Infrastructure deficit

The key developments that have catapulted Delhi to the top position are the expanding metro network,modernisation of the international airport,road widening projects and dedicated efforts to make the Ring Road,the citys central artery,signal-free. Mumbai has been pushed to the second rank because of its lower infrastructure index.

INADEQUATE INFRASTRUCTURE

Ideally,an areas infrastructure should be developed before the real-estate development begins. However,the reality is that in most cities infrastructure development has not kept pace with urbanisation and population growth.

Sachin Sandhir,country head of RICS India,says,With increased demand and pressure to deliver projects that are affordable,cost of land,which expectedly is lower in undeveloped areas,becomes the deciding factor for the developer. Despite the infrastructure-related limitations in these areas,there is a tendency for the developer to start the project and expect the infrastructure to come up later.

During the last boom,developers neglected the aspect of infrastructure development in a rush to develop projects. This was true for projects within metros as well as in peripheral locations. Because of high demand,such projects were absorbed despite this shortcoming. Buyers soon discovered that both their standard of living and the potential market value of their properties were compromised due to this. After the slowdown,buyers have become more aware of the importance of infrastructure. The highest demand in the ongoing revival phase is for properties that are affordable and offer basic infrastructure such as adequate sewerage,roads and water and electricity supply.

In the past,the problem of infrastructure deficit has been less for projects developed within the limits of large cities,since their municipal corporations have the advantages of sufficient funding and forward planning. However,the outskirts have generally suffered,since the authorities in such locations do not share these advantages, says Ashutosh Limaye,associate director-strategic consulting,Jones Lang Lasalle Meghraj.

According to developers,the existing and proposed infrastructure of the area are the key selling points of a project. Navin Raheja,CMD of Raheja Devlopers,says,Infrastructure includes connectivity,water,sewerage system and development in the vicinity. If all these facilities are available around a project,the chances of it succeeding become many times higher than of a project where infrastructure is non-existent or not up to the mark.

SUBURBAN DELIGHTS

Today,when most of real-estate development takes place on a citys outskirts due to lack of land within,the infrastructure of the new area plays an important part in determining whether it gains buyers favour.

There always remains a perceived disadvantage for those who travel from their home in a satellite town to their workplace in the central city,especially if the necessary degree of road or train linkage has not been created. Also,buying a home in a satellite town can lead to a sense of isolation,and dissatisfaction if the location does not feature the kind of social and entertainment infrastructure that are seen as necessary lifestyle quotients, says Limaye.

Some central city-dwellers may choose to move to satellite towns to enjoy relief from city-related stress and to take advantage of the cheaper property rates. However,the majority of metropolitan inhabitants choose not to relinquish their foothold in the main city. Many satellite towns coming up today are of greater interest to migrant populations rather than to core city inhabitants. It is this population that developers target while selling their projects.

Vijay Jindal,CMD of SVP Group,which is developing housing projects on Delhis outskirts,says,If infrastructure is lacking,a real-estate project will fall apart. As developers we not only focus on the present infrastructure but also on the future infrastructure-related plans of the area. We have also taken initiatives to ensure that infrastructure development takes place on time. Jindal informs that they have formed an association of those developers who are developing housing projects at NH 58,Raj Nagar Extension,near Ghaziabad . The association is in touch with the authorities to ensure that basic infrastructure is in place before home buyers shift into their apartments.

Some developers feel that the practice of constructing first and developing infrastructure later mars a projects market potential. Its existing infrastructure that attracts end users. Therefore before we start marketing a project we ensure that the basic infrastructure is in place, says RK Mittal,CMD of CHD Developers.

THROUGH PRIVATE HANDS

To meet the growing demands of urbanisation,stakeholders within the real estate sector acknowledge that infrastructure needs to be revamped drastically. The government,the driving force behind infrastructure development,can achieve only so much. So far private sector participation in infrastructure has been limited due to the long gestation period of such projects. It is essential that more public-private partnerships are undertaken for infrastructure development. Developers could also create townships that incorporate infrastructure as part of projects, says Sandhir of RICS India.

In order to sell their projects,a few developers are working on their own to develop infrastructure. Mumbai-based Lodha Developer is an example. We have earmarked Rs 800 crore to develop infrastructure in the places where we are developing projects, says Abhisheck Lodha,director of Lodha Group.

STATES CONCERN

According to government officials,state agencies have always been proactive in assisting with infrastructure enablement for large townships that follow certain prescribed norms,including a specified component of affordable housing. However,it is not possible for the government to rush in with support infrastructure whenever the developer of a small project takes advantage of the low land rates in an obscure,under-developed location. A certain existing and potential development density would have to be achieved for such measures to become feasible. As such,developers should assume a larger share of responsibility for the establishment of infrastructure if they aspire for the success for their projects, says a government official.

Limaye suggests that state agencies should follow the model adopted by the Ahmedabad Urban Development Authority (AUDA). This body has implemented large-scale infrastructure reforms that do not necessarily involve huge budgets. The model centres around acquiring a larger tract of land,infrastructurally enabling a significant part of it and returning that component to the owners as developed land that has immediate market value. In return,they retain the remaining part for the development of their own projects, he said.

Another example of good satellite town planning is Pimpri-Chinchwad Municipal Corporation (PCMC) of Pune. This area has emerged as the location of choice for mid- to high-level management staff working in surrounding industries,and various local development concerns such as Pharande Spaces have recognised and focused on its potential. Areas such as Navi Mumbai and Punes PCMC are planned developments that have their own social infrastructure as well as distinct resident profiles and social character.

If satellite townships have been meticulously masterminded by the relevant town planning authorities,they will incorporate their own economic drivers,such as employment opportunities,social infrastructure and lifestyle quotients. Such a combination of factors opens up a new growth area for the real-estate market. Under suitable circumstances,office,retail and residential property will work in tandem to create a symbiotic growth pattern, says Subhankar Mitra,AVP-strategic consulting,Jones Lang LaSalle Meghraj.

Moreover,once such a satellite town is established,it tends to attract various industries specific to the available workforce,further boosting this pattern. The overall effect is one of economic diversification of a possibly congested metro into new directions. This spells good news for the regions real-estate market.

As the demand for developed spaces in metros is high enough to make even hastily established projects successful,home buyers overlook whether proper infrastructure is in place. But doing so creates a lot of problems for them once they start living in the area. They,therefore,need to check the status of infrastructure before investing in apartments in suburban locations. l

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