While the larger real estate developers were unsuccessful in tapping the tier-II/III markets in Gujarat, the local developers have been realigning business strategies to leverage cities like Surat, Ahmedabad and Vadodara. From bringing in more transparency to enhancing product portfolio, developers in Gujarat have been trying several things to gain edge of their national counterparts.
"Cities like Ahmedabad, Vadodara and Surat have seen rise in enquiries for industrial plants and financial services. These cities have also become more cosmopolitan in the last couple of years. This has led to local developers making efforts to strengthen their ground in the state. This is being done through either increased transparency or enlarging reach to other cities in Gujarat," said Nirav Kothary, regional director - Gujarat, Jones Lang LaSalle India (JLL).
For local developers in Gujarat, it is also the economic slowdown that has insulated them from large developers. "Metro and other bigger cities have been less insulated to economic slowdown which has impacted the large developers. However, the tier-II and III cities of Gujarat still continue to grow, offering increased opportunities for us," said Suresh Patel, director of Surya Group, an Ahmedabad-based real estate developer.
Increasingly, local developers have been expanding their footprints into other cities in Gujarat and outside. "With more professionalism coming into the realty market in Gujarat, we have been able to expand to other cities within and outside the state," Patel added.
According to a recent report on tier-II and III cities by Sanjay Dutt, CEO–Business, JLL India, local developers also have the edge of understanding their geographies better than large national developers.
"There is at least one strong developer in every region. These brands have demonstrated that they understand their geographies better than any players who arrive from the outside to experiment on the Tier II / Tier III story," the report stated.
Moreover, it is also the diversity in business opportunities in these cities that have led to local developers' success. "Unlike say Bangalore which depends heavily on the IT sector, Gujarat has been versatile. Hence, a slowdown in a single sector has not impacted demand for residential or commercial properties in these cities, which have been leveraged by the local developers," added Patel.
What's more, apart from user-based demand, cities like Ahmedabad, Vadodara and Surat are also witnessing demand from the investor community. "Among the ones that bear watching by long-term property investors are Ahmedabad, Surat, Vadodara, Kochi, Coimbatore, Thiruvananthapuram, Jaipur, Jodhpur, Vishakhapatnam, Vijaywada, Chandigarh and Ludhiana," the report further stated.
However, the success of local developers in near future is set to attract large developers to these cities in Gujarat. "The success of these local developers will inspire larger developers from beyond a region’s borders after the fundamentals of that area’s demand are captured sufficiently and the markets are sanitized in terms of municipal and financial market stabilisation," said Dutt.
Seconding his views is Pankaj Kotak, head-business development, Gujarat, K Raheja Corp. "Gujarat has been an attractive destination for developers. We now have the first mover's advantage in the IT SEZ space in the state and have already seen 150,000 sq ft of our IT SEZ space being leased out. We have also launched our retail ventures Shoppers Stop and HyperCity recently in Ahmedabad," said Kotak.
