NRI New developments: NRI plot thickens

THIRUVANANTHAPURAM, DEC 1, 2004:
M SARITA VARMA
The Financial Express

After a five-year nap, real estate prices in Kochi are setting out on a promising northward journey. Big names like the Mumbai-based Raheja group are shopping for plots around town, and land prices in once godforsaken spots have jumped four times.

The take-off in housing appears to have started with the regulation of interest rates on NRI deposits on July 17, 2003; till then the interest on the segment was 0.25% more than resident deposits. The 2004 budget announcement to tax earnings on NRI deposits also worked up a fear factor about bank deposits. With the dangling of a Damocles’ sword in the form of NRI tax, the NRI account could no more be seen the benign cash-cow.

In just two months, NRI deposits in Kerala banks showed a fall of Rs 478 crore from Rs 30,100 crore in March 2004 to Rs 29,622 crore in June 2004. There are also telltale marks of NRI deposits being withdrawn to invest in real estate. Even Federal Bank, a frontrunner in the NRI banking sector, had to take a Rs 300 crore fall in its NRI deposits during the first seven months in the current fiscal.

Not even State Bank of Travancore, the market leader, was spared the deposit flight on NRI segment. The interest deregulation set the scene for the flat-buying spree.

Says Antony Kunnel of Kerala Builders Association, “There is a snap buyer for a readymade flat these days. Earlier, we had to wait for months for bookings to complete, before we started construction.” According to current trends, at least 4,000 units will change hands in Kochi this year. Last year, this was only 1,000 units. In two years, the number is expected to touch 10,000.

The long overdue price gallop is here to stay for another four years, predicts Gokulam S Venugopal, Gokulam Engineers Group. “It is a spontaneous spurt,” concurs Liyakkat Ali, president of the Kerala Chamber of Commerce & Industry. “The real estate ferment has not come one day too early in this over-ripe market, meaning the cycle will keep it up for a good five years,” he says.

With the maturing of projects like International Container Terminal (ICT), Special Economic Zone (SEZ), Dubai Smart City and arrival of large-scale employers like Wipro in Kochi, housing and commercial needs are growing by leaps and bounds. Dubai Internet City’s $400-million project alone is slated to bring employment for one lakh in Kochi.

Kakkanad in Kochi, literally meaning ‘crow country’, is now home to land sharks, who perked up even undeveloped backwaters from Rs 21,000 in 2003 to Rs 1 lakh for a cent (one-100th of an acre) in 2004. In this area, once Kochi’s Timbuktoo, flats await buyers at Rs 1,100-3,500 per sq ft. For each cent in Marine-drive, Kochi’s real estate jewel, price has crossed the Rs 8 lakh mark.

This trend is no longer Kochi-centric. Despite the recent freight-driven price hike in building materials from cement to steel, at least 100 major construction projects are on in Kochi, Thiruvananthapuram, Trissur, Kottayam and Kozhikode.

Census 2001 found that Kerala housing growth had outstripped its population growth in the last 30 years. Current demand has put more pressure on land. On the credit side, it is the Kerala banking community that catered to housing hunger at the right time and contributed to the real estate growth.

But there are warnings as well. “Easing credit for a houseless family is great banking. But lending to investment-eyed real-estate buyer is a ifferent ball game altogether. This smacks of unabashed speculative activity”, cautions A Sethumadhavan, Chairman, Thrissur-based South Indian Bank.


	NRI New developments: NRI plot thickens THIRUVANANTHAPURAM, DEC 1, 2004: M SARITA VARMA The Financial Express After a five-year nap, real estate prices in Kochi are setting out on a promising northward journey. Big names like the Mumbai-based Raheja group are shopping for plots around town, and land prices in once godforsaken spots have jumped four times. The take-off in housing appears to have started with the regulation of interest rates on NRI deposits on July 17, 2003; till then the interest on the segment was 0.25% more than resident deposits. The 2004 budget announcement to tax earnings on NRI deposits also worked up a fear factor about bank deposits. With the dangling of a Damocles’ sword in the form of NRI tax, the NRI account could no more be seen the benign cash-cow. In just two months, NRI deposits in Kerala banks showed a fall of Rs 478 crore from Rs 30,100 crore in March 2004 to Rs 29,622 crore in June 2004. There are also telltale marks of NRI deposits being withdrawn to invest in real estate. Even Federal Bank, a frontrunner in the NRI banking sector, had to take a Rs 300 crore fall in its NRI deposits during the first seven months in the current fiscal. Not even State Bank of Travancore, the market leader, was spared the deposit flight on NRI segment. The interest deregulation set the scene for the flat-buying spree. Says Antony Kunnel of Kerala Builders Association, “There is a snap buyer for a readymade flat these days. Earlier, we had to wait for months for bookings to complete, before we started construction.” According to current trends, at least 4,000 units will change hands in Kochi this year. Last year, this was only 1,000 units. In two years, the number is expected to touch 10,000. The long overdue price gallop is here to stay for another four years, predicts Gokulam S Venugopal, Gokulam Engineers Group. “It is a spontaneous spurt,” concurs Liyakkat Ali, president of the Kerala Chamber of Commerce & Industry. “The real estate ferment has not come one day too early in this over-ripe market, meaning the cycle will keep it up for a good five years,” he says. With the maturing of projects like International Container Terminal (ICT), Special Economic Zone (SEZ), Dubai Smart City and arrival of large-scale employers like Wipro in Kochi, housing and commercial needs are growing by leaps and bounds. Dubai Internet City’s $400-million project alone is slated to bring employment for one lakh in Kochi. Kakkanad in Kochi, literally meaning ‘crow country’, is now home to land sharks, who perked up even undeveloped backwaters from Rs 21,000 in 2003 to Rs 1 lakh for a cent (one-100th of an acre) in 2004. In this area, once Kochi’s Timbuktoo, flats await buyers at Rs 1,100-3,500 per sq ft. For each cent in Marine-drive, Kochi’s real estate jewel, price has crossed the Rs 8 lakh mark. This trend is no longer Kochi-centric. Despite the recent freight-driven price hike in building materials from cement to steel, at least 100 major construction projects are on in Kochi, Thiruvananthapuram, Trissur, Kottayam and Kozhikode. Census 2001 found that Kerala housing growth had outstripped its population growth in the last 30 years. Current demand has put more pressure on land. On the credit side, it is the Kerala banking community that catered to housing hunger at the right time and contributed to the real estate growth. But there are warnings as well. “Easing credit for a houseless family is great banking. But lending to investment-eyed real-estate buyer is a ifferent ball game altogether. This smacks of unabashed speculative activity”, cautions A Sethumadhavan, Chairman, Thrissur-based South Indian Bank.