal towns like Asansol, Durgapur and Ranigunj, said teal estate prices had gone from Rs 1100 per square feet to Rs 2700 per square feet in Durgapur in the last two years and looked likely to touch Rs 3000 per square feet next year.

Despite this trend, developers were targeting actual users as a target category as this was the more sustainable demand category in the long run, said Sumit Dabriwala, managing director of Calcutta Metropolitan Group.

As far as occupancy rates in residential complexes in tier-II cities was concerned, around 70 per cent were actual users, while 30 per cent were possibly investors. Dabriwala admitted that the proportion of investors in a particular project varied according to the marketing strategy of the developer.

Pradeep Sureka of the PS Group, and president of the Confederation of Real Estate Developers' Association, said only a buyer investing in multiple residential units at the same time could be considered an investor, and the proportion of such investors in tier-II real estate projects was miniscule.

Land was cheaper in tier-II and tier-III cities but rising construction costs could push up prices further in coming years, he warned. Rising interest rates and inflationary pressure were perhaps causing investors to re-evaluate real estate as an investment option, Dabriwala explained. With nearly half of India's population expected to live in urban areas by 2045, tier-II cities could see massive growth, Sureka said.

India currently had 12 tier-I cities, 20 tier-II clusters and 83 tier-III cities, said Sushil Mohta of Merlin Group.

(via Business Standard.)