The IT hub of Kolkata is yet to come to terms with patches of greeneries, empty offices and an errant public transport system.
Yet, these are not deterrents for realtors to buy land in Rajarhat and Sector V, the projected commercial centre of the city.
Land prices have gone up by 10-15 per cent in the last year at Sector V and Rajarhat, as realtors expect price further appreciation over the next one year.
Recently, city-based developer PS Group bought government-owned land, a part of land earmarked for IT park, at Sector V, for about Rs 18 crore (Rs 180 million) an acre through bidding process. The deal is likely to kick off further land transactions in the area, although not many firms are likely to set up offices there in the near future.
"We bought the land keeping in mind the three-year time horizon. Over the next three years we expect the area to develop in a big way," said Pradip Chopra, chairman of PS Group.
However, most city-based developers feel that a price war in the upcoming IT hub of the city will only deter companies to set up offices in the city.
"In cities like Pune and Hyderabad, the commercial rentals are close to Rs 25 per square feet. If someone is buying land at Rs 18 crore and acre, then the rental should not be less than Rs 40 per square feet. In these rates, no company will come to Kolkata. In the short term, the government might have gained, but in long term this is a deterrent," said a city based real estate developer.
However, till about two years back, land prices in Rajarhat and Sector V had zoomed to unprecedented levels. It had gone up to close to Rs 30-33 crore (Rs 300-330 million) per acre, only to fall at about Rs 10-15 crore (Rs 100-150 million) an acre till about an year back.
"Infrastructure at Rajarhat has marginally improved, but unless there is a pick up in the economic activity, there will not be much activity at Rajarhat," said Pradeep Sureka of the Sureka Group. His company recently bought land at Rajarhat for a commercial development.
The difference in rentals in central business district of Kolkata and Sector V is still more than 50 per cent, according to developers.
"In the next three to six months, commercial real estate should develop. The areas of Rajarhat and Sector V are yet to develop to the extent central business district as yet," said Santosh Rungta, president, Credai.
But members of the city's IT industry are cognizant of a supply-demand mismatch if developers complete projects in tandem.
"A lot of projects may be completed at the same time, so it is a question of timing. There is a possibility of over-capacity (of space) in the next six months to a year. The action could start by the third quarter of next year. But nobody can ignore the city because of its business fundamentals," an industry source said.
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