Modi’s dream project is building 100 Smart Cities across the country and the 2014 Budget has laid out a roadmap by providing the fund of Rs 7,060 crore? But what are these smart cities? Are they good investment options? Magicbricks asks the experts.
In his Budget-day speech, the Finance Minister Arun Jaitley said that the Smart Cities will be developed as satellite towns of larger cities and by modernizing the existing mid-sized cities.
Apart from the allocation of Rs. 7,060 crore Magicbricks reveals the other key steps aimed at encouraging the development of Smart Cities and their impact on the Property Market. These include, requirement of built-up area being reduced from 50,000 sq. m to 20,000 sq. m and capital conditions for FDI that have been brought down from US$10 million to US$ 5 million, with just a three year post-completion lock-in period.
What are Smart Cities?
So will these Smart Cities be planned on the same lines as upcoming cities, such as Lavasa, Auroville and Pallava?” asked Magicbricks. “Cities like Lavasa are not considered home for lower or middle-class income groups but are targeted towards the upper middle class. The government is keen on focusing housing for all and that can be possible only through affordable housing.” replied Dr. PR Swarup, director general, Construction Industry Development Council (CIDC), at the `Magicbricks Budget Discussion on Real Estate & Urban Infrastructure’ organized by Magicbricks recently.
But are these efforts enough to convert this vision into a reality? Is this enough? Magicbricks asked real estate experts to find out.
“The seed has been sown, the vision is bang-on, the intent is there and it is a welcome move. But the actual question is how and when will this be implemented,” added Dr. Swarup.
Speaking to Magicbricks he added “The allocated money is just like `token money’. The amount translates into a meager Rs. 70 crore per city, which is not enough to develop one whole city. The blueprint of this dream is still in the pipeline. Identification, time-lining and definition of the concept still remain to be executed. There is also a question mark on how they will provide 24×7 water and electricity, transit, jobs, etc.”
Why Smart Cities?
Magicbricks data clearly shows that development in the country is city-centric and is thus, making a large number of people migrate to the fast-developing cities. The Finance Minister substantiated this fact when he stated, “The pace of migration from the rural areas to the cities is increasing. A neo-middle class is emerging which has the aspiration of better living standards. Unless new cities are developed to accommodate the burgeoning number of people, the existing cities would soon become unlivable.”
Impact of Smart Cities on real estate
Speaking to Magicbricks, experts were upbeat about the impact this decision would have on real estate and on infrastructure across the country. Navin Raheja, chairman, National Real Estate Development Council (Naredco), said, “With the Smart Cities project, there will be a surplus of land issued for urban development and housing. This will ensure that with more supply, the prices of property are reined in.”
Raheja also pointed out to Magicbricks that because of lack of regular planning and small-term perspectives, land utilization is sub-optimal. By freeing up land for planned urban development and long 50-year term plans, cities can continually regenerate themselves and adapt to changing demographics.
V Suresh, principal executive officer, HIRCO, added to the Magicbricks discussion, that Smart Cities should boast of good infrastructure, well-maintained drainage and sewerage facilities, good connectivity and more.
What else does the real estate sector gain from the Budget?
Discussing the impact of the Budget 2014 on the Indian real estate market, the Magicbricks discussion panelists unanimously agreed that the Budget was a positive move towards reviving consumer sentiments in the real estate sector. Vaibhav Sankla, director, H&R Block India Private Limited said that the additional incentive on home loan and the tax rebate is comforting to the business community and the tax payers. “The housing loan rebate raised from Rs 1.5 lakh to Rs 2 lakh may also boost youngsters to buy homes,” he said.
Speaking to Magicbricks, Partner and Head Real Estate and Construction, KPMG India, Neeraj Bansal said, “Accepting the modified version of the Real Estate Investment Trusts (REITs) was also felt to be another positive move. “It will help in easing liquidity requirement for developers, paving the way to raise easy capital and also provide access to retail investors to benefit from regular income and appreciation benefits from the real estate.”
“Overall the government’s commitment to boost the real estate sector seems to be well intentioned. The idea to create Smart Cities was welcomed, but it is still to be seen how this vision of PM Narendra Modi will get off the ground.” summarized Jayashree Kurup, Head of Magicbricks Research and Content.
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