Smart City Mission: Will The Face Of Indian Realty Change?

Budget 2014 had not been encouraging for the revival of the sluggish real estate, due to service tax hike and other changes. The only ray of hope for the real estate in India was the announcement of 100 Smart Cities Mission, which has now taken shape, thanks to government action.

PropGuide decodes how the smart cities project will impact the real estate sector in India:

• Boosting investment in new projects: The time when central government announced the project, it also allocated Rs 7,000 crore for the project, the single largest commitment to the sector. Additionally, the government is also encouraging the flow of foreign direct investment (FDI), increasing the volume of capital allocated to the sector. The real estate was otherwise struggling with growing inventory and a large number of under construction projects in India. This has reduced the investment in new projects, a state of affairs which might change with the smart cities projects.

• Emerging new locations: Under this project the government aims to target 100 mid-size cities and their land and resources, which have not been utilised yet. Thus, 100 new real estate markets will emerge, giving more possibilities of business. These 100 cities, built with world class infrastructure, will have a high livability index from the possession stage of homes. Moreover, the new locations, the people from smaller towns will have an investment opportunity.
  Reviving sentiments: With new markets emerging, the buyer sentiment is expected to revive. This will also revive the financial lending sentiment. The banks, which have been tight-fisted for a while now, will now be more confident towards real estate companies, as their business revives.

• Commercial real estate: The smart cities project will be an amalgamation of commercial and residential projects in India, in close quarters. Thus pushing the development of office spaces as well as hotels, in addition to service apartments and malls. A smart city project, along with real estate, also entails many possibilities across sectors like Information Technology, architecture, interiors, and other application designers who will be a part of the project. Some self-sustained projects will also require mini power stations, water treatment plans, and other civic amenities, bringing in more developers into the fold.

• More affordable homes: Smart cities will also cater to a much neglected area of real estate, affordable residential properties. In spite of state government activity on homes to economically weaker groups (EWGs) and low income groups (LIGs), this area has a glaring demand, which has not been met yet. The sector also does not have enough homes to provide for the growing middle-class with a lot of concentration on homes for the upper middle-class. The smart cities project will allocate enough land and housing to this class, thereby increasing the demand for realty in the country.

(Katya Naidu has been working as a business journalist for the last nine years, and has covered beats across banking, pharma, healthcare, telecom, technology, power, infrastructure, shipping and commodities)