KOLKATA: Have properties in Rajarhat-Newtown suddenly become more affordable? With properties at Rs 2,600-3,500 per square feet being advertised with unfailingly regularity over the past two weeks, a decent 1,200-square feet three-bedroom apartment in a Rajarhat multi-housing complex suddenly appears more within reach at Rs 35 lakh, compared to the Rs 60-70 lakh months ago.
The best part is that the options are not limited to only Rajarhat Main Road but dot the entire Rajarhat-Newtown landscape.
An independent study by global real estate consultancy, Knight Frank, gives some indication of this. In a report, it says Kolkata observed a price correction at -3% in the first half of 2015 compared to the same period last year. This "price correction" the consultancy major attributed to the slew of mid-end and affordable housing projects that came up in peripheral locations like BT Road and the distant areas of Rajarhat, which were launched at relatively lower prices.
Bidyut Kumar Singh, a real estate consultant who has been working in the Rajarhat-Newtown belt, explains the price correction rationale.
"There had been some big ticket launches in Rajarhat-Newtown in 2007-09. In the beginning, they were affordable. But in their bid to show a quarter-on-quarter demand increase, they started spiking the prices by 20-30%. Now their prices have reached somewhere between Rs 5,000-7,000 per sqft. This is unrealistic and nudged out several potential buyers," Singh said.
"Now several mid-tier promoters are aggressively pitching their properties. These are low ticket-sized properties. Their intention is to sell off quickly and hence the prices were dropped to lure buyers. These promoters were always there, but none knew about them before," he added.
A senior bank executive, who heads the home loan division of a multi-national private bank, puts it more clearly.
"These spiked prices have put off several potential buyers. A price correction is inevitable. People take loans to buy properties. Banks follow something called the Fixed Obligation and Income Ratio (FOIR). It basically decides to give you loan based on your repayment capacity. For example, a person with Rs 1 lakh per month income can pay EMI for Rs 60,000. The applicant will have some other EMIs to pay like personal or car loans. That leaves his repayment capacity to approximately Rs 40,000. He is then eligible for a Rs 40-lakh loan," he said.
For a Rs 70-80 lakh property, he reasons, one would need a loan of at least Rs 60-70 lakh. This calculation would require the monthly salary to be Rs 1.5-2 lakh. "How many people earn that much in Kolkata? For high-end properties, one understands that the potential client-base would be NRIs or HNI, but by pricing mid-ticket size properties beyond the scale of the middle-income group, you only curb the client base. And that is what is happening here," he argues.
Real estate consultant Abhijit Mitra said, "Properties behind City Centre-II, Rajarhat Main Road and some panchayat areas falling within the three Action Areas in Rajarhat-Newtown has always been affordable. Only the buyer focus was never there for its apparent lack of connectivity. Now connectivity has increased."
"There has hardly been any big-ticket investment here and the flats coming up now are by Category-B and Category-C builders. The price range for the later will always lower," Mitra argues.
According to the report, the Rajarhat area, excluding New Town, was responsible for the majority of the affordable and mid-end projects in the first half of the year, accounting for 50% of the total new launches below Rs 50-lakh.