Glut of homes steady prices in posh Ahmedabad

“Invest in real estate and your money will double in four years,” says Kiran Patel, a local real-estate developer while hard-selling his residential project to a prospective home buyer in Ahmedabad where the property market has been clocking an annual growth of 20-25 per cent since 2005. However, things have changed in the last one year.

The capital values of residential property in the poshest areas in the city — Satellite, Vastrapur, SG Highway, and Prahlad Nagar — have grown at an unimpressive seven per cent in the last 12 months ending June 2012, shows the data shared by Cushman & Wakefield (C&W), a global consultant having operations in the city’s property market.

In other words, if an investor has bought property in these areas located in the western part of the city, the fund parked therein has grown at a slower pace than fixed deposits in a bank (9% interest for a fixed term of one year).

For instance, in June 2011, Kamala Kannan, an senior executive from the energy sector, bought a 1,372-square feet apartment in Godrej Garden City project on the SG Highway at Rs 2,915 per square feet. For Kannan, there has hardly been any appreciation in the capital value of his apartment as the project is currently offering flats at Rs 3,000 per square feet.

While high-end houses costing over Rs 1 crore on the SG highway have shown no appreciation, similar is the case with mid-range homes in Satellite and Vastrapur areas where the growth has been almost nil. “The residential prices in Ahmedabad are expected to remain stagnant for a while as the supply has surpassed demand,” says Neeraj Tomar, head (Ahmedabad Operations) of Jones Lang LaSalle (JLL), one of the largest property consultants operating in India.

Real estate experts point out that the poor growth registered in the last one year is bad news for real estate market in Ahmedabad which has a very high proportion of investors and has seen realty prices grow by 20-25 per cent annually. While markets like Bangalore and Chennai have 10-15% investors in real estate projects, the proportion of investors in the city’s property market is as high as 60%.

Ahmedabad’s residential market has been stable over the year and the demand has been mainly driven by investors,” says Sanjay Dutt, executive managing director (South Asia) at C&W.

Real-estate experts estimate that over 50,000 under-construction residential units in the western areas (SG Highway, SP Ring Road, Bopal, Vejalpur, New Ranip and New Prahlad Nagar) of the city will create additional pressure on home prices in the city.

Source: www.expressindia.com