Realty developers avoid tier II,III cities,prefer Delhi

With price corrections and softening of interest rates setting in,real-estate developers are keen on investing in Tier I cities,or metros such as Delhi,Mumbai and Bangalore.

With price corrections and softening of interest rates setting in,real-estate developers are keen on investing in Tier I cities,or metros such as Delhi,Mumbai and Bangalore. Almost all realty developers are focusing back on Tier I cities as they believe that as of now,expanding to medium and small cities is on shaky ground. Some investors,on the other hand,are wary about working in Tier II and Tier III markets in the short term. They believe fundamentals in these markets with regards to economic activity and consumer base will take some time to mature, a Ficci-Ernst amp; Young report said.

According to the report, Delhi continues to be the preferred choice of developers and investors in the real-estate sector,with Mumbai a close second. Some key factors that have helped Delhi retain the number one rank are the fast-paced improvements in physical infrastructure such as the functional metro railway,modernisation of the international airport,road widening projects and dedicated efforts to make the ring roads signal free. Other factors are the emerging flyovers,underpasses,pedestrian walkways,high capacity buses,hotels and townships being developed on account of the forthcoming Commonwealth Games.

Mumbai has come to second position due to a slow pace of infrastructure development,pushing the city down by a notch, said the Eamp;Y report.

Hit by recession last year in October,the realty sector seems to be back on the path of recovery. After a rough phase that lasted for over a year,the real estate industry is on the path of recovery. Especially,the residential real estate segment has witnessed a revival in demand,primarily due to improved affordability, the report said.

High taxes and transaction costs continue to remain high across the country where it needs rationalisation. In India too,stamp duties need to be consolidated with GST with an appropriate credit mechanism to provide an impetus to the sector, said Ganesh Raj,Partner amp; National Leader,Real Estate Practice,Ernst amp; Young.

Green shoots seem to be visible and it is encouraging to note that a majority of the stakeholders are optimistic and believe that the sector is on the threshold to recovery. The residential segment appears to have emerged as the most attractive and resilient asset class, Raj added.

Commenting on the report,Amit Mitra,secretary general,FICCI said,8221;These emerging concepts are today giving a whole new meaning and dimension to real estate development in the country. It presents the opportunities in each of these concepts and their respective potentials set to transform the cityscapes of most of our cities.8221;

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Most developers are today going back to the age old philosophy that real estate is a local practice and are focusing their energies back on their home markets. They feel that markets are primarily driven by end-users. In the Mumbai market,the high-end residential segment is slowly experiencing short-term investors creeping. This was not felt as strongly across other regions, they said.

As far as a regulatory body for real estate is concerned,developers were divided. Some of them said that a real estate regulator should be established,similar to those that regulation of the stock market and the telecom industry,as long as it created a platform for fair practice and helped in standardising rules and regulations across states. Whereas,the others were apprehensive that it could well turn out to be another bureaucratic hurdle, the report said.