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Knight Frank: Prices in Madh-Marve, Mumbai, expected to appreciate the most

Eleven locations across six cities that are expected to show the most price appreciation in about five years

Global real estate consultancy firm, Knight Frank, in its recent report, Residential Investment Advisory Report 2016, said that a slowdown is being witnessed in all types of residential properties. Homebuyer interest has not picked up, due to stalled projects, unaffordable prices, delays in completion of infrastructure projects and low credibility of developers.

The report also indicates 11 residential investment locations in the top six cities (Mumbai, National Capital Region or NCR, Bengaluru, Pune, Chennai and Hyderabad) that it expects to provide the maximum price appreciation in the coming five years. Madh-Marve and Ulwe (both in Mumbai) are the top locations.

These residential destinations have been chosen from among all the urban centres in the country. During the multi-stage selection, parameters were chosen to capture their cause and effect relationship with the growth of residential development in the city. Population base, extent of business activity and thrust on infrastructure development are critical factors affecting the housing market. Here is a look at what drives the residential market in these cities.

Mumbai Metropolitan Region (MMR): The long commute to work and back inevitable for a large section of the workforce in MMR has a hand in shaping the real estate market. This is also reflected in the high price gradient of residential properties in the region, which vary from 3,000 per sq. ft to 1 lakh per sq. ft.

NCR: Residential demand here is driven primarily by job creation, supporting infrastructure and fast connectivity. The vast price range bears testament to the pull factor of these zones, which is reflected in the high price gradient of NCR. Existing and proposed infrastructure, employment opportunities, distance and connectivity from employment centres, affordability and availability of residential options, and social infrastructure are all important factors.

Bengaluru: Of late, the city has witnessed substantial interest from the e-commerce sector as well, translating into significant potential for its real estate. However, the city’s primary economic driver remains the information technology (IT)/IT-enabled services sector.

Chennai: The availability of a vast talent pool, favourable state government policies and an improvement in the overall economic landscape will ensure a sustained growth in the IT/ITeS and other services sectors in the city. These are likely to be the largest consumers of office space and are also expected to be the biggest drivers of residential real estate market for an investment horizon of five years.

Hyderabad: Formation of Telangana, coupled with the fact that Hyderabad is the most affordable residential market among the country’s top seven cities, makes a convincing case for a significant and sustained increase in market traction over a five-year horizon. However, market traction on the ground is not as encouraging. The downward trajectory of the demand curve has not changed since 2012, but is showing signs of bottoming out, and could be on the verge of turning the corner.

Pune: The residential market demand here will be driven by two factors: employment generation and infrastructure development. Historically, the manufacturing sector has been the largest contributor to employment generation. But over the past 15 years, the IT/ITeS sector has emerged as the largest employer, and consequently, emerging as the biggest driver of the city’s real estate market.

Edited excerpts from Knight Frank report, Residential Investment Advisory Report 2016.

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