P R E M I U M  3  B H K  +  F S  A P A R T M E N T S  &  2 / 3 / 4  B H K  L U X U R Y  B U N G A L O W S
Bhopal: Real Estate Development

1. Real Estate in Bhopal

The National Residential Property Index shows Bhopal as having the second highest growth after Chennai, in terms of percentage increase in last 5 years making it a hot Investment destination for Residential property. However, still the value proposition is good as rates are far more cheaper when compared to metros and other two tier cities

Records at the district registrar's office reveal that in the last three years, there has been a 42 percent growth in the number of title deeds registered, from 41,214 in 2008-09 to 58,566 in 2010-11. Revenue from housing deals through stamp duty and registration charges has risen 65 percent in the same period. Currently, there are more than 50 construction projects in Bhopal, which will supply 40,000 housing units in the next two years. "There is a boom in Bhopal, Land and property prices have gone up manifold," says Nikunj Kumar Shrivastav,  Bhopal's Collector.

But rising prices- at around 15 to 20 percent per annum - have in no way dampened demand. Indeed the boom continues despite Shrivastav's office having steeply increased the 'guideline values' as well for localities in Bhopal - the minimum price at which a property in a particular area can be sold, akin to the circle rates in Delhi and other cities - by two to seven and a half times from April, 1 this year. "We took the step after a detailed survey, says Shrivastav. "This will mean more revenue for the government apart from reducing the amount of black money in real estate."

2. Industrial Development at Bhopal

The reason for such contrarian behaviour lies in the surge of development that has come to Bhopal in recent years. Industry is growing rapidly. Apart from the sprawling plants of the state owned Bharat Heavy Electricals Ltd. or BHEL, and the Bhilwara Group owned HEG, both of which were set up decades ago, the industrial cluster of Mandideep, 20 km south of Bhopal, houses the factories of among others, Crompton Greaves, Lupin, Procter & Gamble, Parle Agro, and the Vardhaman Group.

Lupin has one of the country's biggest pharmaceutical facilities at Mandideep spread over 65 acres. The company selected the area for its operations in 1997 because of its infrastructural strengths. "That, coupled with the availability of skilled manpower makes it an ideal location," says Ramesh Swaminathan, President, Finance and Planning.

3. Bhopal as Education Hub

The government is also trying hard to develop Bhopal into an educational hub, Ã la Pune. The city already has 85 engineering colleges and 5 medical colleges. The All India Institute of Medical Sciences has set up a branch here, as has the National Institute of Fashion Technology. There is more to come: "The state government has earmarked 400 acres of land for educational institutions," says Shrivastav. All this activity is bringing thousands of newcomers to Bhopal - all of whom need homes. Recently more than 50 acres land has been allotted for Dhiru Bhai Ambani University, to be developed by Anil Dhiru Bhai Ambani Group.

4. Bhopal Vs Metros

No doubt there is a key difference between the real estate market of Bhopal and those of the metros: the prices are not in the same league. It is still possible to buy a well constructed, semi-detached house in Bhopal at the rate of Rs 2,000 to Rs 2,500 per sq. ft (Rs 22,000 to 28,000 per sq. m), or an apartment for between Rs 1,750 and Rs 2,250 per sq. ft. Even in high-end projects, the market rate is around Rs 2,600 per sq. ft. In comparison, the circle rate for residential properties is Delhi's expensive areas - which is well below the market rate - is Rs 7,740 per sq. ft. Land in Bhopal costs about one tenth of what it does in the metros, and overall profit margins too are far more modest.

"Bhopal offers lessons for value engineering," says Gulam Zia, National Director, Research and Advisory Services, of real estate agents Knight Frank (India). He believes property prices in Bhopal are just right and there will be no correction. Some experts, however, sound a note of caution. "The depth of the market has to be seen," says Anshuman Magazine, Chairman and Managing Director, South Asia, of realty firm CB Richard Ellis. "Bhopal might see construction growing at a good pace, but large scale projects are unlikely." But with infrastructure set to improve further - Bhopal airport will soon turn international, and the water supply to the city is being enhanced - such fears may prove groundless.

5. Classification of cities (Tier I/II/III)

Metros are basically regarded as Tier I cities,  relatively smaller cities are regarded as Tier II cities whereas smaller cities are considered as Tier III ones. Here is the explanation why they are considered so:-

As Indian economy experiences the boom in all sectors triggered by its economic and investment policies, the metros or the Tier I cities are the ones that are inundated with burgeoning investments in the industrial and the services sector. Along with large-scale investments has boomed the realty sector creating congestion, arising out of an increasing demand for residential and commercial properties. This congestion in realty structures has forced the respective governments and many investment companies to seek out for alternative smaller cities leading to a demand for Tier II and III cities.

One of the basic reasons for investments flocking in to the smaller cities is available properties and affordable prices. Moreover, the special initiatives taken by the respective governments in providing the smaller cities with infrastructural facilities and creation of SEZs, has played a vital role in promoting these small towns into cities of the future. Keeping in view all the congenial factors necessary for setting up corporate infrastructure, the investing companies ranging from pharmaceuticals to financial institutions, automobiles to the IT & ITES sectors; to the retail and real estate sector are opting for the smaller cities transforming them into India's fastest growing cities in a matter of few years.

The large scale investments by the corporate sector in the smaller cities apart from initializing economic prosperity and job opportunities has also created demand for realty spaces. While developers from all the nearby areas flock in to cater to the real estate demands, the property markets in these smaller cities are witnessing along with a changing skyline, an unprecedented hike in real estate prices. While the realty trend in Tier I cities have reached a saturation point, with the yield gap witnessing significant margin of 9.5 to 10 per cent, the Tier II cities record a yield of 10.5 to 11.5 per cent. However, the emerging winners in the present real estate scenario of India are the Tier III cities, which offer greater yields of up to 12 percent. This rising prices and promising future of these cities are driving investors to buy properties predicting long-term gain in years to come.

Recent trend also shows that due to lack of availability of business equipped infrastructure and exorbitant property prices in the existing metros, the IT, ITES and the BPO companies are vying for the smaller cities where they are promised better infrastructure, state-of-the-art office spaces and also skilled manpower. A careful study of these Tier III cities reveals the close proximity of these cities, to the most happening cities of India like Delhi, Mumbai, Bangalore to name a few. Thereby, it will be no mistake if they are called the extension cities of the booming metros. Of late, the tier II cities like Pune, Kolkata and Hyderabad have made business opportunities and infrastructural development like never before. Now it is the turn of the Tier III cities or the smaller cities like Jaipur, Ghaziabad, Kochi, etc. to make it big into the realty business as the government and the corporate sector target them as 'India's Next Destination Cities'.