Land prices zoom in secondary cities

Land and real estate prices have increased ten-fold over the past seven years in tier II cities across Karnataka.

The demand is clearly noticeable as the developers and buyers are showing interest now in secondary cities. The preferred cities are Mysore, Mangalore, Hubli-Dharwad, Belgaum, Gulbarga, Shimoga and Davanagere.

Records in the department of Stamps and Registration in Bangalore suggest that real estate prices have gone through the roof in Mysore, Mangalore, Hubli-Dharwad, Belgaum and Gulbarga over the past three years. People there are now scouting for open spaces on the outskirts where rates are still affordable.

Realtors say that in tier II cities, a two-bedroom apartment of 1,000 sq.ft. is not available for anything less than Rs 30 lakh. On the outskirts, the same apartment is available for Rs 25 lakh. Likewise, house rents too have become costlier by 8-9 times compared to what they were six to seven years ago.

Interestingly, these cities with a population of nearly 10 lakh, have shown an increase despite the factors that range from political developments, recession, rising bank rates to shortage of construction materials that greatly affect the prospects of real estate business.

"Yes, the real estate business is on the upswing and we are expecting things to get only better in the coming years," said Ramesh Shahbad, a realtor in Hubli-Dharwad.

V Govindaraju, a senior officer at the Stamps and Registration Department, attributed the land price rise in secondary cities to availability of facilities like educational institutions, hospitals, entertainment centres and shopping malls. The government has also taken initiatives to provide infrastructural facilities particularly roads and sanitation.

But members of Mangalore Real Estate Association said that the unprecedented price rise has other reasons. According to BN Shenoy, member of the association, the increase of the base by the government has increased the market value. The hike in guidance value varies from 100% to 200% compared to 2005.

Raghavendra Rao, a member of the Real Estate Developers' Organisation in Davanagere, said that sites and flats in smaller cities are no more selling like hot cakes. "The real estate businessmen have created an artificial scarcity of land thereby making it costlier. The working class, at current rates, cannot afford to buy a plot of land or build a house even if they invested their entire life savings," he rued.

Source (Manu Aiyappa, 21 Jan 2013, Bangalore) : "Land prices zoom in secondary cities."