Locational dynamics which drive real estate demand

Location. Location. Location. The 3 most important things to keep in mind while buying a property. Sounds cliché, but still holds true!

Buying a property in great established locations, with well-developed social infrastructure is never a bad idea. However, if you are looking at property from an investment perspective, then you have to look at locations which are not fully developed currently, but have a high possibility of a massive upside in the future. You need to understand the underlying factors which could create this upside as this is the only way one can really make great returns on real estate investments.

So how does a layman, go about identifying this? Here are 4 steps to identifying the locations which could boom in the future.

1) Look out for infrastructure development – Infrastructure development is by far the biggest booster for real estate markets. New airports, Metro connectivity, widening of roads, Development of bypasses, relocation of traditional industries are all leading indicators for rapid development in the near future. You can get information in media announcements, from the city masterplan, on-ground development and insider information from Government sources before it is announced to the public. Some of the locations which have seen this kind of rapid growth are; North Bangalore due to the development of the International Airport, Tumkur road because of the Metro connectivity, markets along Outer Ring Road (which was considered far out when it was announced), Golf Course road in Gurgaon (excellent example of Private enterprise partnering with the Government), the expected boom in Navi Mumbai with the new Airport announcement and many more.

2) Identify potential hot spots for employment – When the Governments of India and Singapore announced the development of ITPB in Whitefield in Bangalore way back in 1992, many were skeptical about the logic of creating workspaces so far away from the centre of Bangalore. Today ITPB (Currently called International Tech Park and managed by CapitalLand of Singapore) is the epicenter of all the IT offices in East Bangalore and has created an ecosystem where lakhs of people work, live and socialise! The same story played out with the development of Electronic City, Embassy Manyata tech park in North Bangalore and Wipro campus on Sarjapur road. The logic is simple, large campuses create massive employment opportunities and people prefer to live close to their work place. Keep an eye out every time you see a new tech park under development, you will see the place transform in a short period of time.

3) Study other cities to identify trends – The interesting but also unfortunate thing about India is that infrastructure development does not take place at the same time or pace across the country. While Delhi – NCR regions got excellent metro connectivity over the last 2 decades, Bangalore is still waiting for decent connectivity within the city. The property prices along the metro routes in NCR has shot up over the years and the same phenomena is being seen in Bangalore now. A smart investor would have sensed this and placed his bets on properties located on the proposed route of the Bangalore metro! This is applicable to most of the cities in India. Have a look at this report which covers the real estate boom in multiple cities along the metro corridors.

 https://www.livemint.com/news/india/metro-corridors-led-to-15-20-rise-in-land-prices-in-cities-jll-report-11618403248904.html

4) Study where the Developers are acquiring land parcels – The biggest investors in property are real estate developers. They take big bets on locations which the average property buyer will not be even aware of. The success stories of Lodha Pallava City in Mumbai, Brigade Gateway in Bangalore, Mahindra World City in Chennai and the development of DLF in Gurgaon are worth studying. These Developers had the vision and the courage to take strategic bets and build massive development in locations which were not real estate hotspots. By the sheer impact of their development, all the areas surrounding these developments saw a massive boom in property prices. However, do remember that this formula only works when the developers are creating a game changing development at a large scale, and not necessarily for small projects with which will have no strategic impact on the perception of the location.

Few other indicators of fast developing locations are; development of schools, big box retail, construction related stores, saturation of areas nearby forcing development to move outwards etc.