Growth forecast in secondary centres
The Indian property market is showing signs of maturity, and is looking beyond just the four metropolitan centres - Bombay, New Delhi, Calcutta and Madras - for growth.
This conclusion is at the centre of the findings detailed in a report on real estate and property development, prepared by the Industrial and Technical Consultancy Organisation of Tamil Nadu (Itcot).
'In fact, the gradual stabilisation in real estate prices has come about by interest evinced by investors in the smaller cities, such as Nashik, Nagpur, Mysore, Mangalore and Jaipur,' the study said.
Property prices all over the country, which are undergoing technical correction after the unparalleled boom of the early 1990s, are expected to perk up once again, but in a more temperate manner.
'The boom between 1991 and 1994 was, to a great extent, artificial, as it had been triggered off by a sudden demand for space by numerous corporates, largely joint-venture companies, in the wake of the liberalisation measures,' according to Liaquat Ali Baig and M Peethambaran, the authors of the Itcot report.
'Fuelling this was the easy availability of housing finance on more competitive terms, and bank loans up to 2.5 million rupees [about HK$537,000].' The report claims that demand continues to outstrip supply, indicating better times for the real estate industry.
Against the demand of about 100,000 houses per year, the supply has been consistently under 30,000 - less than a third of demand.
The growth in population, pace of urbanisation and the consequent unabated congestion in urban areas are factors that gradually have paved the way for 'the flight of cities horizontally'.
As a result, the peripheries of most of the mini-metros, Class One cities and towns are witnessing development, particularly in infrastructure such as housing stocks, farm houses, residential complexes and residential townships.
'While the metros may still be expanding, it is the satellite towns and township projects which are now acting as speed breakers,' the report says.
The huge demand-supply gap and the easing of credit availability have combined to increase business prospects tremendously, especially considering that housing shortage has been projected to touch 39.1 million units by 2001. This includes 29.8 million in rural areas, and 9.3 million in urban areas.
'There also appears to be no immediate solution in sight,' says the report. 'The housing sector has not enjoyed more than 1.5 per cent of public investment during the last 10 years, and the overall public and private investment in housing as a percentage of total Five-Year Plan investment has been 10 per cent in the Seventh (1987-92) and Eighth (1992-97) Plans.' Thus, the majority depends on family savings, assets liquidation and loans at high rates. Under the circumstances, the goal of providing shelter to every family by 2005 appears to be a tall order, the authors feel.
A housing backlog of 7.57 million units calls for measures to ensure the provision of 16.76 million shelter units for different income groups during the Ninth Plan (1997-2002) - doubling the target of the Eighth Plan.
Even conservatively estimated, the financial requirement for achieving the target during the Ninth Plan is 1.21 billion rupees. This excludes the cost of land and the construction/linking of urban infrastructure services.