New Delhi: Property values in Kolkata have risen at the fastest pace among Indian metros since 2007, according to the National Housing Bank’s (NHB) Residex—an index of property prices.
Property values in Kolkata rose by an average of 16.8% while those in Bangalore fell by 15.6% in the period. Fewer speculative deals and lower base prices saw the eastern Indian metropolis outpace hotter property markets such as Mumbai and Delhi, where property values rose at a comparatively sedate average of 7.5% and 7.3%, respectively.
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The NHB residex, which was launched in July 2007, measures property prices in six-monthly intervals. The index currently captures data submitted by a variety of sources, including housing finance companies and real estate agents, for 15 cities, with plans to widen the index to 63 so-called tier I cities and state capitals in the future.
Of the 15 cities, only the West Bengal capital Kolkata, Faridabad in the national capital region, and Bhopal in Madhya Pradesh saw average double-digit growth in this period.
NHB officials said one of the reasons for Kolkata’s numbers was people investing the proceeds of the Sixth Pay Commission payouts last year. Cities such as Jaipur, on the other hand, saw declines because of massive oversupply, said Raj Pal, a principal adviser with NHB.
Jaipur saw prices rise 19% (over 2007 levels) in the January-June 2008 reporting period. Prices fell 3.4% in the six months between July and December and declined another 38.3% in the first six months of January.
Analysts, however, said high prices in some of the smaller cities could be a combination of low starting prices and low supply leading to higher price growth.
“The base is very low, so when prices in these cities move even slightly it seems like a big increase. While in Mumbai even if prices shoot up, the increase is not so much because of the high base,” said Anshuman Magazine, managing director of real estate consultant CB Richard Ellis.
“Also, in a lot of smaller cities it is difficult to get land because of zoning issues. The cost of land is very high in, say, an area such as Benares, where infrastructure is limited and there are zoning issues. It is very difficult to buy clearly titled land in smaller cities which restricts the supply of land, therefore pushing up prices,” Magazine said.
Others said that the majority of the real estate boom was restricted to the main metros.
“The growth went to secondary and tertiary markets after a while.” said Aditi Vijayakar, executive director, residential, for consultancy Cushman and Wakefield. Developers such as DLF Ltd, Parsvnath Developers Ltd and Omaxe Ltd went into Kolkata and offered housing after launching projects in the main metros, Vijayakar said.
“So, basically tier II or III cities have been late in the real estate cycle. Prices after June have started to decline in places such as Kolkata.
“Also, there is a lot more speculation in mature markets such as Delhi, Mumbai and Bangalore. Chennai and Kolkata are more conservative markets. Chennai has smaller developments and high rises are coming up only in suburbs of the city. The market is largely dependent on people working in the IT/ITES sectors.
Photo by Indranil Bhoumik / Mint
Graphics by Yogesh Kumar / Mint