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Smaller Cities Are Attracting Investments From Retail, IT/ITES And Realty PlayersBy pardeep3dec, Section Development
With a GDP growth rate that has been rolling along at 8% over this decade, India is all set to reap the benefits of rapid development. And the good news is that economic growth is likely to spread over a wider geographical area, reaching smaller cities and towns. As a consequence, India's real estate action is no longer limited to large metropolitan centres alone.
Smaller cities are attracting investments from retail, IT/ITES and realty players, and are being looked at as new growth centres that can generate healthy returns. Nagpur, Baroda, Kochi, Coimbatore, Visakhapatnam and Ludhiana are characterised by relatively low real estate costs vis-a-vis metros, and have manpower pools, local economic activity and an improving quality of life. Moreover, several states have taken initiatives to leverage growth in the IT/ITES sector with improved infrastructural facilities and through special economic zones (SEZs), facilitating the evolution of these centres into cities of the future. Most of these cities have begun to witness large real estate investments in the form of SEZs, shopping malls and large townships. Apart from healthy, long-term sustainable demand, for real estate developers, the other lucrative factor is that such centres offer better returns, owing to easy availability of land at cheaper prices and relatively lower input costs. While there is enough evidence of these small cities and towns having the potential to benefit from the larger India growth story, there is also a need to recognise the inherent challenges involved. Is this real estate boom in smaller towns sustainable in the long run? We need to examine the real drivers for growth; who exactly is going down that road, and more importantly, why? Are these the real engines of growth for real estate in the country?
What lies beneath Click on "Full Story" for more...
The economic dependency of smaller towns on the agriculture and tourism sectors makes it difficult to fully leverage their real estate growth potential. Also, lack of healthcare and education facilities, transportation facilities, employment-generation factors and availability of business-equipped infrastructure impedes their growth beyond inherent capabilities. Most of these local economies have not yet become strong enough to create demand for organised retail and/or premium housing. A shortage of all these will limit their potential in comparison to tier-I centres.
These issues need to be addressed while preparing the urban development blueprint for the whole country. China, for example, has created a wonderful model of developing new urban centres by investing in local social infrastructure and by providing adequate rapid transport facilities to connect these cities to big cities. It thus provides a dual economic stimulus: local sustainability and facilitation of labour availability in big cities without putting pressure on infrastructure. Manpower availability is another factor that is perceived to be one of the strengths of smaller cities. However, the real challenges relate to skill sets and the availability of labour pool that can be hired. Curricula across universities need to be upgraded to produce skill sets in line with the economic composition of growth. Without adequate social infrastructure in these small cities, it will be difficult for firms to hire senior executives. It took around 60 years for India to create the 10 cities that have emerged as employment nodes. The big question is, how many more can we add, and by when? The manifold challenges need to be addressed and a long-term planning exercise needs to be initiated to leverage this urbanisation opportunity. Source: Business Outlook, <a href=http://www.outlookbusiness.com/inner.aspx?articleid=1558&editionid=45&catgid=12&subcatgid=760>Beyond the façade</a>
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