Stagnant prices hit Kolkata real estate

After last year's buoyant market, signs of sluggishness have set in the Kolkata real estate market, particularly in the residential segment.

While property prices in prime locations continue to witness an upward trend, they have stagnated to last year's level in upcoming suburbs in absence of investments.

For instance, in the Rajarhat (the residential and industrial hub in the north-eastern fringes of Kolkata) and Sector V (the IT hub) areas, prices have stagnated between Rs 2,500 and Rs 3,000 for almost a year now, even though construction cost has risen about 25 per cent in the last six months.

Over the last two-three years, residential property prices in the area had gone up by over 50 per cent, and developers had anticipated more than 15-20 per cent rise by this time.

Meanwhile, the growth in property prices (both rentals and outright sale) in the central business district (CBD) of the city have outpaced that in the Rajarhat.

The commercial rentals in the CBD area rose more than 50 per cent at around Rs 100 per square feet over the last three-four months, while rebtal values in Rajarhat area remained steady at Rs 50-60 per square feet. According to Himon Sanyal, head, business development, TCG Real Estate, the reason for the unprecedented rental growth in the CBD is linked to a relative slowdown in the construction activity in Rajarhat, along with its yet-to-be-developed infrastructure. "In residential projects particularly, non-residential Indians are not as eager to invest in Kolkata, as they were a year ago, due to fluctuating dollar prices and the overall slump in real estate," Sanyal said.

Developers are not willing to launch new projects and delaying the existing ones by two-three months, as they fear a price correction to happen in the coming months, think property experts. For example, TCG Real Estate, which had planned to launch a new project at Sector V in June this year, will now launch it on or after October.

"So long Kolkata real estate was not much affected by the overall slowdown in real estate market. However, a recession in property prices in Kolkata has just set in. There is a tendency of resistance towards property investments in Kolkata too," said S Venkataraman, director, Bengal Shriram.

Ranjan Arora of Bengal Unitech Universal said while the overall slump in property prices in tier I cities would be in the range of 30-40 per cent, that in Kolkata would be between 15-20 per cent. However, big real estate developers would not be much affected by the slowdown, as the small ones, Arora said.

"The high construction cost and dull share market has dampened the market. Investors are shying away from investing in the projects. However, there is no slowdown in the demand, even though the construction cost has risen over the last two three months," said Pradeep Sureka, president of the Confederation of Real Estate Developers Association (CREDAI) in West Bengal.

"In Rajarhat, no major project was launched in the last two-three months. However this is not an indication of any major slowdown, as the temporary stagnancy could be due to the fact that market has matured over the last few years, with a number of big players competing in the market," said Saurabh Tibrewal, assistant manger (residential), Jones Lang LaSalle Meghraj.

Sumit Dabriwal, managing director, Riverbank Holdings Pvt Ltd, is of the opinion that while the Kolkata real estate market has not been much affected by the overall real estate slowdown in the country, non-availability of land has become a major problem in the path of real estate development in the state.