Will Regional Air Connectivity Boost Real Estate In Tier-II Cities?

In its report Economic benefits of civil aviation: Ripples of prosperity, The International Civil Aviation Organisation (ICAO), a United Nations' agency, says that every Rs 100 spent on air transport translates into benefits worth Rs 335, while 100 direct jobs in air transport result in 610 jobs in the economy as a whole. This is the note on which the Civil Aviation Ministry starts its draft on Regional Connectivity Scheme (RCS).

The main objective of the scheme is to "facilitate regional air connectivity by making it affordable" because "as the Indian economy grows, consumption-led growth in populated metros is expected to spill over to hinterland areas, and "in this scenario, air connectivity can provide required impetus to the economic growth of such regional centres (towns/cities)".

July 22 is the last day to submit suggestions on the draft RCS, which was published in January this year and opened to public opinion.

How will regional connectivity help Indian cities?

The history of urban development is full of examples where better connectivity has changed the face of a city. The Delhi Metro network is one such case in point. The Delhi Metro started its operations in 2002. Before that, those living in the national capital had to wait for hours before they could manage to hop on to a Delhi Transport Corporation bus bursting at the seams. The Metro came as a welcome change -- the stations were clean, the coaches air-conditioned, the wait-time nominal and the fares quite affordable. As it stands today, DTC buses mostly operate on routes where there is no Metro connectivity.

By the same logic, when one can fly to, say, Faizabad, a Tier-II city in Uttar Pradesh where an airport is being developed, trains running on that route will see their burden shifting towards the air route. At present, while booking a second-class AC train ticket to the city from Delhi costs you Rs 1,410, you have to pay 30 per cent extra on the basic fare if you are booking under the tatkal quota. Further, if you book your ticket through an agent, he would charge you as much as Rs 300 per ticket. (The social media has seen jokes over booking tatkal tickets going viral.) Now, this is as costly as booking a no-frills flight ticket to state capital Lucknow from Delhi.

You have to spend at least 10 hours in the train to reach Faizabad from Delhi, while if you took a flight, it would not take more than an hour to reach. It further makes any extra money on booking an air ticket worth spending. In a nutshell, airports in smaller cities would certainly ease the burden on the rail networks, which are choking with a huge rise in passenger traffic over the past decade.

But, will airports really have an impact on real estate in India's Tier-II cities, the main beneficiaries of the proposed regional connectivity?

Impact on real estate

A better connectivity is a plus for any city, but how the real estate in these cities performs depends on many factors. And an air or railway connectivity definitely is a major factor. The airport in Meerut, for example, will see more and more people investing in property in that city. This is owing to the presence of many industries and the city's proximity to the national capital.

Similarly, with new airports enhancing the ease of travelling to metro cities by cutting the travel time, many people in Tier-II and -III cities who have to travel often will not be forced to migrate to the metro cities. This will also help them save money, as the cost of living in smaller cities and towns is much lower. They could use the air services to travel when they need to. That will boost demand for living spaces at smaller centres, thereby boosting their respective real estate markets. Also, with the coming up of smaller centres as livable places, the pressure on resource-strapped major cities will be eased as more and more people would consider shifting out for better and larger spaces and lowers living costs.