Real estate hotspot: Trends in Ahmedabad

In the third part of the series on real estate hotspots in India, estatelister.com highlights why Ahmedabad could emerge as a long-term investment bet.

Ahmedabad's focus on basic infrastructure such as electricity, water and roads over the past few years has been a topic of constant discussion. It is clear that the policy has started to reap good dividends for the region, with a lot of top real estate companies looking to set huge projects here.

And, the early movers are already seeing good potential returns.

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Click here for Rediff Realtime News on Ahmedabad

As seen in the graphic alongside, real estate rates since December 2009 have almost doubled. The early movers like Godrej Properties have been the biggest beneficiaries of this trend.

Now, the real question is whether this meteoric rise in prices is sustainable? Is there a correction expected in prices in near term?

Note that these are indicative rates and not exact rates.

Is correction expected?

For one, the sales volume, like the rest of tier 1 cities in India, has fallen. That is the first indication that the consumers are thinking that properties are overpriced.

Another indication is the increasing supply of apartments. The number of projects already under construction and soon to launch has shown a rapid increase in the past few years.

Even now, in the next quarter, there are a lot of projects to be launched. Some of the projects have even roped in celebrities like Amitabh Bachchan and Hema Malini for launching these projects. 

The Developer view

The developers argue that the increasing supply is in accordance with the emergence of international corporates in Ahmedabad. For one, Sanand now houses almost every major firm in the automobile sector. Even a lot of high-end electronics and engineering firms are buying land in Gujarat due to the availability of basic infrastructure facilities.

One developer, preferring not to be named, said, "When people see such international companies setting shop here, there is bound to be speculative rise in prices. That is exactly what Ahmedabad is seeing today."

The city's growing stature

According to recent surveys, Ahmedabad is among the best performing markets in the top 12 cities of India. Gujarat State GDP (Gross domestic product) is growing at well over 10 per cent per year over the past few years. Another point is comparison of Ahmedabad suburbs with its peers in Bangalore, Pune, Chennai etc shows that the property rates are comparable, if not higher in some cases.

These trends are generally indicative of Ahmedabad's growing stature at a national level as a credible investment destination in real estate. With multinationals setting their businesses here, job opportunities and income levels are expected to rise in the coming years.

What does this mean for the consumer?

Right now, the property market is slower than what it was two quarters back. Some areas in Ahmedabad with oversupply of similar projects can expect a correction in the coming few months.

But over a 10-year span, Ahmedabad is a good investment destination, especially if it continues to attract the best talent and best companies at the rate it is doing currently.