How infrastructure push will impact real estate sector

                Infrastructure is a key driver of the economy of a country and is known to play a pivotal role in determining the value of properties in any particular region.



Infrastructure is a key driver of the economy of a country and is known to play a pivotal role in determining the value of properties in any particular region. Lack of road, rail or air connectivity to any particular region results in lower property rates there as compared to areas having good physical infrastructure. And infrastructure is limited not only to connectivity alone, whose existence though is a necessary precondition for development of other kinds of civic amenities.



Demand, and hence price, of real estate is directly proportional to the distance of the location from areas providing jobs, industrialisation and civic amenities.



Major housing and commercial hubs have developed in the Mumbai Metropolitan Region and National Capital Region following the establishment of good connectivity options of areas on the suburbs of Mumbai and Delhi. For example, Noida, an industrial township across the Yamuna River in Delhi, developed not only as a prime residential and commercial destination but also as an institutional base following the commissioning of the DND flyway in the year 2001. Areas further south of Noida, including Greater Noida, have also been on the growth trajectory with the extension of the Delhi metro and the commissioning of the Yamuna Expressway that connects the national capital to Agra. More recently, in the National Capital Region, the commissioning of the Hindon Elevated Road has resulted in the appreciation of property rates in Raj Nagar Extension in Ghaziabad by enhancing its direct connectivity with the UP Gate on the border of Delhi.



Apart from transportation networks, infrastructure also includes civic amenities like electricity and water supply, drainage, waste disposal and sewage treatment facilities. The Bharatiya Janata Party (BJP)-led Central government under the able leadership of Prime Minister Narendra Modi has been committed to the development of all kinds of infrastructure in a big way which will have a ripple effect on the overall value of properties in the real estate market in the country. These projects are also aimed at creating job opportunities through industrialisation which will further boost real estate.



The Pradhan Mantri Gram Sadak Yojana, for example, aims to provide all-weather road connectivity in rural areas across the country. In order to boost industrialisation through the ‘Make in India’ policy initiative, the Central government has also begun work on establishing two defence industrial corridors, in Uttar Pradesh and Tamil Nadu, respectively. The under-construction Delhi-Mumbai Industrial Corridor project is a planned industrial development corridor project that will link several major cities of the country with the financial capital Mumbai and the national capital Delhi. The Bharatmala project aims to construct several greenfield highways across the country at a cost of over Rs 5 lakh crore. The Sagarmala project will similarly connect different ports of India along its 7,500-km-long coastline, thereby providing a big boost to the logistics sector. Similarly, the UDAN scheme of the government of India aims to provide cheap and economical air travel options to all citizens of the country.



These connectivity projects are not only expected to boost existing prices of properties but will also open up hitherto unexplored real estate markets in different parts of the country. Development of civic amenities is a time-consuming process and improvement of connectivity provides good access to the existing facilities during the gestation period. For example, good road connectivity from Gurgaon or Noida enables citizens to avail world-class medical facilities provided by the government in the national capital of Delhi.



The Central government has, however, also been at the forefront in establishing and extending civic amenities to the remotest parts of the country. The Saubhagya Scheme aims to provide electricity connections to over 26 million households across the country while the AMRUT scheme aims to provide water connections and sewage facility to all households.



Besides, the Central government has identified 100 cities across the country for infrastructure development under the Smart City Mission. The mission is a urban renewal programme under which existing cities will be retrofitted with state-of-the-art physical infrastructure, including road networks, potable water supply systems, sewage treatment plants and electricity supply systems. In addition, basic governance services will be provided to citizens with the help of IT-enabled solutions. Greenfield areas will also be identified in each city for infrastructure development under the mission. A total amount of Rs 2 lakh crore has been estimated for development of the 100 smart cities which will ultimately result in spiralling real estate development in Tier 2 and Tier 3 cities.



In December last year, the Central government further announced a National Infrastructure Pipeline to be undertaken across the country with funds generated from the Central and state governments as well as the private sector. Projects worth over Rs 100 lakh crore in the fields of energy, roads, urban development, and railways will be executed across 18 states and territories across the country under this programme over the next five years. With India aiming to becoming a $5-trillion economy by the year 2025, the National Infrastructure Pipeline programme is expected to have far reaching consequences in ensuring that the share of real estate is a major contributor to achieving the goal. In the first five years, sectors including roads, energy, urban development and railways will gobble up the majority share of the fund. The National Infrastructure Pipeline project also envisages development later in the fields of logistics, air connectivity, education, digital services, farm incomes and health services.



In addition, development of commercial and retail hubs is a necessary precondition to appreciation of prices of residential properties and vice-versa. Homebuyers are attracted to housing hubs on the basis of availability of services and convenience including shopping malls, supermarkets, banks, food and entertainment zones, leisure facilities and so on. The converse theory of commercial players and retailers getting attracted to populated housing hubs is also true.



Sources Financial Express