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Business News/ Opinion / Online Views/  More to a home, but at a premium

More to a home, but at a premium

Townships aren’t always cheap. Apartments in such projects are typically priced higher

Jayachandran/Mint (Jayachandran/Mint)Premium

Gone are the days when a house meant just that: a simple living space with basic amenities. Today, “townships" are the buzzword, among buyers as well as developers. While amenities and a secure environment are the hallmarks of a township project, you must also consider the location, size of the project and, of course, the cost. Apartments in townships are typically priced higher than those in stand-alone projects. What more to mull over before you take the final call? Read on.

The efficacy of any real estate project largely depends upon the three As: area (size), amenities and accessibility. Townships deliver considerably on the first two. Given the size and scale of townships, they usually do not shy away from providing social infrastructure. Given the various central and state government regulations, townships need to provide a gamut of facilities such as schools, hospitals, and even recreational facilities. Most essential in this regard is that you check the track record of the developer and whether it has delivered the promised social infrastructure in other projects too.

The scope of infrastructure offered depends on the size of the project. While smaller townships may house basic facilities such as schools and medical clinics, larger ones also offer advanced facilities such as a state-of-the-art hospital, higher educational institutes, exclusive police posts, and more.

The third “A"—accessibility—needs careful weighing before you zero in on your choice of project. Such projects are usually located on the peripheries or suburbs, given the scarcity of land in core city areas. Accessibility also has a bearing on the development of infrastructure, especially civic infrastructure (water supply, sewerage systems and electricity) and physical infrastructure (road network and transport facilities). Accessibility issues can also stunt demand, limiting it to a bunch of investors, who may choose to keep the flat unoccupied and the township can end becoming a “ghost town". Legal tangles or an economic downturn could also stall work on the project.

If you want to avoid a ghost town, check for the development of commercial office spaces and retail spaces in the vicinity. Besides making concepts such as “walk-to-work" a reality, such development greatly serves to enhance end-user demand for townships. Such projects are usually a mix of residential, commercial and retail developments, which help builders minimize risks and also offer investors a good bet on their investment.

Now that you’ve taken note of the external frills, here’s a look at what you get inside. Most township projects offer integrated private security services, which include assistance during emergencies (you can alert them via single-switch systems in your flat). Other facilities are power back-up for elevators, dedicated sewage treatment plants, solar panels offering hot water in taps, exclusive parking spaces, and more. Some premium projects also offer personalized concierge and housekeeping services. Though the above list looks promising, you must always check availability and state of the amenities in other projects built by the developer.

Though delays are commonplace in the real estate sector, they have a more severe impact in case of township projects. If you are an early occupant, construction work in the adjoining parts may prove to be a big disturbance and a health hazard. Another point to note is that phased delivery of township projects delays possession significantly. You could also have to adjust to situations where access to amenities such as swimming pools and jogging tracks are restricted, as construction work continues in another phase of the project.

Last but not the least, you must bear in mind that though the above amenities are attractive, they also pinch your pocket hard. Yes, there is a cost attached and it is multi-dimensional, involving all parties: developers, buyers and the government (or regulatory authority). Land is scarce and acquisition even harder for developers, especially given the mandatory size norms that projects must adhere to for obtaining the “township" tag. A long list of regulatory clearances and legal due diligence also act as potential roadblocks. Moreover, for different types of township projects, developers have to provide a specified set of amenities, which may escalate costs, especially in the outskirts, which are low on infrastructure support and the amenities have to be set up from scratch.

What this means is that townships aren’t always cheap. Apartments in such projects are, in fact, typically priced higher than those in stand-alone projects within the same micro market. Other charges, such as maintenance and club house fees, may also be higher compared with stand-alone projects.

The decision clearly lies on your purchase potential. So are you headed down (to) town?

Binaifer Jehani is director, Crisil Research.

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Published: 01 Sep 2014, 05:56 PM IST
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