Coimbatore Real Estate Faces Price Surge and Affordability Challenges
Over the last two years, a confluence of escalating land, material, and labor expenses has propelled property prices in Coimbatore upward by a substantial 25% to 30%. This surge has concomitantly decelerated the expansion of the real estate sector within the city. Local property developers posit that for Coimbatore's real estate sector to emulate the growth trajectory of Chennai, which has maintained consistent growth despite the global economic downturn according to the National Housing Bank's residential price index, governmental intervention is required. They advocate for the development of enhanced infrastructure, the promotion of industries, and the improvement of water bodies.
"There is not much space left for property developers inside the city. All construction activities are moving towards the suburbs,” said V Subramanian, president, Confederation of Real Estate Developers Association of India (CREDAI), Coimbatore. The periphery of Coimbatore has witnessed a significant escalation in land prices over the past two years. Simultaneously, the cost of construction materials and labor has been trending upwards. This combination of factors has disproportionately impacted the middle-income demographic, the primary segment of the population investing in property acquisition. Property developers have found themselves compelled to transfer the burden of these cost increases to consumers, consequently dampening market activity.
Rising Costs Impacting Developers and Buyers
"Land costs have increased four-fold in Coimbatore, which is causing major problems for developers,” Subramanian said. The price of a bag of cement, for example, has jumped from Rs 190 a year ago to Rs 300 currently. Similarly, steel prices have seen a substantial increase from Rs 38,000 per tonne to Rs 60,000 per tonne. These escalating input costs are creating significant challenges for developers striving to manage expenses while simultaneously stimulating sales. Omkar Sankar, director of Sankar Foundation, highlights the considerable demand for affordable and low-budget housing options in Coimbatore. However, the recent price escalation within this segment is becoming a growing source of concern.
As an example, apartments in the Ramnagar area, previously selling for Rs 4,500 per sq. ft., are now commanding prices of Rs 6,500 per sq. ft. In areas outside the city, such as Vilankurichi, Thondamuthur, and Vadavalli, costs have risen from Rs 2,300 per sq. ft. to Rs 3,500 or higher. While the recent reduction in interest rates by banks may offer some relief, many developers remain cautious, adopting a "wait and watch" approach.
Coimbatore's Infrastructure Needs
Coimbatore's current circumstances stand in stark contrast to those of Chennai, which benefits from well-developed infrastructure, even in its outlying areas. P Karthikeyan, Chief Executive Officer of Trishul Shelters Private Limited, anticipates substantial housing demand in Coimbatore in the forthcoming years, projecting a requirement for at least 100,000 housing units. Realizing this demand, he emphasizes, hinges on improvements in connectivity and infrastructure within Coimbatore's suburban areas, currently a significant impediment. He further notes the imperative for developers to explore innovative methods and technologies to curb costs.