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Land value within 500 m of upcoming metro corridors in India is expected to increase by 10-15%: JLL
Published on April 15, 2021
Mumbai : India has been introduced to the metro rail as an alternative mode of transport over last three decades ago. Since then, the advantages of the metro rail system have increased many-folds. Primarily it has been the enhanced connectivity to the suburbs of the city, thus enabling distribution of the city population to a larger extent of land resulting to congestion reduction in the city. Owing to this, land value within 500 m of upcoming metro corridors is expected to increase by 10-15% as per JLL.
Covering a total of 760.62 km across India with another 578.34 km under construction, the past two decades has seen a tremendous growth of the metro rail. Cities including Kochi, Chennai, Bengaluru, Nagpur and Nashik have seen significant expansion of new metro lines, which was highlighted by the finance minister in the Union Budget hearing in January 2021. Further, two new technologies including MetroLite and MetroNeo are being planned to provide affordable connectivity options in tier II cities and peripheral parts of tier I cities.
“The real estate market has seen a steady growth along the metro corridors, owing to increase in developments alongside the routes. Furthermore, on an average, the land value within 500 m of metro corridors has increased by 15-20%, especially in residential and commercial areas. Additonally, it has been observed that appreciation in land value has been on a rise after the metro operation and increase by 2-5% annually over other locations, compared to the construction and planning phase,” said A Shankar, Head – Strategic Consulting and Valuation Advisory, India, JLL.
The deployment of metro corridor directly impacts the real estate sector as it increases the land value, land use change and densification alongside the metro corridor. Mass transit systems such as metros and monorails significantly contribute towards solving traffic problems. Thus projects which are planned around the vicinity witness an increased urban real estate value, since consumers are willing to pay more for convenience.
Cities show a uniformly positive change after the implementation of metros along their metro corridors:
- Delhi: In last 5-6 years, residential property in South Delhi area appreciated by 15-20%. The land value of the metro on the Nirman Vihar stretch which became operational in 2010, was observed substantial increase from INR 150,000 per sq yard to current prices in the range of INR 200,000 – 250,000 per sq yard.
- Hyderabad: The micro markets of Corridor-I starts from Miyapur and ends at LB Nagar followed by Corridor-II from JBS to Falaknuma and Corridor-III starts from Nagole and ends at Raidurg/HITECH City. The micro-market of Corridor-I and Corridor-III witnessed a price growth of 15-20% during 2018-Q1 2021. HITEC City/ Raidurg in Corridor-III micro market witnessed highest CAGR growth of 20-25% between 2019-2021 followed by Miyapur in Corridor-I and Nagole in Corridor-II with 20% growth respectively in commercial land rates.
- Chennai: As soon as the Metro Phase I got completely operational in 2019, the impact of metro on real estate prices could be seen. Many pockets of the city witnessed an increase in land prices closer to metro stations ranging from 15%-35%. There is a considerable increase in demand of retail and office spaces around existing metro stations. The commercial and retail rental prices along 100 feet road saw about 50-70% increase and few properties even touched an 100% increase. The land owners and developers are keen to exploit the premium FSI at reduced price in the metro influenced areas which is likely to improve the living standards and provide sustainable growth opportunities leading to higher productivity. The residential prices almost a decade ago before start of metro were INR 3,600 per sq.ft. and now have surged to INR 7,000 per sq.ft. during year of operation of the metro. Though the increase in property prices are owing to various reasons but the metro connectivity which has eased accessibility is surely one of the primary reasons.
- Bengaluru: The micro-market of CBD along with few SBD locations like Indiranagar, CMH Road, Jayanagar, Malleswaram, Yeshwanthpur, Rajajinagar, etc. witnessed a price growth of 8-10% as soon as the East-West & North-South corridors opened for public use. Among the country’s major real estate destinations, Bengaluru saw the development of a metro rail network that covers over 42.30 km under phase I. The projects envisaged as a game-changer in terms of connectivity resulting to reduction in traffic congestion and commuting time. Some of the emerging areas influenced by metro are bannerghatta road, kanakapura road, whitefield, hosur road, tumkur road, ORR and bellary road under phase II (incl. Phase IIA & Phase IIB) and are expected to witness an increase in price by 8-10%, compared to other areas in the city.
The Transit Oriented Development (TOD) corridors such as metro corridors will have an influence zone of 500 m on either side which will get full benefit. The government usually addresses the specific needs of housing development by granting extra FSI (Floor Space Index) along the corridor. This increased FSI will reflect in increased prices for land along the Metro corridor, and automatically lead to increased population density near the metro station. Reduction in premium FSI charges along the metro corroder will further encourage many existing or proposed developments to avail these benefits and thereby enhancing the growth of the city along the corridors and offering a better quality of living due to the emerging developments.
Metro rail network of 702 km is already operational across the country, and another 1,600 km of metro rail network is under construction in 27 cities.