AHMEDABAD: Real estate markets across the country have a uniform pattern of being speculative if the given market is high on the wish list of investors. On the contrary, end-user driven markets are always modest in appreciation but nevertheless, carry genuine appreciation and provide a level playing field to all the stakeholders, including the buyers. However, the property markets of Gujarat, most notably, the cream of the market in Ahmedabad and Vadodara, defy this conventional wisdom of economics in real estate. These markets have traditionally been high on the wish list of the investors; yet, have never been speculative by any stretch of the imagination.
What makes Gujarat’s property market so realistic and different from the rest of the country? Analysts believe that the property market dynamics of the region cannot be disconnected from the overall economy of the region. The pockets of affluence are always balanced by the cost-conscious spending habits in the state and that reflects in the property market as well. That may be the reason that unlike other property markets, the residential developments in the state are not at the cost of each other, in terms of various projects meant for different classes of people. Of course, the focus is nowadays shifting towards the luxury and other high-end projects but not at the cost of compromising with mid-income housing or even affordable projects. There are all kinds of residential launches, often in the same micro-market and the thrust is more on the project amenities in the high-end projects.
Dhaval Ajmera, director, Ajmera Realty & Infra, has a point when he says that with steady demand being witnessed in the affordable housing segment, residential developers have now recognised the prospective evolution of this sector. They have been undertaking concentrated development in the upper-mid and luxury segments, wherein, the market has steadily been appreciating in the last decade due to the launch of many affordable projects. “It is a realistic market at a time when property markets across the country are speculative. The current momentum for investment in the city is quite stable but it is temporary, as Ahmedabad’s potential is strong and is based on real and concrete growth. Looking at the current scenario, the future yield will be high, making investors value their investment,” opines Ajmera.
Property watchers in this market maintain that the property rates here are realistic as compared to other cities, which bodes well for investors and developers. This is often seen as a strange paradox at a time when the state is witness to an increased focus on industrial and other economic activities. Various industries in and around the city are fuelling demand in Ahmedabad, with IT giants such as TCS entering the city and the development of Info City.
Manan Choksi, regional owner, RE/MAX India, Gujarat, says that the affordable sector may be moving slow but it is a steady segment of housing here. There is a strong demand and even though sentiments are low currently, people are still buying. Most of the people are first home buyers and depend on home loans. So, the slowdown in the property market has not really affected the segment. This buying trend may reflect that the property market is not different from other parts of the country, yet, the fundamental question here is: how realistic is the market at a time when property markets across the country are speculative?
“The Ahmedabad market has been always been investor-driven. Even then, prices don’t fall and the market is not very volatile like that in the other parts of the country. This shows that it is a realistic market,” adds Choksi.
Most residents in the city invest beyond one house for long-term capital appreciation. There are hardly any outside investors in the state.
Moreover, most of the developers in Ahmedabad or Vadodara are either local residents or Gujarati builders, who have experienced the perils of speculative markets in Mumbai and other regions. So, they are quite conscious of the fact that short-term speculative buying activity may provide liquidity to the developers in the immediate term but often takes the project out of the hands of the developers. This kind of strategy often misfires for the developers, who are then forced to strategise their marketing plans as per the wishes of the investors or the under-writers.
This realisation helps developers maintain a stable trend, something that may be a case study for developers operating in other highly leveraged markets. In a nutshell, property markets of Ahmedabad and Vadodara are uniquely poised as these markets are pretty high on the wish list of the developers, yet, not speculative in terms of rental yields or appreciation. These are the markets meant only for either end users or investors, who have a long gestation period in mind.
Even at the worst phase of the economic slowdown between 2009-2011, when there was correction in the property markets across India or there was piled up inventory due to developers maintaining a rigid price range; this bearish cycle was weathered well over here. There has been no significant crash since then and inventory hangover has again never been a reality in this part of the world. This fact probably defines the resilience of Gujarat’s property market very well.