Land prices nosedive on IT Highway

Real estate prices on the much-hyped Rajiv Gandhi Road (IT Highway), which had started softening a year ago, are falling now.
An approved residential plot measuring 4,800 sq ft, located hardly 200 metres from the IT Highway in Karapakkam, was recently sold for Rs 56 lakh per ground (2,400 sq ft), almost 20 percent less than last year’s price.
Subbiah, a realty agent who brokered the latest deal, said he had arranged a buyer for an adjacent plot of land in March 2007 for Rs 70 lakh, but that deal fell through.
Unlike last year, 2008 has seen very few land deals in the area. Subbiah said, "I handled two sales in the same layout in 2006. The first one went for Rs 50 lakh per ground in October 2006 and the second for Rs 54 lakh per ground in December the same year. In March 2007, I organised a buyer for seven grounds in the same layout. The owners, who initially demanded Rs 65 lakh per ground, increased it to Rs 70 lakh in a matter of one week. After much haggling, when the builder agreed to pay that price, the owners pulled out of the deal. Perhaps, they thought the prices would further go up."
All through 2006 and the first quarter of 2007, prices along the IT corridor had risen steeply due to anticipation about a bigger boom in the software and knowledge industries.
Layouts promoted in 2002 at Rs 2.4 lakh per ground saw 20 times appreciation. Even those who sold land for Rs 50 lakh per ground 18 months ago and reinvested it in outlying and undeveloped areas got 300 percent appreciation.
However, with the downturn setting in, those who delayed the sale of their land in the hope of reaping higher profits have been stranded. This applies especially to some of the layouts promoted by the Tamil Nadu Housing Board in Sholinganallur.
Satheesh, an agent who brokered the resale of many plots there, said, "Last year, one ground in TNHB layout fetched Rs 45 lakh. Now many plots are available for Rs 30 lakh per ground."
Pandian, a veteran realtor on the OMR, said, "Investors on the OMR used to get 50 percent to 100 percent profit per annum till a year ago. Many businessmen used to take overdrafts from banks at 14 percent interest and invest on land on the OMR. They are not willing to take such risks any longer."
One of his customers, who had invested on a property measuring 15 acres on the OMR at the height of the boom, is now struggling to sell. "Today, he will sell off the plot even if he just gets his investment back. There are many like him. Most of them waited so far thinking prices would pick up again. Their hopes were shattered when DLF launched its new residential project near Semmancherry recently at Rs 2,800 per sq ft. By pricing it at Rs 1,000 to Rs 1,200 less per sq ft than other ongoing residential projects in the area, DLF not only hit other builders hard but also shattered the hopes of landowners on the OMR.
Apartment prices are good indicators of land prices too. What justification can one give for increasing the price of land when apartment prices are falling? Further, over the past one year, cost of construction had almost doubled. Against this backdrop when somebody sells built-up houses at Rs 2,800 per sq ft, land prices are bound to fall," he said.
A builder, who is promoting an apartment complex on 9,600 sq ft land on the OMR, said, "The infotech highway is highly overrated. Prices on OMR went through the roof even without any basic infrastructure in place. We all came here because government gave sops for constructing IT parks. But nobody thought of providing the basic infrastructure like sewerage, water supply and uninterrupted power supply. I had to buy water for even construction because the groundwater is brackish and saline. After investing Rs 2 crore on land and another Rs 2.3 crore on building, I will hardly get 8 percent profit in the project."

more