“The concept of a second home, especially within a radius of 20 to 40 kms from the city has really picked up post-COVID,” said Monil Parikh, Real Estate Expert, Parikh Infracon Pvt Ltd and former chair of Young Indians–Confederation of India Industries (CII). “People realise that an isolated, self-sufficient farm house where they can go and relax and their families can stay safe is a good investment. The demand for such homes, from areas around Shilaj to Racharda, has increased by around 40 per cent.”
Of course, not everyone can afford this, but Ahmedabad has plenty of people with the resources to make this a viable option for real estate developers, whose focus so far has been on building progressively taller apartment complexes. COVID-19 has exposed the health risks in such packed communities, and imposed resultant restrictions to prevent spread.
Now people crave greenery, clean air, a feeling of openness and control over their immediate environment. Hence the hike in demand and prices for independent bungalows and farmhouses in the city and its surrounding areas.
Premium farmhouse projects are selling at much higher prices; for example, the unusually named “Other Side,” which was earlier selling at around 11,000 per sq feet, is now retailing at Rs 16,000 per sq feet and “Kalhar Bungalows,” that was priced at about 14,000 per sq feet, is now retailing at around Rs 28,000 per sq feet, according to Monil Parikh.
Many schemes like Upland by Arvind Builders, Arun and Ankur that are coming up from Shilaj to Thol, located in a 20-30 km radius from west Ahmedabad, are being considered for first homes.
Spike in prices
Bhavesh Prajapati, owner of real estate firm Vinayak Estates, says he has never seen such a spurt in demand for farm houses. “Post COVID has seen around 300% hike in sales of farm houses, mainly in areas like Racharda, Thol, Bhavanpura, Chekhla, Mulsana, Palodia, Garodia and Nandoli,” says Bhavesh. “Meanwhile, Hebatpur road, Thaltej, Shilaj and Science City road areas have emerged as the hot favourites for a first home. Rates are increasing from 20 to 40 percent depending on location and development.”
But Bhavesh also voices a note of caution. “I feel this is a bubble, as this price spike is not due to any major policy or infrastructural change,” he says. “People expect prices in the newly developing areas to rise as dramatically as in CG Road and SG road, where prices have risen 4 to 50 times, in the past 10 years. I don’t see such returns in the next 10 years in these new areas.”
Interestingly, the scenario is just the opposite within city limits, where the demand for housing and apartments under Rs 1.5 crore is on the rise in apartments complexes like Sheela, Shivalik, Shilp, Ratnakar. But demand for office space has fallen.
“We won’t see a spike in office space for the next one and half years, but it seems that those who were staying in rented homes or in small houses want to invest in larger homes as they see themselves spending a lot of time at home,” said Ms Asha Desai, Vice president of Coldwell Banker, Gujarat.
“The government is providing some legal support, and increasing FSI (Floor Space Index), also known as floor area ratio (FAR) ), which could depress land prices,” adds Asha. However, there was little change in market rate movement during the four times the government increased FSI.
Vertical city not workable
The government has now given permission to create a vertical city by permitting construction upto 70 floors. Asha points out that the problem is that such a building will take a minimum of 5 to 6 years to build, and for it to be viable, it should sell in the range of Rs 20,000 to 65,000 per sq meter. The rates at this time are a maximum of Rs 10,000 per sq meter.
Another major issue with developing a vertical city is the lack of proper infrastructure, like fire-fighting beyond 20 floors and road network to support such a dense population.
Pravin Kotak, chairman of Gujarat Chamber of Commerce’s RERA committee and chairman of JP Ltd Iscon builders adds that the 70-floor building can be a reality only after rules for implementation of the laws passed are in place.
“We are waiting for the government to set up committees to ensure regulations and infrastructure like fire-safety, road, garbage disposal etc,” says Pravin Kotak. “Moreover, right now, the financial viability of such a project in Ahmedabad is in question. Currently, Ahmedabad’s capacity to absorb such projects is at a rate of around Rs 7000 per square feet. Unless Ahmedabad increases its capacity to pay for premium space, I don’t see this happening.”
The most interesting thing happening in the city’s realty scene post-COVID is the spurt in demand around SP Ring Road, in areas like Ghuma, Godavi, Ongnaj and Lilapur. “This is mainly due to interest in open spaces around their home as people have been cooped up in small spaces for a long time and are valuing green and sky-open landscapes,” says Kotak.
Kotak says that rather than investing in high-end apartments in the city, people would prefer to invest Rs 4 crore and upwards in a bungalow, even though they have to move away from the city. We expected a dip, post-COVID but there is an increase of around 30% in trading of land and bungalows based on potential demand”.
Low interest rates
“People have lived indoors for so long that more space at home has become central and important,” says Jaxay Shah, President of CREDAI and Savvy Infrastructure Pvt Ltd. Homes with balconies or bungalows that offer better/larger space are now impacting real estate demand, he says.
“Today it is COVID-19, in the future there may be something else, so this anxiety is influencing decision making. Another factor for the land demand spurt is that interest rates are at its lowest and existing home loans are being transferred to lower rates,” Said Jaxay.
Therefore, according to him, people in Ahmedabad have gradually returned to buying and investing in homes. There is a steady flow of demand in the affordable space of 1 and 2 BHK homes, especially the former. These are first time buyers.
Also, the Prime Minister Awas Yojana scheme is working in favour of these buyers. Under the scheme, home buyers can get a government grant based on the income slab they fall in.
Another noticeable change is that the investment pattern appears to be shifting from retail and office space to open plots. “Plot schemes in areas near the new proposed clubs of Karnavati, Rajpath and Sports Club are witnessing a surge in sales,” says Jaxay Shah. “In addition, investors who have burnt their money in equity are looking to pick up real estate as a long term asset for safer returns and a space they can shift to, in case there is a new lockdown.”
However, Sobha Ltd, a Bangalore-based construction company, is currently developing the tallest residential project in Gujarat with a height of 105.5m at GIFT City. “Tall buildings around the world have represented progress and can attract greater attention of stakeholders fostering growth,” says Jagadish Nangineni, Dy, MD of SOBHA Ltd, which has committed over Rs. 500 crore in residential development in Gujarat. “Conservative thinking, coupled with reducing rental yield and other interest yielding securities, is driving the desire to build financial security with physical assets.”
Only, COVID may be driving a change in the kind of physical assets they invest in.