Track2Realty Exclusive: The property markets of the financial capital Mumbai and the political capital Delhi has always been exposed to the reality that it is the expat Indians, the working class professionals, who are the key demand drivers of property. However, in the last over a decade or so this outlook on the migrant work force has become a pan-India phenomenon.
Today, most of the key cities with sizeable economic activities are a magnet for the young expat professionals who are the major demand drivers. Most notably, they are changing the conservative outlook of many of these cities.
The expat work force has rather been instrumental in expanding the boundaries of the given city and making the satellite towns a success story. Be it Gurgaon or Noida in North, Pune or Ahmedabad in West, Bangalore or Coimbatore in South and even Kolkata in East; the expats are contributing to the economy of the city and its property market is increasingly devising ways and means to attract this segment of buyers.
Beyond the two metro cities of Mumbai and Delhi, in the next phase of market evolution what started with IT driven locations like Gurgaon, Bengaluru or Pune, that have been witness to the migration of large educated workforce, has today spread beyond the IT/ITeS boundaries. It is also reflective of the given cityâs overall economics that suggests the large workforce will have a major share in creating the demand.
The scenario has drastically changed within a span of few years. People from different walks of life are settling down in the cities and analysts often even assert that they cannot be termed as expats anymore because they are willing to settle in the city. But then demography of these cities are changing fast with the educated workforce migrating. It has fast turned many cost conscious cities into a cosmopolitan and the aborigines are becoming more dependent on migrant population.
MNCs magnet for expats in North India
If the Southern suburb of the Delhi-NCR continues to command the premium due to its luxury quotient the credit to a large extent goes to the Multinational Companies (MNCs) who have been the magnets for large young work force from across the country. Gurgaon, as a matter of fact, shaped up as the first corporate city at a time when the financial capital Mumbai was the only obvious choice for the corporate sector. Within a decade Gurgaon emerged as a preferred city for the business world and its demand reached to a level where it started giving a tough competition to the island city Mumbai with its open spaces, quality office & retail and the luxury apartments.
It is noteworthy that majority of the young professionals in this part of the world are actually expats who have been employed in the MNCs operating out of the city. These MNCs are not only providing the white collared and blue collared jobs to the youth but also fuelling the consumption driven society where the aspiration level is high and quest for luxury even higher. Since luxury living and property investment is pretty high on the aspiration level of these youngsters, luxury residential apartment in Gurgaon is doing much better than any other luxury city of India.
DLF which has to its credit the creation of DLF Cyber City that continues to be the MNCâs first choice even after decades maintains that no other city has been as high on the wish list of the corporate sector as Gurgaon. DLF spokesperson Sanjey Roy says that the city does not grow in isolation. It has to match the infrastructure development with the overall aspiration level of the city with enough spending power and that is possible only when there are enough quality jobs in the market. Naturally, MNCs and the young professionals are the deciding factor in the economy of the city.
âA lot of people ask us why other cities could not replicate the successful model of Gurgaon. Well, first of all the idea should be to conceptualise a new lifestyle city and not to replicate. Since the effort has been more to replicate, hence no other city could shape up as the luxury landscape the way Gurgaon evolved over a period of time. Moreover, attractive destination does not exist in isolation as thriving economic activity is what sustains the market in general which needs quality real estate that can attract the aspiring class and they could complement each other,â says Roy.
As the city of Gurgaon started getting saturated, Noida that till very recently has been a distant second option for the aspiring expat population has suddenly become a sought after location. The reports indicate that the investors are most bullish now on the Noida market for long term appreciation. A major reason is that the city is quite affordable and attractive for the expat population. Of course, the developers have sensed the giant leap of the city in terms of its attraction quotient and hence the lifestyle options are increasingly being developed to attract the expat workforce.
Nikhil Hawelia, Managing Director of Hawelia Group feels Noida is a natural home to the expats for reasons more than one. First, it is much more affordable than other destinations which are magnets for the young professionals and also business community. Also, the physical infrastructure is much better than many other destinations that are high on the wish list of both the corporate sector and the expat working professionals.
âExpats driving the real estate market is a reality that everyone within the built environment now well understands. The point is Noida may have been a late mover in emerging as a magnet for investment but then this market has a locational vantage point for expats across the Delhi-NCR. To add to it, there is increasing penetration of corporate giants which is further enhancing its attraction quotient,â says Hawelia.
Lifestyle calling card of expats across West India
With Mumbai getting saturated, increasing urbanization is a phenomenon that is driving both the corporate sector and the expat workforce to Pune. The city will continue to see more migration in the foreseeable future since the urban environments are offering citizens from rural pockets better opportunities and a better livelihood. With Pune being a magnet for such migrant workforce the property market in the city has been benefitted in the last few years. The share of this upwardly mobile, well-earning and lifestyle driven class in the Pune property market is only set to grow. As of now, they stand out as a key demand driver.
The rise and growth of Pune in terms of primary drivers in the city are the migrants working with sectors like IT, automobile, education and other manufacturing sectors which has led to the growth of cityâs economy. Better supply itself is pushing the demand for urban crowd where the good climate all through the yearÂ had earlier made this city the pensionersâ paradise.
Abhay Kumar, CMD of Grihpravesh Buildteck says still IT is predominant in Pune but there are other drivers too for real estateÂ growth of the city.Â The improved connectivity of Pune-Ahmednagar-Aurangabad is driving Raanjangaon belt on one side and the news of Navi Mumbai Airport has shown remarkable interest in theÂ Mumbai-Pune Expressway areas. Â Pune has got advantage that it can grow on all sides. Lavassa Road area, Pirangut, Paud etc too have witnessed some encouraging developments.
âPrimarily yes, the expats are the main demand drivers in Pune. The quality of development too has been due to such demands where the customers are well travelled, well aware and well payers. One can observe the developmentÂ of hotels, recreational joints, malls etc being the main driver for such growthÂ which has beenÂ mainly due to the latent demand of the expats,â says Kumar. Â Â
Similarly, an outside view on the real estate market of Gujarat may wonder with the change of property dynamics. A market known for long as the cost conscious market where economy of the region was heavily loaded in favour of affordable housing has suddenly blossomed into a market where high-end and even the luxury property is doing brisk business. The change of property category is evident not just in residential units, but even the office space and retail outlets have undergone major change in the last around a decade.
A study by Track2Realty finds that more than one third, as many as 37 per cent, buyers are expat professionals and entrepreneurs and that makes Gujarat as one of the leading markets where the share of expat buyers is higher than any other city, outside the metro cities.
Revati Kasture, CGM & HeadâResearch and Grading with CARE Ratings believes Gujarat is a hub for manufacturing sectors like automobile, pharmaceuticals, gems & jewellery, petrochemicals, chemicals etc. It is also emerging as a centre for IT/ITeS industry. This makes demand for real estate lucrative. Gujarat is nowadays witness to a huge investor demand from entrepreneurs, NRIs and from neighbouring cities like Mumbai and Pune. The investor demand is more skewed towards plots and apartments.
âMost of the demand from expats is investment driven. However, with many mega projects lined up and emergence of state as financial & IT/ITeS hub increased demand from migrant population would lead to higher demand for housing. GIFT city alone aims to create one million direct and indirect jobs. The NHB Residex shows marginal uptick in Ahmedabad real estate prices, while Surat real estate index has stayed flat and range-bound. Though the trend in prices is expected to be steady, in the longer term with demand rising, traction could be seen in real estate industry in Gujarat,â says Kasture.
Expats scaling up cost conscious South India
Analysts have been wondering in the last couple of years that when the property market across the country had been witness to slowdown, how come the South Indian cities like Bengaluru and Coimbatore market kept the momentum up with no visible signs of stress. As a matter of fact, the property prices in these two cities across the asset class noticed upward movement in the range of 10-15 per cent, thus bucking the trend of slowdown.
Many thought these markets are end user driven where the local economy and local demand has been the main driver and hence the market remains unaffected. However, one of the most critical components that flushed in the buyersâ money into the property market of Bengaluru and Coimbatore has been the ever increasing demand from the expat community.
Increasing urbanisation is today changing the urban demography of the two cities completely. The expats professionals are flocking to Bengaluru and Coimbatore not only from the South Indian regions but across the country. They are fuelling the local economy in general and property market in particular. More importantly, they are the one who do not hail from the city inheriting parental property but need to buy houses.
Anurag Jhanwar, Director, CRISIL Real Estate Ratings finds a reason behind this growth of Bengaluru as the new lifestyle city. According to him, Bengaluru property market is tilting towards lifestyle options because the young professionals are opting for those.
âIn recent times demand in the Bengaluru housing market has been triggered by the growth of the IT/ITeS and manufacturing industries in the city. Employees working in these companies, including migrants, are creating this demand, which is also paving the way for a lot of townships. Hence, there are a number of townships under construction in the city. These young working professionals have fueled the consumption cycle of the cityâs economy, which has had a corresponding effect in the growth of the property market, including retail outlets, malls and office spaces,â says Jhanwar.
On Coimbatore market, Revati Kasture says with increasing demand for new units, the prices in the city have increased by 10-15 per cent for new launches. Also, rental values have soared by 25-30 per cent in last couple of years. The absorption trend in Coimbatore is expected to remain stable and will follow last year’s trend and the prices are expected to rise at 6-9 per cent year-on-year basis depicting a healthy overall growth of real estate demand in and around Coimbatore city.
âThe current demand is from IT/ ITeS employees who are expats and demand for good facilities & amenities, infrastructure and thus there is heightened activity in construction of integrated townships and residential projects. With IT offices and commercial complexes demand too is rising and it will lead to overall demand for better infrastructure in Coimbatore,â says Kasture.
Expats defy East India trends & perception
Kolkata may be seen in the collective consciousness as a land that does not encourage investment and job opportunities and hence not a market for the expat professionals. But wait! In the last one decade it is the expat professionals who have come up as the main demand driver of property. The transportation and communication have improved in Kolkata like never before and is probably the only metro city, not only in India but in the entire world, which has the cheapest and several transportation options from any place within its precincts or even from the suburban areas.
Kolkata has surpassed all the other metros in India in terms of being a magnet for professionals, paving way for its real estate developers to even think of building homes in areas which are not very close to its city centers. Hence, very good homes have mushroomed now in the various suburban areas of Kolkata, like BT Road (North), Chandpur Champahati (extreme East), Baruipur (South) and Howrah (West). Â The prices are affordable due to low land cost of those areas, but various commuting facilities and economic opportunities have ensured that expats are investing in these areas.
Jitendra Khaitan CMD, Pioneer Property Management makes an interesting observation when he points out the success of service apartments in a city like Kolkata. According to him, Rajarhat and Salt Lake areas have the maximum supply for service apartments because of its proximity to Sector V, the IT hub of Kolkata and the international airport. The areas in south and central Kolkata such as Park Circus, adjacent locations of EM Bypass, Park Street, Ballygunge etc. also witness good demand due to their connectivity to the railway station and metro network.
âThe huge supply in Salt Lake and Rajarhat provide enough choices to the corporates which may create scope for negotiation on pricing to strike the attractive deal on bulk office space and that would derive a win-win situation for both the developers and corporate buyer/tenants. Service apartments, another relatively new concept has picked up in Kolkata over the last few years. These are the ready-to-move-in flats that provide the occupant a fully-furnished unit along with optional facilities such as baby sitter, chef, Wi-Fi connection and a 24×7 service kitchen. Enhanced volume of foreign tourists, frequent & prolonged business trips in the corporate sector and increased investor interest has made service apartments a sought after property segment in Kolkata,â says Khaitan.
The moot point here is whether the expats are the prime demand drivers of property market across the major cities of India? Have they outnumbered the demand from local population and hence expected to change the market dynamics? Well, it may depend city to city and the expats may not be the project riders everywhere as of now, but they have certainly emerged as one of the key demand drivers of property market across the major cities of India.
Increased economic activity will lead to more urbanization and hence expats will continue to be a major demand driver in future. It may not have changed the market dynamics completely in every city but the most visible change is in those cities where the spending pattern has been relatively conservative and per capita expenditure not as high as in other major cities. What can be vouchsafed is the fact that the expats have surely made their presence felt in most of the urban property markets across the country and the developers have taken notice of that. And hence, the real estate trends in many key cities promise to change the market dynamics more in favour of expat professionals.