Wednesday, October 11, 2006

Boom town.....

Once upon a time a boy told his father to buy some marshy land near a new road which passed close by a place with big buildings where they did some strange thing called "IT". Needless to say, no one did anything about it and the boy gave up on real estate speculation. A few years later, that same marshy land was worth some gazillions more and I was left wondering which colour of Merc I would have been driving now! Oops...did I say "I would..."?! Hehe...okay, it was me! And we all know what land we are talking about.

The land appreciation along the IT Corridor has been making the news and no wonder. There has been 1000% appreciation in six months in a lot of areas. Undeveloped plots which no one would touch with a stick even at 5 lakh rupees an acre a few years ago, are now selling at 5 lakhs a cent! And it is not just along the IT Corridor, the prices are zooming all over. Large plots in Kowdiar are selling for over 35 lakhs a cent! Recently, I heard that a large textile retailer was refused land even at 30 lakhs a cent in a not-too posh part of the city!! These days, even the Govt. is shelling out 12 lakhs a cent when it is acquiring land for road widening in some areas!!
Wowie......wat's happening?

Some would call it a "bubble" or something. Real estate bubbles happen when too much money chases after scarce resources. Case in point is South Mumbai or the erstwhile Asian Tigers in the 90s. However, there has been no money influx due to interest cuts or due to the arrival of a bunch of incredibly overpaid people in town, has there? No one's struck gold...or oil.

The one area where some remittance hike would be occuring could be IT. Lol, with the number of people working onsite with Indian IT majors, the flow of dollars, euros, yens and the like must have swollen quite a bit. These days, the locations of my friends on Orkut looks like a world atlas! Moreover, the exploding IT sector right in Trivandrum would be contributing too.

Whereas there were some 5500 techies in the city a couple of years ago, there are 12,500 today and as many as 25,000 by the end of 2007. That number is set to reach 50,000 by 2009-10. That sounds like a lot of high-end customers who would want flats, expensive shops, restaurants, multiplexes and what not to satisfy their newly-developed First World preferences. It would look like the real estate ecosystem in Trivandrum is adjusting to this upcoming demand. A anticipatory expansion, not very common in the knee jerk world we are used to in India.

But, surprisingly, one sees the same story reflected in other upcoming IT hubs like Vizag, Kovai, Pune, Chandigarh or even Kochi. The real estate business seems to have learnt the hard lessons being learnt at the Tier I cities like Bangalore and Mumbai, where infra plays a constant catch-up game to demand, and always remains way behind. Some of these lessons have already been put to use in developing Hyderabad and Chennai, to an extent.

This steep learning curve will stand new destinations like Trivandrum in good stead. For example, Trivandrum is developing an impressive set of infra:

- Inner, Intermediate and Outer Ring Roads: The Inner Ring roads and high density corridors will be ready by 2007 under TRIP.

- A 4/6 lane IT Corridor connecting the main IT zone, Airport, Railway station and Seaport with adequate connections to the City road system.

- Expansion of the International Airport to cater to 2.3 million passengers by 2008 and 4 million by 2009-10. Phase I work is starting on Nov 1 and is expected to be complete in 18 months.

- New Railway terminal just off the IT Corridor with 10 platforms by 2009. Work is already underway and 2 platforms are already operational.

- Satellite townships and hybrid IT-residential parks by private developers like L&T and Raheja Group. The latter are expected to be located within Technopark Phase III. More are planned along the IT Corridor including the massive 500 acre Technocity.

- A new250-acre campus of IIT Madras near Ponmudi which will eventually become Kerala's first IIT.

It is good to see Govt. and industry coming together in such a proactive move. I guess this explosion in land prices and the number of new residential & commercial projects is a sure sign of this. If so, I can rest a lil' bit easier over the missing Merc in my garage!

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