Where should you invest

Let us now turn to a city-wise survey of residential areas that offer good investment potential even in todays bleak market scenario. While other areas in these cities are headed for correction,these locations will hold their own and might even offer positive returns.

MUMBAI

Mumbai witnessed some of the highest prices in the residential market till the beginning of this year. Clearly,those prices were not sustainable since the number of buyers for super-luxury houses is shrinking. Central Mumbai (specifically Lower Parel and Worli) witnessed the highest price escalation. The slowdown has affected these areas.

The current slowdown has curtailed demand from investors. Most of the demand today comes from end-users. In Mumbai,there is no dearth of those desperate to buy affordable housing. Three areas of Mumbai offer such housing. These areas are likely to sustain their prices,while others are likely to witness a correction.

Vasai-Virar sub-region. The extended western suburbs are well-known for budget housing. The key economic drivers in this region are MP SEZ by DHL,Biotech SEZ and IT SEZ by Mahindra. Connectivity to this area is likely to improve due to the introduction of additional suburban trains from next year. Prices range from Rs 2,500-3500 per sq ft.

Area adjoining Panvel. This region is benefiting significantly from infrastructure enhancements such as the upcoming airport,the Trans-Harbour Link,a railway terminus,and the mono rail. Mega SEZs by Reliance and others are also expected to have a positive impact,as is the expansion of JNPT. Many developers have already initiated large township projects in this region. Prices range from Rs 3,000-3,800 per sq ft.

Bandra-Khar area. Those hunting for prime properties focus on this area. Its connectivity is expected to improve due to the Bandra-Worli sea-link,the proposed Metro Line 2,and the upcoming Santacruz-Chembur Link road.

This region has an elite profile due to the availability of quality infrastructure: shopping,healthcare,education and recreation facilities. Developers are working on a number of redevelopment schemes in this area. Prices range from Rs 18,000-25,000 per sq ft.

DELHI

Currently,Delhis suburban residential market is witnessing a definite slowdown. Construction on several new projects has come to a halt,and rates of flats that are ready-for-possession have stabilised. Even within Delhi rates are currently stable. Some areas,however,hold better prospects for appreciation over the medium- to long-term.

Gurgaon-Dwarka road. Areas around the 150-metre road that will eventually connect Gurgaon to Dwarka specifically,Sectors 103 to 111 have significant growth potential. As the area develops,it could offer a 5-7 per cent annual appreciation even in the current scenario while over the next three years you could expect an appreciation of 30-35 per cent. Much will depend on the ability of developers to raise cash for completing their projects. Currently rates range between Rs 2,200-2,300 per sq ft.

PUNE

With Talegaon not picking up in the anticipated manner,Punes new growth corridor now encompasses Kharadi and Nagar Road. This can be safely regarded as the most lucrative real estate investment zone for 2009-2010.

The key demand driver is the Eon IT Park,which offers 4 million sq ft of prime IT space. It is currently in the final stage of completion. Other IT SEZs and commercial developments are also on the anvil. Proximity to revamped airport is another point in its favour. Due to the opening of VIP Road that connects Viman Nagar to the airport,connectivity has improved. The opening of five-star hotels such as JW Marriott,Grand Hyatt and Leela in the near future will add further gloss to the area. Moreover,at Rs 2,700-3,500 per sq ft,the area appears reasonably priced.

MOHALI

With residential rates in Chandigarh having gone through the roof in the last few years,there appears to be little scope for appreciation currently. Because Chandigarh is a planned city with a cap on density of population,the potential for development is limited here. For this reason the city could not partake of the IT boom of recent years.

Nearby Mohali,however,presents a sharp contrast. The area named Greater Mohali,which encompasses the fast-developing Landra-Mohali Road area,is promising. Pan India developers such as Unitech,Emaar-MGF,Ansals and DLF have snapped up land here for developing mega,multi-sector residential hubs.

The key drivers of growth here will be the international airport,Indian Business School,and the 120-acre township with IT SEZ.

The investment opportunity here lies in land,which is currently available for Rs 12,000 to 14,000 per sq yd. In three-four years,land rates in these areas could even surpass rates in central Mohali,which are currently in the range of Rs 30,000-35,000 per sq yd.

CHENNAI

Chennais residential real estate scenario is depressed currently. Developers with projects along the once-booming IT corridor are set to reduce their rates by as much as 20 per cent. However,the Mogappair-Porur composite region continues to hold mid- to long-term potential. This location is close to the prime residential catchment of Anand Nagar and also to the railway station and the bus terminus. The fact that it is not near the IT corridor also increases its potential. Rates here range from Rs 2,800 to 3,000 per sq ft.

BANGALORE

Bangalore is feeling the brunt of the IT slowdown. However,established suburban areas like Koramangala,Outer Ring Road and Bellari Road continue to be good investment destinations. As in the case of Mumbai,appreciation is not the criterion in the current scenario: these are the areas that will sustain their prices while others are likely to correct. Mysore Road, which encompasses the upcoming NICE corridor,has potential owing to good connectivity with Mysore. Koramangala. Its close to Electronic City. Residential demand is high here while the scope for new developments is nil. Rates range between Rs 7,000-8,000 per sq ft.

Outer Ring Road and Bellari Road. These are close to IT hubs. Outer Ring Road is close to Whitefield. New developments are coming up on Bellari Road,which is also close to the Devenhalli airport. The rates here range from Rs 3,500-5,500 per sq ft.

HYDERABAD

Hyderabad continues to hold its own even in the current scenario,though significant growth is now restricted to specific areas. Residential real estate investment growth in Hyderabad is expected to centre primarily around Gachibowli and Tellapur owing to their proximity to the financial district,which is where the highest growth of IT and other commercial projects is happening. These areas could emerge as the next central business district (CBD) over the next ten years. Proximity to Outer Ring Road (Phase 1 in advanced stage and phase 2 scheduled after six months) will reduce commuting time of residents to key workplaces. Rates range from Rs 3,000-3,500 per sq ft.

While demand exists,affordability is the key issue. Location,as always,will remain an important criterion: investment destinations that are closer to the CBD and other demand drivers will do well while far-flung destinations will have less potential for appreciation. Investors with a medium- to long-term investment horizon should take advantage of the current depressed climate now and in the latter part of 2009 to hunt for bargains.

The authors work for real estate consultancy

Jones Lang LaSalle Meghraj