BANGALORE: When the Special Economic Zone (SEZ) Act 2005, supported by the SEZ Rules was introduced in 2006, the idea was to make it easier to establish large, self-contained facilities with excellent infrastructure with the aim to promote exports. As per the guidelines, SEZs can be developed by public or private players or even jointly, by State governments, their agencies, or on the public-private partnership (PPP) model.
They provide large-scale employment which in turn pushes up the demand for housing options in the vicinity giving an impetus to development of commercial spaces and social infrastructure.
Thrust for development
Girish K S, Local Director – Strategic Consulting, Jones Lang LaSalle India, explains how this has impacted localities in the vicinity and led to the development of support infrastructure. “In Bangalore, economic drivers guided directions of development, as evident from the way micro-markets like Whitefield, Electronics City, the Marathahalli-ORR belt, and Hebbal developed over the years. SEZs being large economic hubs, the areas surrounding them developed quite fast, with augmentation of support infrastructure and facilities like residential, retail, schools and hospitals, in all these micro-markets.”
Push for residential market
The Outer Ring Road (ORR) had given a fillip to the commercial development around these areas. Commercial spaces in these localities, in turn, are leading to the multiplication of residential catchment pockets and the consequent development of quality social infrastructure like schools of international standards, retail development (malls as well as main streets) and also hospitals.
Enhanced connectivity through the Metro has been planned in order to connect even the peripheral parts of the city where SEZs are located to the central and suburban places. The presence of large amount of commercial space in the north and east has also contributed to the planning of the Peripheral Ring Road.
Naveen Nandwani – Director, South India, Cushman & Wakefield, elaborates, “SEZs have come up mostly in the Hebbal to Sarjapur Road stretch of the ORR, and thus boosted the residential development in the north, east and south-east parts of the city. In the north, areas such as Devanahalli, Hebbal, Bellary Road, Thanisandra, Hennur and Horamavu have benefitted from proximity to SEZs. In the east, residential catchments cropped up in Whitefield, Hoodi, along Varthur Road and along Old Madras Road due to the establishment of SEZs. In the southeastern parts, Sarjapur Road and HSR layout witnessed a growth in residential pockets.”
Girish adds, “Key micro-markets benefitting from the existence of SEZs and IT developments in the city are Whitefield, Electronics City, Marathahalli-ORR stretch, and Hebbal. Going forward, some of the catchments of the existing/upcoming SEZs such as Mysore Road and Yelahanka are also likely to be benefitted.”
Advantages of living in these belts
Considering the hectic lives that professionals lead, their priority is to try to cut-down on the commuting time. Thus, homeowners prefer to purchase homes in the vicinity of their workplaces.
Naveen states, “The infrastructure of these areas shows promise and gets attention from the government and even the private players look to develop better quality of social infrastructure to cater to the mushrooming residential areas. Thus, homogenous development is much more likely in these belts as already witnessed in the Whitefield area. Since the demand for apartments, either for purchase or for rent remains high in these belts, even as an investor, these areas hold promise of medium to high returns. The rental yields as well as the capital appreciation are more or less assured and attract investors.”
Potential for appreciation
The development and augmentation of support infrastructure and facilities around SEZs will make living comfortable for homeowners. The changing characteristics of these areas will offer higher returns for investors in real estate.
Girish points out, “Most of these micro-markets are likely to witness 9-10 percent compounded annual growth rate in prices of residential spaces in the medium to long terms. In terms of commercial and retail rentals, the rental growth may be 5-6 percent per annum while the present yield may offer 16-18 percent returns for long-term investors.”
Future residential development
According to Naveen, “Growth of residential catchments in the east, around Old Madras Road towards Hoskote, may be spurred through establishment of new SEZs there. Whitefield and Hoodi, thriving residential areas, are within 10 km of this location and may grow further in case more SEZs are established in the vicinity.”
Since Bangalore has developed in a concentric manner, growth has been happening all along the major corridors and micro-markets where large economic drivers such as SEZs and IT parks are located.
“From this perspective, micro-markets such as Whitefield, Electronics City, Marathahalli-ORR stretch, and Hebbal are likely to continue witnessing growth or further augmentation. Similarly, all Secondary Business District locations – Bannerghatta Road, Kanakapura Road, Sarjapur Road, Mysore Road, Bellary Road, Tumkur Road and Hosur Road – are likely to continue witnessing growth. Growth along Bellary Road is likely to be significant due to the augmentation of city-level infrastructure all along the road up to the airport. Growth along Kanakapura Road, Tumkur Road and Mysore Road is likely to be driven by Phase I of the Metro,” says Girish.