Property Price in Kolkata rise on Supply Restraint

Kolkata, capital state of West Bengal, popularly known as the city of joy, is considered to be one of the most economical cities in India. Despite the negative attitude surrounding West Bengal’s image, property prices in Kolkata have continued to grow. Opposing the national trend, residential real estate prices have appreciated between 20 and 30 percent in the last two years, say developer. However, the high returns are not on account of a booming real estate market in the state, but the lack of new projects in the city and its fringes. As a repercussion, prices of existing properties have risen, almost remarkably.

After, Durgapur, no new planned city has come up near Kolkata over the last decade. Even plans to develop satellite townships in areas like Bariupur in the southern fringes of the city have failed to take off. Suburbs in West Bengal continue to be a sufferer of poor infrastructure and connectivity. Notably, unlike Tier I cities like Delhi and Mumbai, Kolkata real estate market caters to end-user buyers, rather than analytical investors. The ticket size of the investment is also low, between Rs 2 crore to 5 crores, compared to Rs 10-15 crore in other Tier I cities."The slow down the real estate market is linked to the general economic downturn, rather than local issues. In the investment perspective in Kolkata is fairly good. The price escalation is mainly in prime locations. The supply is limited, and in real locations, the land holding is small, which has resulted in steep rise in prices," said Harshavardhan Neotia, Chairman, Ambuja Realty Group.

"In the short and medium term, some property in Kolkata have given up to 30 percent return to investors, which is much better than other cities, " said Jitendra Khaitan of Pioneer Properties. Not many consider investing in Kolkata. The reason is negative sentiments linked with the business environment in the city, he said. Some of the areas where investors got good return include prime locations like E M Bypass, Salt Lake, Garia, where property prices recently have risen in prospects of Metro linkages. A primary reason for the improbable land prices is linked to government policy. Property prices have grown up by more than 50 percent in many luxury locations, as demand remains durable, and hardly any new townships have come up in urban and semi-urban areas in city fringes. "The rate of the property has gone up by around 50 % in Kolkata, the brunt of which will be emulated in the upcoming project. The land supply is decreasing, but the demand remains constant, and there are hardly any new townships coming up to meet the application," said Santosh Rungta, a city-based developer.

High land prices in West Bengal are not exactly new. Around 2009, in the earlier Left Front government, government agencies made windfall gains by selling land in prime locations.For example, three outstanding public bodies involved in land deals in and around KMDA (Kolkata the Kolkata Metropolitan Development Authority), Kolkata Municipal Corporation and West Bengal Housing Board-- signed contracts worth more than Rs 18,000 crores, for over 5,250 acres of land during the time in little over two years. In fact, KMDA (Kolkata the Kolkata Metropolitan Development Authority) was credited with signing deals, worth more than Rs 800 crores with real estate developers on a single day. One of the biggest difficulty in developing new townships in Bengal is the ULCA (Urban Land Ceiling and Regulation Act), 1976. According to this Act, the ceiling limit on unused land in a category ‘A’ city like Kolkata is 7.5 cottages. It is one of the states in the country to have a law like the Urban Land Ceiling and Regulation Act (ULCA). The move is in synchronization with the apprehensions of the chief minister. After all, Banerjee had once wondered, "What will happen if someone wants to buy the city?

"However, much of the obstacle for the developers, urban development minister Firhad Hakim has recently ruled out the possibility of repealing the Act."We are not overturning the Land Ceiling Act," he said. "Instead, we will give permission to developers for the purchase of land beyond the ceiling, provided they reserve 30 percent housing for low-income housing segment."

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