Trivandrum Real Estate 2012 - Apartments in Kazhakoottam, Kerala

Property, Projects, Real Estate Trends and Price analysis of Apartments in Kazhakoottam, Trivandrum, Kerala

A recent survey conducted by the market research team of Nandanam Consultants, across 64 locations in Trivandrum over a period of two months, analyzed the following trends in each of these small micro markets in Trivandrum. 

Our survey methodology included focus group discussions, email, telephonic interviews, questionnaires, and meetings with reputed developers who operate out of these micro real estate markets in Trivandrum. We used regression and statistical modeling methods to arrive at a cause effect relationship and understand the underplay between factors that affect property prices in the Kerala and specifically the Trivandrum real estate market. What follows below is an executive summary of the property trends at Kazhakuttam and areas surrounding Kazhoottam. For an indepth understanding of Flats on sale at Kazhakoottam, buyer feedback, price determinants in Kazhakoottam, builder reviews in Trivandrum, and apartments in Trivandrum, please reach out to the Nandanam team.

About Kazhakuttam - Source Wikipedia

Kazhakoottam (Malayalam: കഴക്കൂട്ടം) is a locality in Thiruvananthapuram city, the capital of Kerala, India. It is located on theNational Highway 47 on the way to Kollam from the city, and has gained in significance because of proximity to Vikram Sarabhai Space Centre, and, Technopark,the IT center which is the first and largest of its kind in the country. The Sainik School is also situated in this area. Kazhakoottam is the first ward of Thiruvananthapuram Corporation.

Our analysis of the Kazhakoottam, Trivandrum real estate market covered the following aspects: 

1) Evaluation of new and ongoing projects by developers and builders at Kazhakuttam in Trivandrum. 

2) Forecasting calculations on the number of units being created afresh and that are outstanding to be sold at Kazhakoottam based on available market data.

3) Survey of home buyers who purchased flats at Kazhakuttam or those who took houses on rent in the Kazhakoottam market in the past one year and their feedback on rents, price and overall living conditions at Kazhakoottam.

4) Analysis of Flats for Sale at Kazhakoottam and the average sales value of Flats in Kazhakootam per sq.ft.

5) Occupancy levels on apartments in Kazhakoottam area and factors affecting home rentals and occupancies.

Flats for Sale at Kazhakoottam, Trivandrum

Our team looked at existing and ongoing or recently announced projects at Kazhakootam with a focus on the 2011-2012 time frame. Of the total of over 250 projects which are under construction at the moment in Trivandrum, Kazhakoottam has a pie of 30 projects which is about 12.5% of the total construction activity in Trivandrum. That's a massive number for a small city like Trivandrum which means that out of a total of about 35,000 units which are under construction all over the city, approximately 4000 units are coming up at Kazhakuttam. 

Occupancy levels, Rentals and Sales Price of Flats at Kazhakoottam, Trivandrum

Our forecasts based on samples collected, showed that on an average, units which are within 1.5 to 2 km radius of Technopark or Infosys campus at Kazhakootam, recorded occupancies higher than 75% which means that there is a real demand for apartments in close proximity to the IT hubs. Results also showed that factors like amenities present, nearby schools, quality of homes also played a role in occupancy levels. Outside the zone of 2 Kms to the IT hubs, occupancies varied with a negative correlation to distance from the offices as well based on values of flats. Luxury flats above 1cr, showed less occupancy indicating that some where bought for investment purposes. Highest occupancies was usually for 1 or 2BHK apartments at Kazhakootam. Luxury housing was usually preferred by senior management of IT companies with employees at mid and junior levels going for 1 or 2BHK options. Employees from companies such as TCS, Infosys, Oracle and US Technologies formed the majority of occupants at flats near Kazhakootam, Trivandrum

Historical Sales values as per data collected by us for flat and home transactions from 2010 -2012 showed that, compared to earlier trends, currently Kazhakootam offered deals to home buyers in the 40-65 lacs range predominantly for apartments. The area had property values at 2500 per sq.ft in prime locations prior to 2008, but has crossed over to 4500 per sq.ft. for these properties as we enter 2011-2012.

Rentals varied with property and ranged from Rs.8,000 - Rs.17,000 for 1BHK or 2BHK apartments based on proximity to Technopark, area in sq.f.t, furnishing in the apartments, closeness to utilities and amenities offered.

Size of the Units of the Apartments on Sale at Kazhakoottam, Trivandrum

For a majority of 4000 units coming up at Kazhakootam, the average unit sizes are 2 Bedrooms ranging from 910 - 1100 sq.ft. with a median of 950 sq.ft. Most of the units tended to be over 1000 sq.ft. and developers  in Trivandrum seem to have gone for this as a benchmark when designing and architecting the units. Kazhakootam also offers units across the 1BHK and 3 and 4 BHK ranges, the former with single bedrooms and the latter catering primarily to the affluent sections with prices ranging from 60 lacs to 1cr+ for some apartments.

Developers and Builders at Kazhakoottam, Trivandrum

Interestingly over 19 builders out of the 56 builders (i.e. about 33%) in Trivandrum seem to having an eye on the pie at Kazhakoottam in the list of 30 projects coming up, showcasing that no one wanted to miss out on the real estate action there. The underlying effect seems to be a hungry scout for lands in the Kazhakootam region for these projects and price escalations of even 100% for lands in areas with close proximity to Infosys and Technopark in the last one or two years.Our survey also showed that no single developer was willing to put all eggs in one basket and barring a few, none of the developers had 3 or more projects underway at Kazhakootam, with most focussing on a single apartment or villa project at Kazhakoottam. 

Developers with projects underway at Kazhakottam (with respect to number of projects in descending order are): Oceanus, Favourite homes, SFS, Skyline, Cordial, Creations, Future, SRK, Vijaya, Asset Homes, Aswathy, Big Infra, Condor, Confident, Goel Ganga, Kristal, Nikunjam, Olive and RDS builders.

Luxury Real Estate - Villas and Apartments on Sale at Kazhakoottam, Trivandrum

Going by the true definition of luxury real estate at Kazhakootam, few of the projects completed and very few ongoing had amenities which could fit the bill to enter into the real luxury segment. SFS Cyber Palms project took the icing on the cake across all the projects, not only with CRISIL 7 star ratings, but with home buyers in the property expressing extreme satisfaction on their purchase, amenities offered and real estate appreciation.

The property also earned 8 out of 10 credits in our survey with existing lessee's in the project, interested in buying homes if available at reasonable prices in this project. Some projects like Heera Infocity, SFS Cyber Palms, Big  Infra and Asset Signature, seems to have earned significant mind-share of prospective home buyers who are looking for an investment in the area, and many were ready to pay extra to buy their next property if available at a good price in one of these four projects.

Assessing risk of buying projects in Kazhakoottam, Trivandrum

We are constantly faced with uncertainty, ambiguity, and variability especially for home and real estate investments. And even though we have access to information, we can’t accurately predict the future. Monte Carlo simulation (also known as the Monte Carlo Method) lets you see all the possible outcomes of your decisions and assess the impact of risk, allowing for better decision making under uncertainty.

We used Monte Carlo simulation and other techniques available with statistical tools to estimate risks to a home buyer based on property trends and price values in Kazhakoottam, Trivandrum and comparing it with the Trivandrum and Kerala real estate market. The risk quotient varied significantly based on timeliness, price ranges and depending on if the property was being bought for investment or stay purposes. Overall it showed that Kazhakootam may not be ideal for an investment in a second flat since projects were getting delayed due to lower number of transactions in the last year or so and also due to a slow growth phase in the IT sector. Our real estate agents and experts point to looking for value deals at Kazhakoottam, and making prudent decisions based on location, services, quality and delivery. You can also contact us for our comparable analysis which can help you compare projects across Trivandrum which might offer same value or appreciation like Kazhakootam at similar budgets.

Summary of our analysis for home buyers at Kazhakoottam, Trivandrum

For those home buyers who entered and bought properties at Kazhakootam, in the pre-2010 time especially 2006-2010 phase, seem to have got good value for money for their investments, especially if the projects were from reputed builders, and were completed in the stipulated time. Some buyers expressed their deep dissatisfaction with a few builders who handed over projects 2 to 3 years later than promised. Our advice would be to talk to a reputed real estate consultant, especially if you are keen on Kazhakootam and are looking at the existing inventory available there. For all you know, there might be a couple of great deals for you to invest in at Kazhakootam!

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Property trends & heat map by Location in Trivandrum

A detailed analysis of apartment and villa projects done by Nandanam Consultants across 64 locations and 52 developers who operate out of Trivandrum city, throws out some interesting statistics.  Kazhakootam, in trivandrum leads from the front in the property arena with over 30 projects and a minimum of 3000 to 4000 units coming up there in the next 2 to 3 years.  Following Kazhakootam is Pattom, Kowdiar, Vazhuthacaud and Sreekaryam although these come in at distant second, with less than 50% of units being created compared to that of Kazhakoottam. 

Other upcoming areas which are grabbing attention of various developers are Peroorkada, Poojapura, Vellayambalam, Kuravankonam, Menamkulam, Vattiyoorkavu and Sasthamangalam. Areas which have reported 4 or lesser number of projects in the past few years, are those which have potential in the future as the city grows.

Zonal Analysis: We divide the areas in Trivandrum which have higher real estate activity into three zones, namely 

• Zone 1: More than 1000 units being created in next one to two years; 
• Zone 2: More than 500 units being created in next one or two years 
• Zone 3: Minimum of 100 units being created in the next one or two years.

Areas under Zone 1 include: Kazhakootam, Pattom, Kowdiar, Vazhuthacaud, Sreekaryam

Areas under Zone 2 include: Kariyavattom, Peroorkada, Poojapura, Vellayambalam, Kuravankonam, Menamkulam, Sasthamangalam , Ulloor, Vattiyoorkavu

Areas under Zone 3 include: All other locations in Trivandrum as mentioned in the table below.

Recommendations: 

1. A large number of units i.e .over 4000 being created in and around Kazhakootam means that investors should be prudent and look for value for money investments in the area. Today Kazhakootam offers value units in and around 30-35 Lacs for those looking for budget apartments. The objective of such large inventories near Kazhakootam is to serve the IT audience which might start living there in a few years. These 4000 units can easily accommodate an additional 100,000 individuals/families in the city. For someone looking to buy a second apartment, other areas in Zone 1 or Zone 2 might be good to consider instead of Kazhakuttam given the huge oversupply that could come in a few years.

2.  For other areas in Zone 1 like Kowdiar, Vazhuthacaud etc. our advise would be go selective and choose builders based on reputation, expertise and timely delivery. Projects in these areas are likely to run into 4500-6000 per sq.ft. and hence one has to make a wise decision on the project based on locations, rentals etc.

3. Areas in Zone 2 and Zone 3 offer choices for home buyers with a wide variety of options and choice of locations. Developers usually have multiple parcels of lands in a given area, so one might see multiple projects by the same developer in Zone 2 and Zone 3 areas. To get more choice a home buyer could keep his options open when it comes to these zones and choose the investment that meets his or her needs.

Before you buy your house or apartment do consult our experts on which locations in Trivandrum makes sense to invest in, based on projects under construction or those in the pipeline. This will enable you to make a prudent decision and not commit to a property, if there is oversupply and avoid paying more than required to buy a property in a area which might not have enough end user demand.

Location	No of Projects	Min Units
Kazhakootam	30	3000
Pattom	18	1800
Kowdiar	16	1600
Vazhuthacaud	15	1500
Sreekaryam	11	1100
Kariyavattom	9	900
Peroorkada	7	700
Poojapura	7	700
Vellayambalam	7	700
Kuravankonam	6	600
Menamkulam	6	600
Sasthamangalam	6	600
Ulloor	6	600
Vattiyoorkavu	6	600
Mannamthala	5	500
Akkulam	4	400
Kaimanom	4	400
Kesavadasapuram	4	400
Kumarapuram	4	400
Nanthancode	4	400
Pettah	4	400
Peyad	4	400
PTP Nagar	4	400
Ambalamukku	3	300
Jagathy	3	300
Thampuranmukku	3	300
Balaramapuram	2	200
Enchackal	2	200
Kudapanakunnu	2	200
Mudavanmugal	2	200
Nalanchira	2	200
Paruthippara	2	200
Perunthani	2	200
PMG	2	200
Pongamoodu	2	200
Thycaud	2	200
Vanchiyoor	2	200
Anayara	1	100
Choozampala	1	100
Gandhipuram	1	100
Kachani	1	100
Kaniyapuram	1	100
Kanjirampara	1	100
Karamana	1	100
Kattanam	1	100
Killipalam	1	100
Kovalam	1	100
Kuzhivila	1	100
Marapallam	1	100
MC road	1	100
Mukkola	1	100
Museum	1	100
Muttada	1	100
Nedumangad	1	100
Ngandoorkonam	1	100
Ootukuzhy	1	100
Pattoor	1	100
Pothencode	1	100
Powdikonam	1	100
Puliyarakonam	1	100
Thirumala	1	100
Vattapara	1	100
Maruthamkuzhi	1	100
Thiruvalla	1	100

Property Prices in India and around the world - Economist. Fair Value and Trend Analysis.

The  Government of Kerala  has declared a fair value of land in all parts of kerala . From the link here you could see the fair value of your property provided you can provide some minimum details on the tool.

Recently the Economist magazine reported trends in property value across the countries in the world, which makes some interesting reading. Out of the 21 countries that economist tracks 12 of them dropped in prices, and 5 of them gained. As per Economist "Many markets are returing to “fair value”, defined as the long-run average ratio of house prices to disposable income and to rents. Housing is now around or below its fair value in eight countries."

If we look at the charts below which shows property value trends in developed countries, over the last 37 years from 1975 to 2012, property values has shown tremendous gains. In some countries like Australia, the values have sky rocketed in the last decade or so. So while the largest market, United States is now picking up after a huge drop, the more a market is closer to its fair value, the prices seem to rise from thereon. In Spain which is reeling under the Eurozone crisis, prices have fallen 23% from their peak in 2007 (A note: Kochi prices fell 32% over the last three quarters and we now believe it has stabilized).

In the Asian countries, Hong Kong prices which were sky rocketing at 28% growth yoy is now growing at 6% yoy. Hong Kong prices had increased by about 67% since 2007 and followed only by Austria which reported a 23% increase since 2007. The biggest casualty of the price drop, Ireland has seen prices drop by 49% in the last 5 years.

So from an investor perspective in India, what does one make out of these global trends?

1. For one, it is clear that, after years of dizzying ascents, it seems like a big bulldozer has hit residential-property markets around the world and stabilized them to a large extent.

2. If you take the case of United States for example the housing bubble threw out some interesting facts. For many middle- and lower-middle-income Americans their home made up nearly all of their wealth. They were largely invested in a single asset that did very poorly in this period. Richer Americans, who held other assets, did not see such large declines. This demonstrates how important it is to diversify your wealth, even when you don't have much of it. It appears that there seemed to be a mentality that you should buy as much housing as you can afford, not as much as you need. That may be because of the pervasive view during this period that housing is always a good investment.

3. The case is not too different in India. During times of rapid ascent in property prices and going by trends world over, it is good to stop short and take a closer look and not go blind foldedly and invest. A well diversified portfolio consisting of government bonds, MF's, FMPs, VPFs would help a youngster in mid 30's to earn a good retirement income even if property crashes or stabilizes in the next decade.

4. To reduce the risk from your property portfolio, it is very important to do your ground research well and choose the property. Tie up with a good property consultant, who understands your financial situation and then advices you on the right kind of property go for.

5. Keep a track of price trends, fair value and other market indices to understand if you are over paying for your purchase or under selling on the property value. Negotiate well and don't hurry into your decision.

6. Take a long term view into investments and avoid short term investments unless you are aware of market realities.

Realty growth is here to stay in India and in Kerala, especially with burgeoning population figures in our country. But speculative investments in property, often made due to impulse buying and hearsay, may not be a good idea, unless backed by a good understanding of the overall market. After all the objective behind buying real estate may not always be a wish to own your home, but to become wealthier in the longer run. A good portfolio of assets and knowledge of how to build it, would always come in handy compared to risk prone, myopic investments in a few assets.

Financing a new property purchase in Kerala? Tips for a smooth ride

For a majority of people bank financing is the primary route to raising finance for buying property. This is a trend all over India. The real reason behind the strong real estate growth in the country has been the measures taken by RBI to prop up bank loans for housing.

Due to the formation of a temporary bubble towards the end of 2000, RBI changed the norms for bank finance from 100% to 80% of the property value, so that customers have to at least put in 20% of the money from their pockets for purchasing a property.  Most of our customers who come to Nandanam for advise on financing their home purchase usually have three queries: 1) Which bank or financing institution do you go for the home loan 2) How much do I have to pay upfront to avail the loan? 3) What documents would be needed?

Typically when we advise customers on financing their property, we try and understand their risk apetite. When it comes to liabilities, if you are a salaried employee your liabilities such as Auto loan, Home Loan and others should ideally not be more than 50% of your take home pay. This is because you have to also plan for monthly expenditure, education for children, marriage, medical expenses, investments (if any in mutual funds or shares or FD's) and contingency expenses.

The same applies to banks as well. Usually banks would finance based on 50% of your take home pay i.e. if your 50% equates to Rs.50,000 and you have no other liabilities, you could avail a loan of up to 50 Lacs for a period of 20 years. This means your net property value (excluding regn, stamp duty etc.) could be around 65 Lacs. The rules vary depending on the type of the property for e.g. residential flat or land or independent house etc.

For the question of which financing institution to go for, it purely depends on what you want to expect in terms of service, loan interest rates, other charges etc. As you might know, SBI has probably the largest home loan portfolio in the country and offers good terms to the home loan customer. But some people do not have the time and energy but rather prefer a home loan executive from ICICI or HDFC doing all the paper work. One inside tip which we would like to offer you is to have a good relationship with the manager of the branch from which you are availing the loan. For e.g. some of our customers availed bank loans from SBT and had a really good experience, when they faced trouble paying their EMI's. The bank on a case to case basis gave a little leeway to the customers if they could not pay their EMIs on time. For large private banks this may not be the case and you might have ended paying up some penalties. So the choice of the financing institution needs to be made based on a plethora of factors and a good property consultant should be able to advise you on the pros and cons of each.

With regards to how much one needs to pay upfront for the loan this again varies on a case to case basis with some thumb rules like we explained earlier. The real benefit which a good property consultant  brings to you is not only negotiating payment terms with the bank or HFC, but also in negotiating payment terms with the builder or seller of the property. To give an example, one of our customers liked a property near Technopark and wanted to buy it immediately on a short trip to India. For him what mattered was not the bank itself from where he availed the loan, but the upfront payment which was not there at his disposal at the given moment. Usually for doing the agreement, the builder would ask for 20 to 25% of the value of the apartment paid either completely by you, or partly by you and partly by the bank. In this case, the customer could avail the loan based on his salary, but he did not have all the money needed for the upfront payment. We helped negotiate with the builder, so that he could avail a 6 month time frame for the agreement and pay the money, instead of the usual one or two months which builders give customers once they pay the advance and book the property.

This example may not be hold good for all builders and all properties. Its the relationship that the property consultant maintains with the said builder or the property owner, and his experience in finance and expertise in agreement negotiations which really changes the game for the customer. The customer in question is really happy with his purchase and is paying his EMIs as planned. Also in terms of time value of money, the customer could avail the bank loan at a later stage and hence got more than what he desired.

Last but not the least, were some customers struggle with is documentation like Tax Returns, Pay Slips etc. It would be prudent on your part to check with your properly consultant, if you have paucity of time, as to what kind of documentation would be required to avail the loan. Even if you do not have everything in place, a good advisor can help with all of what is required for you to finance your property.

Kochi property prices seem to have stabilized after sharp fall

Property prices in Kochi finally seem to have stabilized over the last quarter after a steep fall over the last 3 quarters of over 30%.

A close look at the RESIDEX index published by the National Housing Bank shows that property rates in Kochi, across multiple parts of the city have more or less stabilized. We had reported earlier about the fears of a bubble in the Kochi real estate market given the sharp drop in prices. If statistics are to believed the demons have left Kochi and all parts in the city except Vytilla has seen property rates stabilize.

This is good news for investors and real estate owners since it shows that speculative investments are not happening at a frantic pace as was the case earlier. The demand is stable and growth should kick in once demand supply mismatch is corrected in the next few quarters. It would be interesting to wait and watch for the next quarterly RESIDEX index which would be published in a month or so to see if Onam festivities has helped increase demand for property and thereby lead to appreciation in rates.

The Pre-Launch property game. Proceed with caution.

What is a Pre-Launch project

A pre-launch project is one for which either the entire land has not been acquired (that is, the developer does not have full legal sanction of the title), or clearances (like licences, land conversion and site plan) have not been obtained, or both. Developers are allowed to launch a project only after all clearances, and full ownership of the land have been obtained. But when a developer cannot raise the entire amount needed to launch the project from internal accruals or equity, he turns to private financiers, investors and end-consumers by 'pre-launching' it. He works on the premise that full legal sanction will come through by the time the project is ready.

Techniques used by Developers

The marketing technique used in a Pre-Launch project is quite simple. It is "Enter Early and Buy Cheap". The temptation and carrot offered by the developer to a customer mostly are:

1. You get to choose your site or apartment you want to live in before everyone else. So you can choose the right floor, best view, road side etc. etc.

2. You get the best rate possible for the property only now

3. The pre-launch rates would only be valid for about 3 months and then rates could be up by 200 or 300 rs. per square foot.

From the developers point of view , every four to six months, as the approvals trickle in, he can keep hiking the prices. Post full legal sanction he can launch the project and by then he has enough bookings in his kitty.

Perils of a Pre-Launch project

One of our customers, brought a project called "Salarpuria Senorita" in Sarjapur Road, Bangalore in 2010. The Project was in Pre-Launch. Salarpuria being a reputed builder, put up huge sign boards at the sight of the property and hoards of people walked into enquire. The project was being offered Rs.300  per square feet lower compared to launch (which was scheduled 4 months away). The promise was some one who books now, would get about Rs. 5 to Rs. 10 Lacs benefit depending on final price and size of the unit. The booking amount for pre-launch was Rs. 5 Lacs.

As the story goes, despite waiting for one year, the project was not launched. The person's money was stuck because in the interim other builders launched projects and he did not take the money back in the hope that Senorita project would launch. Salarpuria finally returned back the pre-launch booking money with bank interest, leaving the person in question flummoxed and exasperated.

This is typical of most pre-launches which do not take off. Six months would already be gone by the time you realise that the promises are not being kept and the construction is not happening as promised. By then, you would have sunk in between Rs 5-15 lakh . If you buy a plot in the pre-launch stage and the project is shelved, the only exit route is to approach consumer forums or courts, unless the developer returns the money. The riskiest move is buying into a project for which the developer has not acquired the entire land.

Checklist to avoiding perils in the Pre-Launch game

1. Check the title deed. Reputed and credible developers start the project only after acquiring 100 per cent of the land and will not shy away from showing the title deed

2. Look for the developers residential housing track record.

3. Be proactive and pull out if you start getting feelers that the pre-launch project is not going to launch in 4 to 5 months or if developers keeps giving excuses that approvals are coming shortly.

Onam, Kochi Metro and Emerging Kerala expected to usher in property appreciation in Kochi real estate market

As Malayalees get set to celebrate their most awaited annual festival of Onam in the end of August, real estate developers in Kochi are the most anxious as well as exuberant. In stark contrast to the property correction which has been witnessed in Kochi over the last one year, developers believe that the gloom prevailing over the sector  will soon fade off and prices would again rise by 15 to 20% after Onam due to the triple bonanza - Onam , Emerging Kerala and the Kochi Metro launch.

In anticipation of a rise in price and demand for property near the Kochi metro stations, most developers have already bought parcels of lands in the proposed vicinity of where the stations have been announced. We had mentioned earlier why improvement in accessibility to mono rail or metro or LRT augments the real estate prices within a radius of 1-2 Kms of the station.

The end of Karkidakam masam and the onset of Chinga masam is considered an auspicious time for Malayalees. Most marriages, new business launches take place in this season and it is also an auspicious time to register a property. So Malayalees who are on the look out for property at the moment in Kochi, might be spoilt for choices by many developers. Developers also are hoping to close many new bookings in the Onam season and are preparing welcome bonanza's and discount schemes for home buyers. The key trend that is beginning to emerge however is that after the NRI driven demand, Kerala’s real estate market is now slowly turning in favour of the working class with a gradual shift towards the affordable housing segment.

Since common sense states that most users of the Kochi metro will live and breathe in the city, (than an NRI who would sit abroad), the demand for housing in areas near the metro station is expected to be real and measurable. There is a growing belief that the correction seen in the Kochi real estate market over the last many quarters, might be the prelude to a phase of stability in property prices.

In the interim some malls like Abad Nucleus at Maradu have also started selling individual shops, which is seen to be a new trend in the real estate sector. As per CREDAI Kerala, "Building rules which were amended three years ago, is the main reason behind the collapse of real estate sector in the state. Because of over supply, 40 per cent of residential properties have not been sold.In 2008, 10 new projects were announced in a month but now only one new project is announced in six months. In Thiruvananthapuram, the most happening place in real estate in the state, the property prices have doubled in 4 years."

For the sake of the investors, the developers and those aspiring to own their home in Kochi, we hope the predictions come true and the prices reign in, in Kochi and other parts of Kerala and offer stability.

Onam 2012, can then finally be one to savour and remember!

Kochi real estate market - Down but not Out. Fears of a bubble still strong.

If the statistics are to be believed, the real estate market in Kochi has seen a declining trend over the last 3 quarters starting June 2011. The drop itself is a staggering 32% over the quarters from Apr -Jun 2011 to Jan - March 2012 (data below) as per the RESIDEX index.  This also raises alarming noises amongst a section of the populace, who feel the real estate bubble in Kerala and specifically Kochi might be about to burst. The significant price correction along these lines in Kochi, can in no way be correlated with other 20 odd cities in India, some of whom have shown considerable growth over the same period for e.g. Chennai and Delhi.

NHB Residex is a housing index and first of its kind in India, provided by the National Housing Bank (which is wholly owned by RBI) on a quarterly basis. The objective of the index was to provide transparency to the real estate market in the medium to long term. The index tracks residential price movements and is currently available for 20 cities in India and is proposed to be expanded to 63 cities, covered by the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). The index currently has a lag of about one quarter in providing data about the real estate market pertaining to a city.

As per the National Housing Bank "Actual transactions prices are considered for the study in order to arrive at an Index which will reflect the market trends. Primary data on housing prices is being collected from real estate agents by commissioning the services of private consultancy/research organisations of national repute; in addition data on housing prices is also being collected from the housing finance companies and bank, which is based on housing loans contracted by these institutions." 

In compilation of NHB RESIDEX the cities have been suitably stratified by administrative zones or municipal wards according to availability of the data. The sample size of price observations consists of 500-600 observations for each city. The index is computed by using Price Relative Method (Modified Laspeyre’s Approach). Under this method price relatives are calculated only once (at the basic stratified unit) and the weighted average of these price relatives leads to the index at next level. (Source: Hindu)

 Source: NHB Residex

 So how does one interpret the NHB Residex. The index is currently fixed with the year 2007 as the base and base index value as 100. If the value in Bengaluru was 100 in the previous quarter and 92 in the current quarter it shows an overall drop of 8% in real estate prices for the quarter.

DRILLING ONE LEVEL DEEPER INTO THE KOCHI REAL ESTATE DATA
 

A further drill down into the data provided by NHB on the Kochi market by locality is given below. As per the data, Fort Kochi Vili, Karugapalli, Vennala & Mammankalam has seen the biggest drop in real estate prices in the last quarter of around 23.75% (From 80 to 61) followed by Mattancherry, Chakkamadam, Cherralai; Panayapalli & Edakochi South which has seen a 20% drop in real estate prices.

Possible reasons that could be attributed to a slump in property values in Kochi are:

1. Slackening of demand due to high interest rates and inflation

2. Property rates hitting their peak from where they have started going downwards

3. Postponement of decision to purchase property on the part of the buyers

4. Oversupply of inventory and less sales velocity (number of units sold vs. number of units created)

5. Drop in speculative investments by HNIs and NRIs prompting a correction

CONCLUSIONS

Although the NHB data provides a good indication about the state of the market, it predominantly covers transactions which involve financing institutions. Thus a complete picture cannot be drawn from this data alone. Also since NHB looks at the overall market, there is no clear indication if specific segments like luxury apartments, villas have been more affected compared to budget properties which trade in the 30 - 60 Lacs bracket. 

Our recommendation for investors looking at Kochi as a property destination, would be to "not resort to speculative buying".  Since most fundamentals in Kerala for Kochi and Trivandrum are still strong, segments which have seen drop in property rates in Kochi, could further see a drop till the demand - supply mismatch is rectified.

Some protagonists also argue that the overall Kerala market is a real estate bubble waiting to burst. The NHB residex at present does not cover other cities in Kerala for us to compare if the Kochi phenomenon is something felt across Kerala. Going by the request of many of our customers, we are going to showcase an article about the so called housing bubble in Kerala and examine whether it is truly a reality or just a figment of somebody's imagination. 

You can write to us with your comments, suggestions or requests for any specific information on Kerala or Trivandrum real estate to nandanamconsultants@gmail.com