The Land of Promise

Gujarat’s real-estate market looks promising with the infrastructure development that is happening in and around the state. Sachin Sandhir, Global Managing Director – Emerging Business, RICS gives an overview.   Gujarat is emerging as an attractive real-estate destination for prospective home buyers and investors. The state took everyone by surprise, when the real-estate market here recovered quickly after demonetisation by December, 2016. This was not the case with other states. There are a number of factors that make Gujarat a lucrative real-estate market for buyers and developers. The state is an investor’s paradise, attracting one of the highest amounts of FDI in the country. Gujarat is home to textile, engineering, chemical and automobile industries, which generate employment opportunities. There is also a tendency among Gujaratis to invest in buying a home rather than renting it out, spurring the growth of residential real-estate market.The other factors that have contributed to Gujarat’s real-estate growth are improved infrastructure and connectivity. The key real-estate markets in Gujarat are Ahmedabad, Surat, Vadodara and Jamnagar. The most promising market is of course Ahmedabad, which is also the state’s business hub. While Gujarat’s real-estate market has grown steadily, some developers have complained of a delay in securing approvals from the state government. Any delay in obtaining approvals affects project completion timeline and escalates cost for developers. This particularly hurts smaller developers who work on one project at a time and have limited financial resources. Streamlining approvals will help developers and strengthen the real-estate market.   The changing trends Gujarat’s key cities have seen a change in their skyline over time. Residential development in Ahmedabad has moved from individual bungalows to apartments and townships. Shortage of land and a steep rise in land prices in key cities of Gujarat has made it impossible to grow horizontally. In recent past, several real-estate developers in Ahmedabad have launched residential projects over 20 storeys tall. Surat is also seeing a trend of high rises while apartments in Vadodara are mostly mid-rise. The other interesting trend is a rise in demand for luxury homes. While Ahmedabad’s real-estate market is smaller than other metros, it has seen an increase in luxury home prices, indicating a strong demand for luxury homes. On the other hand, Gujarat leads in building affordable homes under Pradhan Mantri Awas Yojana and is ahead of Rajasthan and Karnataka. Private sector developers in Gujarat are also focusing on the affordable housing segment. Developers such as Godrej Properties, Adani Township & Real-estate and Tata Housing have all launched affordable housing projects in Ahmedabad. In the Union Budget of 2017, the government granted infrastructure status to affordable housing sector. With infrastructure status, developers will have access to equity and debt funding at low cost. It will also help in attracting foreign investment.This should encourage the development of more affordable housing projects in Gujarat.   The potential of Gujarat realty market There is no doubt that Gujarat’s favourable FDI policies have helped the growth of state’s real-estate sector. With REITs coming in, we could see more interest from developers in developing commercial real-estate space in the key cities of Gujarat. The state is already building India’s first smart city called the Gujarat International Finance Tech (GIFT)-City, located between Ahmedabad and Gandhinagar. It is India’s first international financial services centre which will act as a financial hub for banks, brokerage houses etc. and will compete with Mumbai, the financial capital of India. Apart from GIFT, seven cities in Gujarat-Gandhinagar, Ahmedabad, Surat, Rajkot, Vadodara, Bhavnagar and Junagadh have been included in the list of over 100 smart cities to be developed under the Central government’s Smart Cities Mission. The state has the highest number of smart cities along with Kerala, Rajasthan and Karnataka. Gujarat is clearly emerging as a leader in the development of smart cities.  GIFT city will generate employment opportunities and lead to a demand for residential real-estate. The city’s connectivity is expected to improve when the Ahmedabad metro link becomes operational. This will further improve the real-estate value of the city. Ahmedabad also has many HNIs and the city is seeing development of many premium areas to cater to this segment. Apart from Ahmedabad, Vadodara and Surat-major industrial centres in the state are also emerging as key real-estate markets.   RERA in Gujarat The implementation of RERA in Gujarat has raised some eyebrows. The state government has diluted an important provision in the Act related to punishment of real-estate developers for non-compliance. The Act states that the promoter of a real-estate project can face up to three years of imprisonment or penalty of up to 10% of the project cost or both for non-compliance. Gujarat government has however issued a notification, which has a provision that says the promoter of a project can escape jail term if he is willing to pay “5% of the estimated cost of the real-estate project”.