Here are 9 smart Indian cities to invest in

This year’s Budget and the government’s Smart City push have together brought good news for home buyers. In the Budget, the Finance Minister extended the construction completion deadline for getting tax breaks under Section 24 from 3 to 5 years. Two, the tax benefit for buying a house on loan was increased with the FM announcing an additional deduction of Rs 50,000 under Section 80EE.

However, this benefit was limited to first-time home buyers with loans of up to Rs 35 lakh where the cost of the house is less than Rs 50 lakh. While it is difficult to find a house in metros within Rs 50 lakh, Tier-2 towns, on the other hand, have ample investment options in that range.

The first list of 20 smart cities released this January boasts quite a few locations, which may not be among the popular residential markets today, but will develop significantly with good overall infrastructure, sustainable real estate, communications and market viability.

Out of them, we have picked nine destinations which are not only good for end-users with small pockets but are also great investments considering the potential price appreciation. We have focused on the most promising localities in each city, listing their current prices and the expected escalation in the next five years.

The passage of the Real Estate Bill will also play an important role in the Smart City story by protecting the interest of buyers and ushering in more transparency in a sector notorious for opacity.

Bhubaneswar and Cuttack

Twin cities Bhubaneswar and Cuttack are among the fastest growing IT and educational hubs in the east. This in turn has boosted real estate development. As most of the available land is government owned, the real estate market is well-regulated.

"Real estate activity by private players has only become prevalent in the last two decades,” says Saurabh Mehrotra, National Director, Advisory Services, Knight Frank. The arrival of national-level players like Assotech, Vipul and Tata has forced local developers to become more process oriented.

New developments are mostly in the north and south-west of Bhubaneswar, propelled by the presence of Infocity–1 and KIIT’s deemed university. Independent bungalows and duplexes score over apartments here.

Rs 50 lakh will fetch properties in upcoming areas like Hanspal, Patrapada, Kanan Vihar and Uttara. Properties in upmarket Kharavela Nagar, Saheed Nagar and Nayapalli can cost up to Rs 1 crore.

Growth drivers

Infra projects that could influence real estate prices

- Large commercial projects: The DLF Cybercity and Unitech One projects are expected to generate employment.

- Six laning of the NH-5: Part of the Golden Quadrilateral project, six-laning of the highway would help vehicles move faster within city limits. The expansion is currently underway.

- Kalinga Nagar Industrial Complex: The complex will cover 13,000 acres, of which 9,906 acres have already been allotted. More industries have expressed interest and would be allotted space shortly.

- Paradip SEZ: Being set up at Kalinga Nagar, Paradip SEZ Limited received central assistance of Rs 3 crore. Another Rs 998 crore has been sought from Japan’s Official Development Assistance for infrastructure development in the area.

- Pharma SEZ: The dedicated pharma SEZ will come up near Bhubaneswar.

Visakhapatnam

Visakhapatnam, or Vizag, is the largest city in Andhra Pradesh—in terms of area and population. One of the largest harbours in India, it is the commercial hub of the state.

Boasting good infrastructure and home to a rapidly growing IT industry, the city is attractive from a real estate perspective. “The bifurcation of Andhra Pradesh has opened up new locations in the state to development,” says A.S. Sivaramakrishnan, Head-Residential Services, CBRE India.

Visakhapatnam has been drawing the attention of real estate investors. Since 2010, the city has seen good demand for plots and apartments.

Residential locations, which are expected to witness capital appreciation in the next five years include Seethamadhara, Madhurawada, MVP Colony, Packer Layout, Lawson’s Bay Colony and Rishikonda. Properties here will cost you between Rs 75 lakh and Rs 1 crore. For more affordable options (around Rs 50 lakh), look towards Gajuwaka,Murli Nagar and Pendurthi Road.

Growth drivers

- Visakhapatnam-Chennai Industrial Corridor: Chief Minister Chandrababu Naidu wants to make this corridor the next Silicon Valley of India. The project anchored on an 800-km segment of NH 16 has Visakhapatnam as one of the four proposed industrial nodes around which the project plans infrastructure development such as better connectivity, power transmission and distribution network and other urban services. Industrial development and IT companies in and around the city will increase job opportunities and lead to rise in demand of residential real estate.

- Visakhapatnam Metro Rail: The first phase of the Vizag Metro Rail (VMR) is expected to be completed by December 2018. Corridor-1 proposes to cover a 22.28 km stretch from Madhurawada to NAD Junction with 19 stations, including Kommadi Junction, Madhurawada, Hanumanthawaka Junction, Maddilapalem, Gurudwara Junction, Akkayyapalem, Kancharapalem, Muralinagar and Government Polytechnic College.

Chennai

The capital of Tamil Nadu is largely an end-user driven market, making it less prone to speculation. North Chennai is predominantly industrial, while central Chennai is the most developed part of the city with established commercial and residential markets. South and west Chennai, previously predominantly residential areas, are fast turning into commercial zones, hosting a large number of IT and financial services companies.

Nodes such as Perungudi, Sholinganallur, Siruseri, along with GST Road, have created enormous employment opportunities in south Chennai. “The focus of the state government in providing excellent road connectivity along these nodes has helped in the development of this region,” says Kanchana Krishnan, Director – Chennai, Knight Frank India.

Outer Ring Road has emerged as the best upcoming investment market with large townships. Outer Ring Road Phase II and Metro Rail Phase II will become operational late this year. The Guindy-Alandur cluster is expected to emerge stronger in the mediumterm with infrastructure push.

Growth driver

- Outer Ring Road II: This six-lane highway will connect NH-205 (Nemilichery) with NH-5 and TPP Road at Minjur.

- Chennai Metro: Corridor-I will enhance connectivity between the international airport and central Chennai via Guindy. Corridor-II will connect the heavy-traffic route between the city centre and St. Thomas Mount.

- Mass Rapid Transit System: The elevated railway line will seamlessly connect the Metro and MRTS lines at St. Thomas Mount.

- Chennai Monorail: The monorail is expected to have nearly three dozen stations. The 57 km Phase-I will constitute three elevated corridors. The first from Vandalur to Velachery via Tambaram east (23 km) will mean better connectivity for Vandalur and Tambaram with the city centre. Corridor two between Poonamallee and Kathipara (16 km) will connect west Chennai via Porur. The third from Poonamallee to Vadapalani via Valasarawakkam (18 km) will enhance the connectivity of Porur.

Coimbatore

The ‘Manchester of South India’ with its burgeoning textile and spinning industry, is the second largest city in Tamil Nadu. The city’s activities have diversified beyond textile in recent years to include general engineering, automobile parts manufacturing and IT/ITeS.

Earlier, real estate activity was driven by small commercial developments, offices of local businesses, high street retail and individual houses. “The emergence of the IT/ITeS sector has led to organised retail developments. Increasing land cost has paved way for group housing built by local and national developers,” says A.S. Sivaramakrishnan, Head-Residential Services, CBRE India.

Locations like Avinashi Road, Trichy Road, Saravanampatty, Race Course, Ganapathy and Vadavalli are set to witness capital appreciation in the next five to seven years. A 2-BHK apartment can set you back by Rs 50 lakh on Trichy Road, Saravanampatty and Vadavalli. If you have Rs 1 crore, you can get a villa in the outskirts or an apartment in the heart of the city.

Growth drivers

- Gandhipuram flyover: The two tier flyover will ease traffic in busy Gandhipuram. Work is expected to be completed by 2017.

- Ring Road: Starts at South India Textile Research Association (SITRA) Junction on Avinashi Road and passes through other upcoming residential areas like Saravanampatty and Kurumbapalayam before ending at Mettupalayam Road. Avinashi Road is where the Coimbatore airport is.

- Western Bypass: To run from Kangeyampalayam to Mettupalayam, the proposed bypass is expected to ease traffic by diverting heavy vehicles from Palakkad.

- Eastern Bypass: Provides connectivity between the major arterial roads such as Trichy Road, Avinashi Road, etc.

- Airport expansion: Land acquisition underway to increase capacity.

- Bus Rapid Transit System: The proposed 18.6 km-long corridor will start on Avinashi Road and end on Mettupalayam Road, via Dr Rajendra Prasath Road.

Kochi

Kochi is not just on the government’s smart city list, but also on the map of many new IT businesses. Apart from being the commercial hub of Kerala, developments such as privatisation of the international airport and upgrade of the sea port have brightened the prospects of the real estate sector in the city.

Residential real estate in Kochi has traditionally been driven by NRIs. Only 30% of end users are locals. “Although there has been a dip in NRI investments in the past two years, the housing demand is robust,” says Saurabh Mehrotra, National Director–Advisory, Knight Frank India.

The city has witnessed a lot of infrastructure development. On the planning board are a metro corridor, operation of the mobility hubs, expansion of IT parks and development of the Electronic Park in Amballur village.

If you have a budget of Rs 50 lakh, you can afford a property in Kakkanad, Thripunithura, Maradu and Aluva. Properties in Edapally, Kaloor and Vytilla can be bought within Rs 75 lakh. Real estate in Marine Drive, Panampally Nagar and Kadavanthra can cost Rs 1 crore plus.

Growth drivers

- Vallarpadam International Container Trans-shipment Terminal: The project will make this port city the trans-shipment hub of the Indian peninsula, opening up investment opportunities here.

- Kochi Metro: KMRL has proposed an elevated route spanning 25.2 km from Aluva to Petta, with 23 stations. The first phase is expected to be operational by June 2016.

- Industrial corridors: The Kochi-Coimbatore and Kochi-Kasaragod industrial corridors are expected to take-off soon. The goal of the projects is to double employment, industrial output and exports within five years.

- IT SEZ: The under-construction project is expected to create over 90,000 jobs. SmartCity Kochi is located approximately 12 km from downtown Kochi and 22 km from the Cochin International Airport.

- Oceanarium: Conceived as a tourism and marine research facility to tap the tourism potential of the state, the underwater aquarium in Puthuvypeen island in Kochi will be the first of its kind in India.

Pune

Proximity to Mumbai and a thriving education, engineering, automobile and IT scene have accelerated real estate activity in this once sleepy city. The Mumbai-Pune Expressway has made Pune a much sought-after location for out-of-town investors, while year-round good weather makes it a preferred destination for homebuyers.

“In the last five years, the Pune real estate market has gone from an average performing one to one of the best performing," says Shantanu Mazumder, Director-Pune, Knight Frank India.

Pune offers properties catering to end users as well as investors at various price points. Prices start at Rs 15 to Rs 30 lakh in the affordable segment. The premium segment starts at Rs 1.3 crore and luxury projects can cost up to Rs 2.5 crore. Vishrantwadi, Dhanori, Kharadi and Whagoli in east Pune and Wakad, Hinjewadi, Ravet and Tathawade in the west are the upcoming areas to scout in.

GROWTH DRIVERS

- Metro Rail: Pune Metro Rail Corridor I, connecting Pimpri-Chinchwad, Shivajinagar and Swargate, will enhance connectivity between north and south Pune, once ready. The second corridor, between Ramwadi , Pune station and Vanaz, will solve the heavy traffic issues on the east-west route. Both corridors are expected to be completed by 2020.

- Bus Rapid Transit System: With over 600 special buses, the Sangamwadi-Vishrantwadi Corridor and the Sangvi–Kiwale Corridor in Pimpri Chinchwad became operational last year. Routes between Nashik Phata and Wakad, Nigdi and Dapodi and Nagar Road will be completed this year. The Kalewadi Phata to Dehu Alandi route will be operational by 2017.

- International airport: The Lohegaon airport cannot serve international traffic of more than 3 to 4 flights a day. Hence, a new international airport is being developed 14 km west of Rajgurunagar, which would be connected by the Metro.

AHMEDABAD

Ahmedabad is Gujarat’s largest business and trading hub. The employment landscape is driven by the textile, engineering, chemical and automobile industries. A surge in employment opportunities has attracted talent from across the country and turned the investordriven real estate market into an end user-driven market. Infrastructure projects like the BRTS and Outer Ring Road have opened up peripheral locations. However, there is an oversupply of real estate.

“In this situation buying for self-use is highly recommended. From an investment perspective, it is not advisable as we do not see significant price appreciation in the coming two or three years,” says Samantak Das, Chief Economist and National Director-Research, Knight Frank India.

With Rs 50 lakh, you can explore all locations in east, south and north Ahmedabad. Most locations in west Ahmedabad are available within Rs 75 lakh. Premium areas— Ambawadi, Navrangpura, Shahibaug and Nehru Nagar—command up to Rs 1 crore.

Growth drivers

- GIFT City: The Gujarat International Finance Tec-City or GIFT, an under-construction central business district between Ahmedabad and Gandhinagar, promises to offer global firms world-class infrastructure, facilities and the finest quality of life with integrated townships. The site is 12 km from Ahmedabad International Airport.

- Sardar Patel Outer Ring Road: The outer ring road is already operational. It has mainly benefitted peripheral locations of the city. In West Ahmedabad, Bopal, Shilaj, Science City Road and Shela have gained as has Tragad in North Ahmedabad. Kathwada, Nikol and Odhav stand to gain in East Ahmedabad.

- Metro rail project: East Ahmedabad will witness a higher traction in coming years, as construction work on the initial phase of the Metro project has started in the area. This phase will connect affordable residential locations like Vastral in the east to the city centre and west, thereby reducing the effective travel time between the most densely populated areas.

Indore

An educational hub boasting an IIM and an IIT, Indore is one of the fastest developing cities of Madhya Pradesh. The city has a strong pharma and auto industry presence, which also influences its real estate market. Prices in the upcoming areas are largely driven by investor demand and currently in a state of oversupply.

“The city witnessed a building boom between 2010 and 2013, especially in the outer fringes. Growth is now subdued with many projects stalled,” says Saurabh Mehrotra, National Director, Advisory Services, Knight Frank India. Speculative buying in the past few years has also led to a price correction, making this a good time to buy.

Land is available in plenty in Super Corridor, an upcoming area, due to the presence of IT industries in the vicinity. Upcoming luxury projects in this locality are offering 2, 3 and 4 BHK apartments in the Rs 32 lakh to Rs 65 lakh range. Plots and villas are available in the Rs 15 to 55 lakh price range.

Growth drivers

- BRTS: The Indore Bus Rapid Transit System or the Ahilya Path project, which started in 2007, flagged its first pilot corridor along AB Road in 2013, boosting property prices in the vicinity.

- Super corridor: This 250-ft-wide road connecting the airport with Major Road (MR) 10 is where Infosys and TCS are setting up their campuses, making it an emerging location for real estate development. Areas along the corridor have are witnessing large-scale residential developments.

- Major Road (MR) 12: This new road is expected to ease the traffic on MR 10 and people coming from Bhopal can directly go to Indore airport without entering the city. The connecting Ujjain Road to Bypass via AB Road will also help regulate traffic.

- DMIC: About 1% of the influence area of Delhi-Mumbai Industrial Corridor passes through Madhya Pradesh, covering Neemuch, Mandsaur, Ratlam, Dhar and Jhabua, which are all close to Indore. This will impact the residential market.