Even as global economic slowdown and uncertainty in financial markets have battered the real estate industry countrywide, forcing a price correction in several markets, properties in Kolkata and Chennai bucked the trend with steady demand in affordable and mid-segment housing.
According to a study by global realty player Knight Frank, the residential sector in Kolkata is least affected by the economic slowdown among tier-I cities. Only Chennai fares close to Kolkata. In the other metros, the market has either shrunk or remained stagnant, leading to a supply glut.
“The reason why Kolkata and Chennai have not been hit by the downturn is because both markets are driven by end users and not speculative investors. Builders, too, have been pragmatic in these two markets and not gone the whole hog to create a situation where supply is excess. Moreover, prices in these markets continue to remain reasonable,” said Pradeep Sureka, President of the Bengal chapter of Confederation of Real Estate Developers’ Association of India (CREDAI).
It is not just the prudence of builders that helped the two markets. Elections in West Bengal and Tamil Nadu earlier this year played a crucial role in constricting supply. The political flux that preceded and followed the election grounded construction activity for five-six months. The resultant delay in deliveries meant the supply crunch persisted, unlike other cities where a spate of new projects in a depressed market situation led to oversupply.
“Building material supplies had stopped for four-five months as a political realignment happened after the elections. Like Kolkata, the supply line for stone chips, sand and bricks is controlled by political interests in Chennai. While AIADMK men took charge after the change of guard in Chennai, it was Trinamool Congress taking over from CPM in Kolkata,” said CREDAI national secretary T Chitty Babu.
The elections also meant that sanctions for large projects were suspended for months. It is only now that fresh sanctions are being handed out. “With Urban Land Ceiling Act still in place and the new government in Bengal announcing its intent to steer clear of land procurement, large projects will be difficult to come by. The supply crunch situation will only accentuate,” Sureka added.
