Land Economics - Issues and Challenges

Patterns of Land Prices

E Jayashree Kurup,

Head – Content & Research, Magicbricks.com

Assisted by

Rishab Jain, Girish Bindal, Renu Arya

September 2013

Chapter 1

Introduction

Pricing urban land has been one of the trickiest issues in recent times. As the

country urbanises rapidly and is expected to house 50 per cent of population in

urban areas by 2039, providing space and facilities for them to live and work has

been a challenge. Yet the issue is one that requires a fair amount of research, a

generous amount of creativity and deep understanding of usage patterns that

lends ticket value to every square yard of land.

Unfortunately, data required for research is often locked in numerous dusty files

in government offices across the country or in service wings of various corporate

houses which computes various statistics to determine urban population. In the

current scenario, one needs to apply various proxies to determine the price of

urban land.

India Development Cycle: The development cycle in India follows the following

pattern:

New Project

Plots Sold

Low prices

Apartments released

Unit price up

Plot values up

Critical value

Investors exit

Living starts

Magicbricks Data: At magicbricks.com, a full service real estate portal promoted

by the Times of India Group, the dynamic database of residential properties listed

by individuals or agents for sale and by property seekers looking for various

denominations of plots for purchase, was the basis of the base data. Most active

localities in major metro cities – Delhi, Bangalore, Chennai and Pune – have been

studied as representative of major and minor cities in the country.

Gurgaon has been picked up as a special case as it best shows the inter-

dependence between commercial and residential land values. It was also included

in the study as it grew from a small suburban district, over the last 30-odd years,

and was primarily driven by the availability of quality real estate and has

overtaken the parent city in development and rate of growth of property prices.

Similarly, Mumbai has been dropped from the list, though it counts in the big

three property markets, because it is driven by apartments and built-up real

estate, unlike Delhi and Bangalore, which have a large proportion of plotted

development. Plotted and built-up developments function on different logics and

are not comparable on an apple-to-apples ratio. Therefore, Mumbai has been left

out of this study.

Historical Perspective: The latest round of the Indian land pricing story began

more or less in the 1990s when rapid growth of urban India was sparked by the

liberalisation of the Indian economy and the rapid growth in consumerism. As

structured commercial growth transformed pockets of urban India, the

professionals, armed with salaries vastly in excess of the erstwhile levels, pushed

aspirational development by a host of developers - large and small. Developers

such as DLF, Unitech and Ansals in Gurgaon and Hiranandanis in Mumbai, pushed

premium development in self- sustained suburbs, offering an option to the

housing units earlier offered by cooperative group housing units or apartments

built and marketed by development authorities where the pattern was to apply,

cross your fingers and wait for allotment of affordable mass housing. The idea

was to own a house, not necessarily how you wanted it or backed by lifestyle

facilities which give the neighbourhood a profile greater than that of simply a set

of houses.

Land as a Commodity: The first National Housing and Habitat Policy of 1998 was a

landmark of sorts where the government started talking about allowing everyone

to buy a house, when they needed it. Private enterprise in the real estate sector

was encouraged and land was acknowledged as a stock in trade for the first time.

The relaxed housing finance rules brought housing within the ambit of all and that

too, in the working years and not just at retirement.

So, what has this got to do with land pricing? This move allowed land to be

commoditised as never before in urban India. Unlike the previous decades, where

the source of funds for acquisition of urban land for development was never

really talked about, for the first time, there was a crop of land bankers who

turned professional, using money aggregated from large individual investors as

well as real estate backed private equity funds.

Law makers actually started thinking of laws that would allow investors to benefit

from the growing real estate boom as equity partners. Today, a limited number of

Real Estate Investment Funds allow users to invest small amounts and benefit

from the growth in real estate. The issue managers are answerable to the

Securities and Exchange Board of India (SEBI), thus ensuring investor protection.

Another crop of investors entered the urban land banking system – those flush

with funds from other sectors – eg the Paras Group whose wealth came from the

milk business, the Videocon Group which made money in the electronics

business, the Sahara and Zee Groups, which were primarily in the media and

entertainment business. Real estate had become the best place to park surplus

funds and watch them grow. As the assets appreciated in value, unlike most other

sectors, the return on investment could be computed and estimated. Property

could finally figure in balance sheets.

Along with these, came bigwigs from the finance sector such as ICICI and HDFC

which too, turned investors and picked up property as an asset class to invest in.

This spurred various small investors to capitalise on the relaxation of rules in

housing finance and growing urban salaries to turn investors and turnaround

money in cyclical residential real estate investments as individual investors. In this

whole process, the only factor left out was the availability of credible statistics

that would allow value of investments to be computed with credibility. Today

there is the National Housing Bank’s Residex, based on sample transactions and

housing finance disbursals and the Magicbricks PropIndex, which is based on

listed property values across cities, to estimate demand and supply. There are

others who estimate stock based on physical assessment but that has not yet

attained credible benchmarks.

All these factors pushed this asset class to a burning hot level and directly

impacted the value of urban or potentially urban land. After two to three decades

of such rapid growth, urban land prices have appreciated manifold. As a result,

current buyers of real estate are not only paying for the intrinsic value of urban

land but also the opportunity cost charged by various middlemen in the whole

urban land value chain.

Chapter 2

Development Cycles and Price Trends

Urban land both gains and loses from development over a period of time.

There are two major cycles of growth in urban areas:

1) Greenfield development

2) Brownfield development

Greenfield Development: In this cycle, new land areas are included in the existing

city and are planned into the city municipal limits. Rural land is converted to

urban after acquisition, through a change in land use. Simplistically put, the cycle

moves like this: When it is first acquired by speculators who dominate the early

stages of growth, rural land is acquired at rural land rates (normally a fraction of

urban land rates). The land use is changed to urban when the area comes into city

Master Plans or just before that and the value of that land rises suddenly.

Adjoining land too, benefits from this growth in land value.

The new Right to Fair Compensation and Transparency in Land Acquisition,

Rehabilitation and Resettlement Act, 2013 has been brought in to tackle this

problem of original land owners losing out on the opportunity cost after

development. The solution has been to offer four times the highest sales price in

the given area to farmers or original landowners in rural areas and twice in urban

areas.

In urban land under Greenfield acquisition, the value increases progressively in

the following manner:

1) Newly aggregated land has little value as urban residential areas, since they

are often far from inhabited areas and difficult to access.

2) Since there is plenty of supply and limited demand, values are low.

3) To unlock the value of land, developers need to start infrastructure

development such as laying roads, drainage, utilities etc.

4) At this stage developers start releasing plots to early investors. The money

so collected starts funding the development.

5) Built-up construction happens and development accompanied by real

estate assets bring in potential end users and occupancy begins. This

pushes up asset value, which rubs off on the plotted development which

posts significantly higher values than at launch. This cycle normally takes

about five years.

Brownfield Development: In the Brownfield development cycle, city authorities

intervene when the liveability of the area goes down over a period of time.

New Aggregated

Land

Big supply, low demand

Development begins

LiveabilityGoes Up

Values Up

Normally, the pattern of land value changes every 20-30 years in residential areas,

where the land values overtake the demand as the liveability of the area goes

down. There is a change in living patterns, utilities age and need to be

strengthened or replaced, new facilities are required and the real estate too

needs to be modernised. There is a marked difference in values between ageing

structures and new modernised units. Consider the case study we picked up from

one locality in South Delhi – Chittaranjan Park (CR Park).

City – New Delhi

Locality – CR Park

Property – Single floor unit

BHK – 3

Old Properties (5-10 years old) Rs 13,000-18,600 per sq ft

New Properties Rs 15,000-21,900 per sq ft

Average price differential 15-35 per cent

This new value also impacts land and plot values in the locality. They rise

proportionately and the land values go up. In established city areas, where there

is no new land for development, this is how land value is unlocked. As re-

development takes place, there is a proportionate increase in land values.

Normally, when there is a spike in demand for new apartments, small builders

enter the market and purchase plotted units. The existing units are demolished

and new units are created utilising the new permissible FAR. The price of the total

square footage plus the notional value of the land becomes the new price per sq

yd and becomes the new benchmark land value in the locality.

Planned re-development restores the liveability quotient and restores or even

enhances the value of land. This happens in cities such as Singapore, where there

is planned re-development every 20-30 years.

Since real estate values have become dynamic and prone to frequent variations,

values need to be tracked regularly across localities. In frequently transacted

areas, the listed values and if available transacted values provide the benchmarks.

Since real estate transactions are not generally completely reported, the ratios

between registered and transacted values need to be determined. This is the total

land value in the area.

When a seller lists a property for sale, the asking value on magicbricks.com has

been deemed to be the value of land for the purpose of this research. However,

when the actual transaction takes place there may be a negotiation on values

between the seller and the buyer. During strong economic cycles there is very

little difference between listed and transacted values. In weak economic cycles

and rising inventories, sellers are more willing to negotiate.

Sold historically

Big demand, low supply

Values upPlanned

redevelopment

New stock, new values

Case Studies

Downtown or City Areas:

In the absence of planning norms for re-development in most Indian cities, this

process has normally been adhoc and pushed by users or land owners. Most

Indian cities such as Delhi, Bangalore and Chennai have seen this type of re-

development over the past two decades. Mumbai, being a high-rise city, has

evolved re-development norms for apartment complexes but not for the entire

neighbourhood.

Safdarjang Enclave in South Delhi is a typical case where the value of land and

therefore, apartment values had eroded by the early 2000s. After the property

market slowdown, the demand for property had dropped, and both capital and

rental values of built-up property had dropped. While the authorities made no

real efforts to grow the liveability quotient, land owners went in for individual re-

development and the capital and rental values of apartments in the area went up.

The growth had been to such an extent that this rise in values significantly

impacted the Magicbricks Delhi Property Index in the Arp-Jun 2011 quarter,

where apartment values had gone up by 15 per cent in three months.

In the case of Uttam Nagar in West Delhi, a low-value area was opened up to

development by the advent of the Delhi Metro, which pushed up the liveability in

Established Areas

• Quality of life up

• Values up

• Occupancy High

Old Localities

• Quality of life down

• Values remain up

• Occupancy drops

Redevelopment

• Plots sold to unlock land value

• New values establish price benchmarks

• Quality of life up

the area. Accessibility has always been a big driver of growth in urban land values.

Whether it is a metro link (Uttam Nagar, Vaishali, Noida or Gurgaon) or a flyover

(Marthahalli flyover in Bangalore), transport links always favourably impact urban

land values.

Extending City Limits: In some cases such as the master planning of Greater

Chennai, Greater Nagpur and New Gurgaon, some existing areas are included in

the Master Plan and therefore, given the official sanction for planned

development and facilities provided by the urban development authorities.

Chennai added 42 small local bodies, including 9 Municipalities, 8 town

Panchayats and 25 village Panchayats to its portfolio as Greater Chennai

Metropolitan Development Area. In Nagpur, the areas that had started evolving

as warehousing hubs due to proximity to transport links to other cities, as well as

the convenience of large warehousing spaces being available at reasonable rates

as compared to the city, were added to city limits.

Both have serious impact on values of urban land in the vicinity. Sohna Road in

Gurgaon is a case in point. Values jumped from Rs 46,600 per sq yd in the Jul-Sep

2009 quarter to Rs 87,000 per sq yd in the Jul-Sep 2013 quarter.

Price percentage change:

2012 to 2013: 3%

2010 to 2013: 23%

2009 to 2013: 87%

Sohna Road (Rs/Sq yd)

Time Line Jul-Sep 2013 Jul-Sep 2012 Jul-Sep 2010 Jul-Sep 2009

Upper Range 87,000 83,000 67,600 46,600

Middle Range 73,000 71,000 59,200 39,000

Lower Range 59,100 58,700 51,000 31,300

Residential Plot price on magicbricks.com

Chapter 3

Demand Patterns

With the volume of latent demand in India, all urban or urbanisable land has a

value that is far above rural land. The units are picked up by three categories of

buyers:

1) Pure play investors – They buy at the launch stage at cheaper prices, wait

for values to rise, sell when prices start going up. Often make part

payments and book profits and sell just before buyer-seller agreements are

signed. That way the new buyer does not have to pay significant amount

for name changes on registered documents.

2) Future end users – These buy either at launch or when development work

is complete. They do not mind waiting for the plot value to go up as their

use is in the future.

3) End users – They buy close to hand-over time, when property is fully

developed and construction can begin or even later, when some first

movers have started living in the vicinity. They enter the transaction at

higher rates but can start building and living immediately.

Because of this cycle and pattern of living, plot prices move in a linear direction.

The areas closest to densely populated areas, which are in demand but priced

high, or those closest to the city in suburban areas or those along transport

corridors such as highways that have the maximum possibility of going into

planned development, are in demand.

As a result, it is possible to plot graphs of areas in demand. They follow cyclical

patterns with each in-demand area functioning as a hub, with a ring of localities

and demand radiating outwards. The distance is usually accompanied by a lower

listed value. This value of the hub normally comes from proximity to commercial

or leisure destinations. Availability of social infrastructure such as schools,

hospitals, entertainment and shopping facilities etc determine the demand which,

in turn, impacts prices. Physical infrastructure such as quality roads, transport

links such as suburban rail or metro, as well as drainage, water and power supply

etc contribute to residential property values in the hubs.

Consider the following example. If DLF Phase 1 in Gurgaon is considered a hub for

its proximity to the commercial hubs of Golf Course Road, Cyber City and many

more, other localities mentioned here are plotted in distance from the hub.

Values too drop proportionately.

Locality Average plot in 2011

(Rs/Sq Yd)

Distance from Centre

DLF Phase 1 1,54,192 0 km

Sushant Lok 1,20,441 2 km

South City 1,11,195 3 km

Sector 15 84,067 5 km

Sohna 65,261 7 km

Dwarka Expressway 35,420 9 km

There is always demand at both ends of the spectrum. For those who enter as end

users, it makes sense to be near the hub. But for those who are future end users,

buying further away from the hub reduces the initial investment because of lower

property values. For those who are pure play investors, buying at low values

means a better Return on Investment when they choose to sell. Land values

always rise more than apartment values but the holding period is longer. During

this period, the development and occupancy of apartments in the vicinity

contributes to the rise in values. Given below is an example of how plot values

were in East Delhi and Ghaziabad.

Locality Average plot in 2011

(Rs/Sq Yd)

Vaishali 97,390

Indirapuram 81,724

Vasundhara 72,020

Sector-93B 99,762

There is also another reason for shifting demand. During weak property cycles,

when there is either poor consumer sentiment or during weak economic cycles,

users move further away from the city and purchase land further away from the

city. This land is priced cheaper and has future growth potential. The distance

from the city is directly proportional to the risk appetite of the buyer and the

strength of the hub from which its distance and future value is measured.

Locality Average plot in 2011

(Rs/Sq Yd)

Plots on Sale in

Magicbricks

Sector 122 50,500 91

Sector 105 72,000 83

Large Apartment Complexes are present near Sector 105 and 122

• Increased supply of plots in new sectors as developers need cash influx at

the start

• Post launch of apartment complex and amenities development, plots start

commanding higher premium

Plots in NOIDA are following this pattern:

Investors/End Users are available at both ends of the spectrum. There is no

dearth of investors for the high-end market and the lowest priced market. The

ones with least risk appetite will buy closest to the hubs, where weak sentiment

would have lowered land values or at least opened it up for negotiation. As a

result, there is always demand at both ends of the spectrum.

Given below is a case study of Ghaziabad in Delhi-NCR. There was demand and

supply at both the low end of the spectrum in Hapur Road as well as Surya Nagar

(the higher end). The property values reflect the demand patterns.

Locality Average plot in 2011

(Rs/Sq Yd)

Hapur Road (Low end) 2,500

Govind Puram (Low end) 7,240

Surya Nagar (High end) 1,54,916

Ram Prastha (High end) 1,19,198

Chapter 4 - Supply Patterns

So how is urban land released? Both the private and public sectors contribute to

the supply of urban land. While the traditional route to development was for

urban development authorities to acquire land after planning and notification

from farmers in the earmarked areas, the newer route as well as the traditional

Haryana model was for the private sector to aggregate land and apply for

development licenses and start selling.

Development authorities and developers have resorted to selling land parcels cut

into plotted development to start the development process. These lands can be

sold at a slightly lower value as development is still away. However, it helps

secure ready cash flows that help in early development.

This is followed by built-up space being created in the form of apartments and

houses which takes typically 24-36 months to conclude. Once developed, they

soon get occupied and apartment values start going up proportional to the rate of

occupancy. Once apartment values go up, there is a corresponding rise in the

demand and therefore value of plotted development. This usually takes place

about five years from the original sale of land. Traditionally, land values doubled

in five years. However, recently it has been noticed that land values can grow

many times over in localities close to the city or where commercial hubs have

come up while those further away from the city take more time and may not

double even in 10 years.

There are many factors that impact the growth in values. Take the case of Greater

Noida, where development preceded commercial sale of land. However, there

was one inherent disadvantage that Greater Noida had despite being

meticulously planned for liveability, it was planned as an extension to Noida City –

which was in demand, had a severe shortage of supply but huge banks of land for

development in its kitty which was hoarded by the city authorities for decades.

Just when property values in Greater Noida started showing signs of rising, Noida

released vast quantities of land, sold to developers at affordable terms as the

value was to be amortised over eight years. Greater Noida’s land value

immediately dipped and settled at non-speculative levels.

An inflation-indexed rate of growth took place but the opportunity costs that is

normally the biggest factor pushing gains in property investment, dropped

abysmally. To the extent that developers who bought land from the development

authority in Greater Noida preferred to market it as Noida Extension to gain from

proximity to the in-demand Noida rather than market it as Greater Noida. A clear

case of bumping up opportunity costs and capitalizing on consumer sentiments.

In Conclusion:

Investor Appetite Never Dies: Location Preferences Change with Budget

• Slow market conditions – investment far from the city

• Market heats up – consumer preference moves closer

– Currently, investors moving towards Ajmer Road along proposed

DMIC as Jaipur market weak

– Weak market conditions: Investors moved further along SG Highway

(Ahmedabad) and Airport Road (Bhopal)

– When markets regained: Investors started investing in plots near city

on the same stretch

– Sometimes a trigger can reverse sentiment: Jaipur is on the verge of

such a trigger. The city has an intrinsic demand which may be kindled

by the start of the metro. The trial runs are on, which is typically a

time for consumer preferences to start changing. Many areas may

see a rise in values or active transactions.

Chapter 5

Plotted value trends across five Indian cities

Delhi

Normally developments are planned with fixed sizes of plots. As a result each

layout has standard plot sizes. However, the price is not dependent simply on the

size of the plot. While as a rule smaller plots have greater unit value, there are no

general laws that can be applied.

Plot values depend on a number of factors – location, size, access, neighbourhood

and facilities. Normally, the location of the plot, including its distance from the

main road, access from the outer gates, facing a park, school and other facilities

impact its value. If a plot overlooks a school or commercial facility but does not

share parking space with them, it has higher value. Park facing plots fetch higher

value because of two reasons – it means more parking space and the unit does

not overlook another built-up structure.

The size of the plot is significant, in conjunction with building byelaws in the city.

For instance, in most cities which allow re-development of plotted areas with

each floor being registered as separate unit. There is greater commercial viability

and therefore demand. Small local builders buy these units and redevelop them

into multiple units for sale to different buyers. This is of immense value (Chapter

2, Brownfield Development) in the stage of development when the demand for

property is very high but the supply is limited. At this stage the market values are

high and new buyers get a chance to purchase new units of smaller size in the

redeveloped property. This cycle of development, leads to enhanced value of

other older plots in the neighbourhood.

In existing cities, the localities in demand are determined by the re-development

potential of the land. As the number of developers looking for plotted land for re-

development increases because of greater demand for individual apartments in

the locality, the unit value of plots in the area goes up. In localities where re-

development does not bring with it significant commercial advantage as the city

authorities do not allow the individual units to be registered separately, the unit

value of land does not rise as much. Noida is a case in point, where apartments

outdo the rise in values of land as apartments on plotted developments cannot be

sold as individual units according to the laws of the land. As a result of rapid rise

in apartment values in older plotted areas, the cost of purchase of a complete

house utilising the entire FAR available for use becomes very expensive and

therefore not viable. As a result, these old areas give way in consumer preference

to newer primary launches of apartments on greenfield plots, where the prices

are more affordable though the commute becomes longer.

The cost-demand arbitrage is clearly visible in the top 10 localities by supply in

Delhi from Jan-Jun 2010 to Jan-Jun 2013. Najafgarh was just making its

appearance in the list as a locality in the top 10 list. It kept appearing sporadically

as more and more land was put up for sale. However, the prices are a critical

indicator of how the demand patterns evolved. From 2010 the values hovered

between Rs 40,000-50,000 per sq yard. However, by 2012 the values jumped to

Rs 1,50,000 per sq yard. This was on the back of a pending proposal to allow more

FAR to farmlands in Delhi. Najafgarh was one of the last bastions of farmland

within Delhi and the policy trigger was enough for the values to jump.

Similarly, the policy push of regularising Sainik Farms and Aya Nagar immediately

put them on the active supply market in 2013.

Another major finding from the analysis of the property value trends in Delhi’s

top 10 localities shows how the metro drove supply across South Delhi and

Dwarka. These subsumed the previous high-supply localities in West and North

Delhi. Transport drivers obviously impact supply. Currently, sellers in the real

estate markets in urban India are savvy and release land when they are likely to

get best returns on their investments. Obviously, the last line to become active –

the Violet line connecting Central Secretariat to Faridabad – opened up markets

across Greater Kailash, East of Kailash, Jasola, New Friends Colony and

Chittaranjan Park.

Bangalore

In Bangalore, the major driver was the Outer Ring Road along the Sarjapur Road

and along other transport corridors such as Hoskote Road, Hosur Road and

Doddaballapur Road. The IT industry’s concentration along the Whitefield area

pushed demand and therefore active supply in the area. The completion of

infrastructure projects in this area led to enhanced activity in the plotted

developments along this locality.

The opening of the new Airport in the city pushed activity in North Bangalore

areas such as Doddaballapur and Yelahanka. These are early on in the cycle and

land is available in these areas at relatively affordable rates.

City Dynamics

The Outer Ring Road and Electronics City have led to the expansion of South

Bangalore into new areas and the development of Sarjapur Road and

Bannerghatta Road.

East Bangalore has been a growth engine since two decades. Setting up of

manufacturing units and concentration of IT/ITeS companies and increase in

residential, retail and hospitality demand have triggered the need for social

infrastructure. Activities which are infrastructure-related have been undertaken

which include upgradation of the road from Marathahalli to Whitefield, the

Kadugodi Flyover for commuters heading towards Hoskote, further extension of

the Metro Phase II upto Whitefield and a new Metro line running up to Nagavara,

and the improved connectivity to the ORR are further fueling growth in the

region.

North Bangalore came into attention with the opening of the new Airport in the

city. The drive into the city from the airport in Devanahalli, is enough to assess the

possibilities of growth in this region. This pushed activity in North Bangalore areas

such as Doddaballapur and Yelahanka. The area’s advantageous proximity to the

IT growth corridor will also be a contributing factor. The social infrastructure is

another factor that has worked for North Bangalore.

Apart from opening of the new airport and setting up of IT Hub, planned

infrastructure developments are also pushing development in North Bangalore

such as the Peripheral Ring Road, high-speed rail link and the Metro will further

augment connectivity and impact residential and commercial development.

Chennai

Chennai has a typical trend of new localities on the fringes of existing in-demand

areas coming into the active stage if they are well-connected to existing

commercial hubs. Urapakkam, Pallikarnai, Guduvancheri etc are all examples of

this type of development.

Localities such as Oragadam and Sriperambadur have grown on the back of strong

economic drivers. As a city, Chennai’s demand and therefore supply has always

been along planned economic corridors. As one corridor gets crowded, as in the

Old Mahabalipuram Road, which has become the IT hub in the city over the years,

the East Coast Road and Grand Trunk Road, parallel to these, have come into

focus.

As property values stabilised in Chennai in 2012, there has also been a rise in

activity in Central Chennai areas such as Nungambakkam, T Nagar, Anna Nagar

and others.

City Dynamics

South Chennai: Old Mahabalipuram Road (OMR) and Grand Southern Trunk Road

(GST) and East Coast Road (ECR) are the three important transport corridors in

South Chennai that witnessed maximum development.

OMR is home to many IT/ITeS companies. The increase in commercial activities

along the corridor has led to residential development. However, today OMR is

faced with a situation of over-supply. This has kept capital values stable as buyers

have a wide range of options to choose from.

GST with the presence of SEZs, integrated development and excellent connectivity

to various parts of the city, is evolving into a prime realty market.

West Chennai: Rapid industrialisation and arrival of large scale manufacturing

companies along Sriperumbudur, has led to an array of developers launching

residential projects in integrated townships in the region.

The Chennai-Bangalore Industrial Corridor Project in West Chennai is an

upcoming mega infrastructure project of Government of India. The corridor plans

to come up along Chennai, Sriperumbudur, Ranipet, Chittoor, Bangarupalem,

Palamaner, Bangarpet, Hoskote and Bangalore

North Chennai: The property values are relatively affordable in comparison to South Chennai and owing to the spate of civic and infrastructure projects such as upcoming metro connectivity, Outer Ring Road (ORR) project and upgrading of the Chennai-Ennore Port connectivity project are driving demand in North Chennai.

Localities such as Avadi, Ambathur, Kolathur, Poonamallee and Peramburare are witnessing maximum demand.

Gurgaon

Gurgaon grew on the back of three developers launching plotted developments in

the city in the 1980s – DLF, Unitech and Ansals. On a parallel track, the Haryana

Urban Development Authority (HUDA) too, started selling plotted developments.

According to the laws of the land, the developer had to earmark a portion of the

land for Economically Weaker Section (EWS) Housing. This explains why there are

a very large number of plots in the 80-150 sq ft sizes and an equally, if not more,

units in the 200-1000 sq yard category. Since Gurgaon grew as a suburban

affluent location the number of units in the 300-1000 sq yard sizes was

significantly large. Most of the plotted developments that came up for resale upto

2010 were primarily from the DLF, Unitech South City and Green Woods and

Ansals Sushant Lok and Palam VIhar. Besides, there were plots in the HUDA

allotted sectors.

There has always been a very large demand for these plots. Jul-Dec 2010 marked

a watershed in land pricing and there was a significant spike in property values

across the city after it became legal for individual floors on plotted developments

to be registered as separate entities. This led to a boom in land pricing as builders

large and small, purchased plots from the open market and converted them into

multiple housing units to be sold to individual buyers. As all these plots were

within gated communities developed by colonizers, they were in demand.

After 2012, when the new Gurgaon Manesar Master Plan 2021 was created there

was a release in new sectors from 68 onwards and the plots map enlarged to

include Sohna Road and New Gurgaon areas. Again, as explained in the

introductory chapter, since the developments were new and the infrastructural

facilities were awaited, plotted developments were sold by colonizers in a bid to

mobilise early money. This trend has abated since 2012 as land values have risen

exponentially and the New Land Acquisition Act has made further aggregation of

Greenfield land more difficult. As a result, more apartments are now being

launched.

City Dynamics

In spite of high property values in Gurgaon, demand remained robust on the back

of strong economic drivers and connectivity to the airport. High land prices and

limited availability of land has pushed development of new sectors in the city such

as DLF IV and Sohna Road.

Sohna Road is one of the preferred residential areas driving demand on account

of its connectivity to NH-8. This attracts a number of corporates to set up their

base in this region. The area has adequate social infrastructure and a healthy mix

of commercial and residential developments and exhibits a classic example of

‘walk-to-work’ concept.

Pune

Pune’s growth story started in 2002 when the developers’ Association undertook

a structured analysis of the potential growth areas of the city and worked to a

plan. Subsequently the city’s market grew from a sleepy retirement destination

driven by education primarily to an Information Technology and manufacturing

hub which drew users from all over the country. Early plotted development in

areas such as Aundh, Baner and Pashan Road spread in all directions.

By 2010, plots were available in all old and new areas of the city, including the

upcoming Kharadi, driven by the IT parks, Magarpatta, a unique example of

integrated township on cooperative land, and far-off places such as Wakad and

Talegaon. The IT hubs in Hinjewadi and Kharadi have been responsible for a large

amount of residential development around these areas and places such as

Talegaon are driven by the manufacturing base. With the city bringing in newer

areas for development, prices have remained fairly steady and have not seen the

investor-driven growth in places like Gurgaon.

City Dynamics

East and West are the most active regions in the city. These regions are primarily

riding on the presence IT/ITeS companies, automobile manufacturing industries

and transport corridor.

The East Pune real estate market is largely driven by the CBDs in Kharadi,

Magarpatta and Hadapsar. A mix of BFSI, IT and BPO industries operate in the

vicinity. In the past few years, Kharadi and Magarpatta have gained prominence

as commercial-cum-residential destinations. Proximity to the airport and railway

station is another important reason for the development.

On the other hand, West Pune is driving on the back of IT Parks in Hinjewadi,

Baner and the industries in Talegaon and Pimpri Chinchwad Municipal

Corporation (PCMC). This has primarily attributed to the growth and development

in the western side of the city. Proximity and easy access to Mumbai through the

Mumbai-Bangalore Express Highway too, contributes in the development of the

region.

Conclusion

Studying urban land pricing is a complex exercise. These are just a few examples

of plotted land that was posted for sale on magicbricks.com. We have presented

these as a case study to understand how the ratio of different sizes of land and

their pricing differs according to market cycles. This analysis can be undertaken on

various parameters. As land becomes more and more difficult to procure, the

amount of land to be traded will decrease compared to built-up apartments.

However, the re-development potential of urban land adds to its value. This will

only become dearer as time goes on.

All data used for this research paper has been extracted from Magicbricks.com

and is proprietary in nature. The analysis and conclusions is the author’s own.