KOLKATA: Limited growth opportunities in Kolkata are forcing city-based developers to explore other markets. Chennai is high on the preference list, followed by non-metros such as Ahmedabad, Raipur and Bhubaneshwar.
Delay in receiving clearances, long turnaround time (for projects) and other inherent risks are some reasons for venturing outside the State.
At least five major developers have firmed up plans for entry in Chennai, while Raipur, Bhubaneshwar and Ahmedabad are the other alternatives.
Harsh Patodia’s Unimark Group, Nandu Belani-controlled Belani Housing Development, Sushil Mohta’s Merlin Group, Pradeep Chopra’s PS Group and the Space Group are planning to enter Chennai.
Merlin is also firming up plans for entry in Raipur and Ahmedabad.
“The signs of a slowdown in Kolkata are imminent. Over the last one year there has not been any upward price movement despite increase in demand. Commercial space off-take has gone down too,” Nandu Belani of Belani Housing Development Ltd told Business Line.
Belani has over the last one year set up an office in Chennai followed by zeroing in on a plot. He plans to develop a residential project. Merlin too is eyeing a residential project in Chennai.
According to Harsh Patodia, President (CREDAI Bengal), apart from expanding operations, the need to de-risk investments – i.e. having more offerings outside a single city – is also a reason. The best bet would be to enter new markets that have similar dynamics as Kolkata.
Chennai, which has moderate presence of private equity players and investors, relatively stable price movement and upcoming infrastructure, along with demand for apartments, offers the best alternative.
Other places such as Ahmedabad have a faster turnaround time and Raipur and Bhubaneswar have fewer local developers. As such these States have come up as logical alternatives.
“In the southern States, people identify with local developers. Many of us are entering into tie-ups with a local player in the region,” Patodia said.
Patodia’s Unimark Group is in final discussions with a prospective local partner for its Chennai entry. Kolkata’s Space Group too has entered into tie-up with Chennai’s Olympia Group for joint-development.
Market sources, meanwhile, indicate that over the last one year, growth in Kolkata has been stunted. A prime indicator is the price (of apartments).
Till April, the average per sq ft price in the city stood between Rs 3,000 and Rs 5,000, a stable price that has neither moved up or down.
“Developers have been taking a hit on their margins. They are unsure of unsold stock if they opt for new projects. Price is unlikely to move up with the uncertainty in the market,” a developer said.
Delay in obtaining clearances and non-withdrawal of the Urban Land Ceiling Act leading to non-availability of land; followed by increase in registration fees and property valuation; have adversely impacted developers. Large projects are on the back-burner.