The year 2019 has been mostly uneventful for real estate in Kolkata, with not many enquiries converting into sales, keeping the home buying sentiment below average. With new launches kept at a minimum, the focus is currently on clearing the inventory overhang.

Various stimulants such as the Non-banking Financial Companies (NBFC) crisis and revised GST rates, in addition to political instability, had threatened to bring down property prices considerably in Kolkata, earlier in the year. However, braving the odds, the average property prices in about 60-70 percent of the localities remained unchanged, while only a few showed a marginal dip of one to two percent through all the quarters of 2019. Developers refrained from launching new projects and concentrated on clearing the current pile-up of unsold stock, which has been stable for the over a year at about 40,000 units.

Amid muted sales, the rental market remained upbeat, showing about a 2-3 percent surge in rental ‘asks’, YoY, across all the quarters (Source: 99acres Insite Reports). 

Buyer demand inclines towards affordable projects by established builders

Mitrangshu Mukherjee, real estate agent, Property Inc, reflects, “Projects by established developers, who have been operating for a decade or more, have been garnering most sale enquiries, while new players are finding it hard to find a foothold in Kolkata. Demand for branded developers has been gaining steam through promotional campaigns and attractive payment plans and schemes.”

Developers have also been pushing the concept of service apartments, which is an emerging segment in the city. Innovative marketing strategies such as arranging channel partner meetings and consumer centric seminars have helped attract buyer interest for such burgeoning real estate offerings. Meanwhile, more than 50 percent of the demand was concentrated towards 2 BHK and 3 BHK ready-to-move-in units in the affordable segment.

Under-construction properties, which attract five percent GST post the revision of rates, witnessed very low demand. As buyers insisted on Completion Certificates before finalising transactions, sales of under-construction units dwindled significantly, in turn, hurting the funding of new projects.

State policies

Developers faced some initial troubles in getting accustomed to the newly introduced West Bengal Housing Industry Regulatory Authority (WBHIRA). There have been under 200 project registrations with authority from Kolkata, and only about 400 across West Bengal, with many developers and homebuyers questioning the constitutional viability of a regulatory authority separate from the nationally adopted Real Estate (Regulation and Development) Act (RERA).

Further, according to a knowledge paper published by CBRE, the West Bengal government introduced a slew of policies to encourage Foreign Direct Investment (FDI) in the retail and commercial real estate segments. An encouraging policy environment and funding for infrastructure helped the State attract some investments from offshore players. Some of these policies include:

  • Single window facility for real estate services in the State
  • Incubator centres for start-ups       
  • Government incentives for technology, manufacturing and automobile sectors
  • E-governance initiatives for regulating commercial real estate under WBHIRA, such as Silpa Sathi
  • In line with the Business Reforms Action Plan (BRAP), 2017, a number of reforms for Ease of Doing Business (EoDB) were introduced over the 2018-19 period

Emerging localities in Kolkata that witnessed growth in 2019

Joka

With affordable options aplenty, Joka has proven to be a locality individually responsible for a major share of real estate enquiries this year. With the locality recently coming under the jurisdiction of the Kolkata Municipal Corporation (KMC), the infrastructure has rapidly transformed and upgraded over the last two years. The social infrastructure consists of some big names in secondary as well as higher education, such as the prestigious Indian Institute of Management (IIM). Joka is also set to be one of the terminal stations of Phase 3 of the Kolkata Metro. The average capital rate of homes here rose from nearly Rs 3,500 per sq ft in January 2019 to around Rs 4,200 per sq ft in September 2019, still managing to remain among the least expensive options in Kolkata. This locality commands an average rental ‘ask’ of Rs 9 per sq ft per month, which has remained unchanged from last year.

Madhyamgram

A surprising entrant in the real estate scene of Kolkata was the peripheral district of Madhyamgram, posting a three percent YoY hike in the capital ‘ask’ rates (Source: 99acres.com). There was an overwhelming demand for 2 BHK units priced within Rs 24-30 lakh in this locality. Major developers showed a keen interest in investing in this serene, untapped locality, away from the hubbub of the city. The area is close to the airport, and a well-planned rail network connects this peripheral locality to prime destinations such as Barasat, Park Circus and New Town.

Localities which demonstrated consistent performance in Kolkata

Popular localities of East Kolkata such as Salt Lake, Rajarhat and New Town, and South Kolkata such as Joka, Rajpur, EM Bypass and Tollygunge, continued to record consistent housing demand with about 70 percent of the total enquiries concentrated in these areas during the year 2019. 

Salt Lake

The bustling IT hub in Salt Lake feeds the flourishing rental market of the city because a majority of the IT professionals’ crowd here comprises of bachelors renting shared accommodations, many of them belonging to other parts of the country. This area consists of premier educational institutions and IT companies such as Accenture, TCS, IBM, and so on. The Eastern Metropolitan Bypass enhances the connectivity of this area to prominent commercial districts in South Kolkata. The enquiries in this locality have been steadily increasing over the year while posting a minuscule uptick in property prices.

Rajarhat

The satellite district of Rajarhat continued to post stable housing sales and a two percent YoY hike in the capital ‘ask’ rates in the third quarter of 2019. New launches across the city were muted, but Rajarhat witnessed a few leading developers setting up new projects, possibly looking to capitalise on the upcoming residential hub consisting of commercial and retail complexes and IT Parks. Robust social infrastructure and amenities in addition to proximity to employment hubs such as the DLF IT Park, Candor Techspace, Gitanjali Park, etc. have managed to keep the attention of consumers to this district.

Expected real estate trends in 2020

Hirawat, property consultant, Arham Estates, avers, “Northern and eastern peripheral localities are expected to see a revival in demand for housing in 2020, owing to the proposed residential hubs as well as commercial and retail complexes which will be completed by the year-end. Although, only if the existing inventory overhang is offloaded will there be room for new launches.”

Further, Kolkata may witness a positive impact of the State policies for ease of doing business along with the commercial hubs, in addition to an impressive mechanism to encourage the establishment of IT/ITeS industries. Meanwhile, there could be some development towards the adoption of the directives of the Real Estate (Regulation and Development) Act (RERA), 2016, following a massive hue and cry from the developer lobbies. 

Currently, the primary concern of the Kolkata-based developers remains that the special funding window or the proposed Alternate Investment Fund (AIF) is only available to RERA-registered projects that are stalled or incomplete. About 13,000 under-construction units in the city have been excessively delayed, which would benefit if the West Bengal government enacts RERA in the State instead of WBHIRA.