A move by the Kerala state government to set up a Smart City at Kochi has triggered off a fresh rally in real estate prices in the central districts of Kerala, especially in and around Kochi.
The real estate and construction business in Kerala have been passing through a dull phase after new and stringent norms on registration and stamp duty were introduced some months ago.
The announcement of the Smart City project has added life to the segment recently.
The government will soon tie up with the Technology and Media Free zone Authority of Dubai to set up the Smart City, one of the largest IT infrastructure projects of India at Kakkanad, near Kochi city.
Around two years back, the UDF government had announced the project and this had led to a surge in real estate prices in Kochi and surrounding areas.
Almost all the major builders of India had acquired land at Kakkanad area and the value of land had increased by manifolds.
Thereafter, LDF had swept to power in the elections and work on the project was slowed down.
Now after a year, the project is about to take off.
The project was expected to create jobs for 90,000 professionals in the city and this would create demand for apartments.
According to major builders, around 30,000 apartments and flats would be needed in Kochi in three years.
By 2015, Kochi would need more than 100,000 plus apartments.
Three mega projects, the Vallarpadam International Container Terminal, Petronet's LNG terminal and the Smart City, were expected to lead to 200,000 jobs while related projects like the bunkering terminal, single point mooring and new hotels would add to demand for apartments.
In the last few months, land value in Kochi's Kakkanad area climbed 75 per cent.
A large number of land deals were being done in Kochi localities like Vyttila bye pass (NH 47) and the Sea Port to Airport Road.
Prices per centiare near NH 47 was Rs 20 lakh and on the Sea port -- Airport Road it was Rs 600,000 to Rs 800,000.
According to K A Mohammed Salim, managing director of Asset Homes, land prices in Kochi were lower than most other tier-II cities and hence the interest among builders.
Salim said that the construction of flats would surge in the coming years and investments to the tune of Rs 6000 -7000 crore (Rs 60 to 70 billion) would be required in the next three
years.
Villas were also in demand in major towns in the average price band of Rs 50 to Rs 70 lakh (Rs 5 to 7 million) per unit.
But major builders agreed that demand for apartments would drive growth in the future with prices being in the Rs 15 -25 lakh (Rs 1.5 to Rs 2.5 million) band, affordable for professionals.
Salim said the surge in land prices could derail plans to build villas as unit prices could soon exceed Rs 1 crore (Rs 10 milion) per unit.
Demand for flats, especially from NRIs, was already high and most flats were being booked as soon as bookings opened.
Major builders were concentrating on sales in the Persian Gulf region and around 50 per cent of flats were being sold within a month of announcement of a project.
In Kochi city, around 5,000 flats were under construction at present.
Demand was so high that extension of the city outwards in all directions was inevitable.
In the north, land upto Thrissur 80km away on NH 47 was now being described as being suitable for apartments in future and land value was rising in areas like the Nedumbassery-Angamally area where the international airport was situated.
In the south, the road to Cherthala was suitable and in fact, in Cherthala, some large apartment projects were coming up.
Other areas to see development included the south-eastern suburbs of the Thripunithura-Chottanikkara and the north-western areas of Varapuzha, North Parur and Vypin Island.
The city of Kochi was at present slowly spreading to around 70 per cent of the land area of Ernakulam district as very little land was available within the city limits.
The city was already extended upto the Kalamassery and Aluva municipalities since these were areas adjacent areas of the old city.
Hectic construction was also going on the reclaimed land near Goshree bridges connecting the city with Vypin island.
The development of infrastructure projects and the new road-rail connectivity would revive the fortunes of the city and a number of big hotel projects had been announced recently.
However, the unique eco-system of the city was under threat as a major portion of the paddy fields were now being taken over and developed into flats and housing projects.
High real estate prices was likely to edge out many of the older residents of Kochi city and its suburbs to other districts.