Ahmedabad: Dharmesh Chavda, a senior executive with a private firm in Ahmedabad, had set aside Rs25 lakh to buy a house in the city. He shortlisted a few flats in the newly developed western Ahmedabad in December but decided to wait for the karmurta, or inauspicious period, to get over to register the deal. When he went back to the promoter of the property after 15 January, he was in for a rude shock. The price of the flat had gone up by 10%.
“My builder told me that the prices have gone up after Narendra Modi has come back to power,” he said.
According to some real estate developers in Ahmedabad, stability and the pro-development image of the Bharatiya Janata Party government, led by Modi, have acted as a catalyst for the rise in real estate prices.
“Many companies that bought plots of land in and around Ahmedabad would now start work. This has improved the sentiment of the real estate market,” said N.K. Patel, president, Federation of Residential and Engineers and Developers Association of Gujarat.
There is also a surge in enquiries from corporations seeking property for their offices and non-resident Indians looking at buying land at the newly developed areas of the city, particularly the SG Highway. On the western side of the city, the SG Highway is emerging as Ahmedabad’s new development hub, housing a large number of commercial establishments, malls, multiplexes and office complexes.
A real estate broker, who did not want to be named, said the Modi effect can be gauged from the spurt in enquiries from buyers. “I had an enquiry from a firm in Delhi to buy 100,000 sq. ft land on 23 December, but as soon as the state assembly results were announced on 25 December, the firm called up again and raised its requirement to 500,000 sq. ft,” the broker said.
Property prices on the city’s outskirts have also been rising. The price of land in Chattral and Kalol-Mehsana belt north of Ahmedabad has gone up three times in the last six months. Land that was selling at Rs5-6 lakh per bigha (about 25,000 sq. ft) now costs Rs15-18 lakh.
But there are some who feel the hype around Modi’s return is too much and the bubble may burst. “Gujarat real estate developers are expecting miracles from Modi,” said Shrenik Shah, chief executive, commercial, at Space Management Ltd, a real estate consultancy firm in Ahmedabad.
He believes the rise in property prices is not in tune with the growth of the Indian economy. “We are witnessing tremendous amount of speculative froth. In the short term, there could be demand, but I feel this is because of buoyancy in the stock market. People are making money by subscribing to initial public floats but once the stock market starts falling, everything would come apart,” he said.
This prescient thought was echoed, albeit in a different way, by Jayant Ganatra, president of the Surat Builders Association. “With the primary market booming, many investors prefer to invest in stocks to real estates. When the market corrects, the money would flow back into real estate,” he said. “This, coupled with development projects that the Modi government has promised to usher in, could well decide the fate of land prices in the state.”