Virtual standstill of real estate development in Guwahati
GUWAHATI: The real estate sector in Guwahati is not developing and builders are struggling to stay afloat. While at one point in time this sector contributed significantly to state budget and earnings because of prescribed taxes, now it is lacking. Even though some areas of the city are attracting major value, the overall development in this city has stalled.
“Everything starts with real estate. This sector is such that it is important for all other sectors and is at the core of development. However, the growth in this sector has been stunted. We had a lot of interest for different projects, hospitals, educational buildings, residential projects, but nothing has materialized,” said PK Sarma, president of AREIDA (Assam Real Estate and Infrastructure Developers’ Association).
The trend in the real estate business is somewhat skewered nowadays. All over the city, there are at least a thousand vacant houses and plots that have either not been occupied by real tenants or are lying vacant because they would not sell at current rates.
Demand-supply gap hits builders hard
“There is a major gap in the demand and supply aspect in this sector, according to the top builders in this city. The supply is much higher than demand which causes a huge impact in its market rates. Since real estate prices in Guwahati are not appreciating like other bigger metros, whatever appreciation in terms of prices occur, it does not match the increased cost of production,” said Bichitra Sharma, a builder.
This gap in demand and supply occurred because approximately five years ago, the market was booming and it was a good opportunity to invest, build and buy in the real estate sector. However, given the current market status, there has been a surplus because no survey or research was conducted on potential market variables.
In Guwahati, most builders never buy land. The landowners offer them land either on a condition basis or by purchasing it. Thus, landowners should be aware of market trends as the price of a particular property that is high now may not hold the same significance in a few years. This is one of the main reasons that causes a surplus and shift market dynamics causing supply to be higher, said Ranel Kumar Das, a construction consultant.
Guwahatians yet to choose real estate as investment
The size of the real estate sector in Guwahati is also comparatively smaller when compared to other cities in India. People here view buying real estate as need-based and less as an investment because of many factors. One such factor is that Guwahati is still a developing city and does not have a very esteemed corporate sector that facilitates indulgences such as high income or high standards of living. This limits people on their spending and investment abilities, as compared to other budding real estate sectors in India.
The average price point for a middle class household to buy an apartment is around Rs 40-45 lakhs. Also, only 10 to 20 percent of the local population is willing or looking to invest in real estate seriously.
Another reason that halts the growth of investment in this sectoe is the lack of initiative and action from the regulatory board’s side, according to PK Sarma. Even though the government of India has come up with certain guidelines that promote the growth of infrastructure and real estate in India, the regulatory board here has not moved in tandem with other states.
The last revised version of bylaws came in 2014. This section has 28 mistakes which have still not been corrected. As a result of this, Guwahati and its markets are suffering in the big picture as it has not been able to live up to its potential and attract the kind of investors it could.
The cost of production and labour has also become exorbitant; thus people do not want to invest as it becomes a big risk, both for the builder and the investor.
Utpal Das, a builder from Guwahati city, explained that the stalling of the real estate sector is not only about buyers and sellers. It includes all aspects of society. The livelihood of a lot of other professionals such as carpenters, plumbers, electricians and many more have been brought to a stop because of the collapsing nature of the real estate industry. The economy also gets affected as the tax volumes decrease and everyone is then stuck in a vicious cycle.
“The cost of materials has escalated by 100 percent and because of this, sellers are losing most of their profits,” said Bichitra Sharma.
Also, the market cost of construction is now approximately Rs 1,600/square feet but a sufficiently well-done apartment gets sold at approximately Rs 3500 /square feet (depending on the area) which includes the land cost and the promoter’s profit margin. Before GST, things were different too. Tax rates have increased from four percent GST to 12 percent GST now. The cost of any completed projects is much higher than any ongoing projects.
What the real estate market in Guwahati needs is a Project Management Group (PMG) that can oversee not just the construction, but also other factors such as economic feasibility, market rates in current and future scenarios as well as investment opportunities so that the real estate sector can grow and develop, explained Ranel Kumar Das.
Too many options for buyers
However, looking on the bright side, present day Guwahati is a buyer’s dream in terms of real estate inside the city. The buyer has the advantage since supply is high. They also get to choose and make most of the decisions. Areas like Uzan Bazar and Rehabari are prime spots and sell quickly for high rates. The Survey area between Beltola and Dispur has also become a residential hub. Other areas like Chandmari and Zoo Road are also in demand by local residents.
As PK Sarma of AREIDA said, “Urban land is the scarcest thing in Guwahati and where there is land, there is development.”