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What investors should look in a township property?

New Delhi: We have entered an era of Indian real estate wherein townships have become the most important model of real estate development in the foreseeable future. In most large Indian cities, real estate development
India TV News Desk January 08, 2014 7:06 IST
India TV News Desk
New Delhi: We have entered an era of Indian real estate wherein townships have become the most important model of real estate development in the foreseeable future. In most large Indian cities, real estate development has been reactive rather than proactive, meaning that infrastructure has not stayed abreast with actual real estate development.

As a result, the citizens of our larger cities have become victims of intense chaos and lack of civic amenities. The problem is basically one of the crudest forms of land economics.

Advantage township

In a township, all real estate and supporting infrastructure is planned with people rather than maximum development potential of available space in mind. There are reserved open and green spaces to ensure proper circulation and natural purification of air.

Residential and commercial buildings are planned and developed in a manner that allows residents to walk or cycle to and from work, rather than having to drive or commute crippling distances each day. Schools, hospitals and entertainment facilities are accessible with equal ease.

There is no doubt that townships are rapidly becoming the only feasible long-term residential options in our more populous cities. Nevertheless, buyers looking to buy township properties must study these projects from all angles.

Making a township work

The first thing to keep in mind is that the optimal functioning of a township does not depend on planned real estate development alone. The township developer must also ensure that the commercial spaces he provides are tenanted by businesses which create a sufficient number of jobs for the township population.

This calls for a considerable amount of forward planning, as he needs to successfully market these spaces well ahead of the residential component. Similarly, he must forge tie-ups with retail and entertainment chains as well as education and healthcare institutions, as sufficient social infrastructure is mandatory to attract a resident population.

These are aspects that buyers of township properties can and should verify with the developer well in advance of a firm 'buy' decision. They not only impact the real-time ‘liveability' quotient but also the property's investment value.

Another factor which is critical for the success of a township is accessibility. This is a complex aspect that must ideally be considered at the land acquisition stage itself. If a location is extremely far from any kind of economic or social activity, it will not attract either residents or commercial space occupiers. At the same time, large townships can only be created where sufficiently large land parcels are available.

For this reason, many township developers opt for cheap land parcels in the furthest outskirts or even completely barren areas that are in no way connected to the main city. Many township projects in India have failed simply because of unfavourable locations which have no municipal support - and no prospects of receiving such support until the area is actually included in the municipal limits.

The successful Indian townships have the advantage of location as well as size, and were pre-qualified for municipal facilities such as water, electricity and sewage disposal from the very beginning.

To Sum Up...

There are more factors than just unit size and price tag to keep in mind while selecting a township property. These are overall commercial / retail space absorption within the township, the healthcare and educational institutions that have signed up with the project - and, probably most importantly, the location. An oasis in the desert does not change the fact that it is still in a desert.

It is true that kind of land parcels that townships require cannot be found in central city locations. Nevertheless, a township which is completely cut off from the main city does not serve anybody's purpose either.

Townships are the wave of the future for Indian residential real estate, but not have the right ingredients for success. Buyers and investors looking at townships should certainly establish if the right combination of factors exists before making a purchase commitment.
(Arvind Jain is the Managing Director of Pride Group)