2015 could well be dubbed the Year of the Metro rail in India. One of the biggest drivers of urban land development is happily spreading its wings. This year Metro rail networks have been unveiled in Chennai and Jaipur and expanded in Delhi and Bangalore, which makes it a total of seven operational Metro systems in the country. Kolkata was the first city to be ordained a Metro rail in 1984, followed by Delhi in 1995. The success stories of the two has paved the way for Metros rail in others cities, Bangalore (2011), Gurgaon (2013), Mumbai (2014) and Jaipur (2015).
Such expansion can only augur well for the real estate sector. Metro rail implementation on real estate prices along its corridor and ‘influence zone’ can scarcely be underestimated. In the larger and immediate context, it improves the standard of living of a large segment of the urban population, as well as act as a catalyst for sustainable development across large urban swathes.
What is the Metro rail’s USP?
n Saves on travel time
n High service availability, reliability and quality
n Higher productivity and savings across the system
The Metro rail system in India’s capital, for example, has changed the city beyond recognition in the last few years. In Delhi, landmarks and important buildings are identified by their closeness to Metro pillar numbers. Where once existed barren stretches of land is now home to vast flourishing market places, the scene of hectic commerce and business, where people seek to build fortunes.
“These cities show a uniformly positive change after the implementation of Metros along their corridors. The deployment of a Metro directly impacts real estate through increase in land value, land use change and densification along the corridor. International case studies prove that mass transit systems such as Metros and monorails contribute significantly to solving traffic problems. Such projects also result in increased urban real estate values, since consumers are willing to pay more for the convenience,’’ says A Shankar, national director & head – urban solutions (strategic consulting) JLL India.
Not only does Metro rail impact retail or commercial areas due to improved accessibility, even residential areas receive a dual demand driver – it generates jobs, which result in increased demand for homes, reduced commuting costs and increased conveniences. Naturally, it draws buyers to areas in close proximity to the rail.
Assess for yourself, the Metro affect:
- in areas closest to the stations, the visible impact is higher on commercial property values than on residential values, and the effect diminishes as the distance from the station increases.
- Land prices are higher if a land parcel is located within walking distance, but not directly next to the station.
- The increase in land values is reflected in the area served, especially around the stations
there is a considerable increase in demand of retail and office spaces around existing metro stations.
- most commercial properties near Metros result from the conversion of standalone residential units to apartments, mixed use properties to commercial use and new development on vacant land.
Says Brotin Banerjee, Managing Director & CEO, Tata Housing Development Company: “The prices of the projects are driven by market dynamics and are directly in proportion to the quality of both physical and social infrastructure in and around the project. Proximity to such a well-connected Metro system undoubtedly will have an impact on the property prices. However, there are other factors that drive the prices of property at a specific location. The Metro not only provides faster and better economic mobility, but much more comfort, higher productivity and savings across the system. In the larger context it has affected the standard of living of a number of people and is also a catalyst for sustainable development. Its connectivity with outskirts of the city also has had an impact on the property and land prices in these areas.”
Experts believe land values are inversely related to the distance of land parcels from the Metro station. Ordinarily, land values decrease along with the distance from Metro stations. Technically, the rail exerts an influence buffer of up to 1 km radius, with the maximum influence being within 500 metres. Typically in a city, the market value of properties will increase by more than 50 per cent over prevalent values after the launch of Metro rail, depending upon the location, land use, and the micro-market’s overall potential.
Points out JLL India’s Shankar: “The population density of nearby residential areas will increase after the launch of a Metro because of proximity preference, along with the increased demand for retail and office spaces. There will simultaneously be a steep increase of new developments in the abutting vacant land or open spaces, as developers will seek to capitalise on the profit implications of higher developments that can result from additional floor shop index (FSI), if this is applicable. A constant rise in land prices in the proximate areas is usually seen during all project stages.’’
Many things begin to change. For instance, expect regulatory changes after Metro rail is in place. To address the needs of urbanisation in these areas, the government usually addresses the specific needs of housing development by granting extra FSI along the corridor. This increased FSI will reflect in a rise in land prices along the Metro corridor and automatically lead to increased population density near the station. That pattern, for instance, reveals itself at all stages.
Needless to say, these changes impose stress on the existing infrastructure available in the region, which the government must tackle along with the Metro development. In order to control development along the corridor, land usage needs to be revised – failing which unorganised commercial development will crop up on the heels of the higher rentals assured by the increased connectivity.
Given the influence zone of 800-1000 metres from the Metro stations, the land use for this zone must be properly mapped in order to maintain a balance. Residential to commercial land use conversion will invariably be most prominent, as commercial spaces will fetch higher rentals.
Points out Anil Pharande, chairman of Pharande Spaces, a leading construction firm, which develops township properties in Pune: “Improved road connectivity has a massive impact on real estate prices of a location. There is always higher demand for homes in well-connected areas, because they are more accessible, safer, healthier and cheaper to live in.”
(By: Ranjit Bhushan, FC Build)