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Posted Apr 27, 2009, 8:54 AM
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The Bottomline on Kochi's Economic growth
Quote:
‘A rising urban star’
By Nicola Venning
Published: April 25 2009 03:37 | Last updated: April 25 2009 03:37
Cochin
Cochin has become popular with second home buyers
In Cochin, India, spider-like cranes holding fishing nets dip into the water from a palm-fringed shore that has barely changed since ancient times. Meanwhile, on the opposite bank, stand shiny new skyscrapers and apartment blocks, symbols of modern Kochi, to take the city’s new, though less-used, name. This picture of old and new, tradition and modernity, captures the rapid changes happening in India – and particularly in this busy port on the Arabian Sea.
The global recession has taken its toll on the country this year, knocking three percentage points off economic growth, paralysing the mortgage market and bringing construction to a standstill. Yet Cochin, a former British and Portuguese colony on the south-west “spice coast”, remains the business capital of the lush Kerala province. And international property experts still regard the city as a “rising urban star” with a housing market poised for long-term expansion.
“The demand is there because India is moving its population from an under-developed state to a developed state very quickly and, in the process, the middle-class is growing at a very fast rate,” says MG Girish at DLF Homes, one of the largest developers in India.
According to McKinsey, the consultancy group, India’s middle class numbers roughly 50m people and is expected to increase ten times between now and 2025. And it is this predominantly youthful group that has been buying both second and first homes, fuelling recent booms. Although property prices in Cochin dropped 10-20 per cent last year, that followed a rise of 20-25 per cent per year from 2002 to 2007, according to international property services company Jones Lang LaSalle.
The city is helped by its well-educated population (Kerala has one of the highest literacy rates in India at 90.9 per cent); a vibrant information technology services industry; and a growing banking and finance sector, including offices of Ernst & Young, HSBC, Citibank and Standard Chartered. There are new bridges linking Cochin’s five main islands, including a new economic zone, and container terminals, and the business park in eastern Kakkanad is thriving.
Tourism is also growing and there are plans for a $2.4m modernisation of Port Cochin, on Wellington Island, which will include the construction of a new cruise ship terminal. A short ferry ride away, in the charming crumbling colonial island of Fort Cochin, elegant five-star hotels in former merchant houses and mansions happily co-exist with pepper, cardamom and chilli warehouses, fruit and fish stalls and ancient churches.
Before the recession, much of the residential property market action in Cochin was in Ernakulam, a modern district with gleaming apartment towers springing up along Marina Drive and a new, upmarket 60-acre residential zone built on reclaimed land overlooking Lake Vembannad. This is the site of one of DLF’s most prestigious developments – Riverside, a group of five towers housing 176 three- and four-bedroom apartments, 70 per cent of which are already sold – and eight other developers, including Abad and Prestige Properties from India and Emaar and DEWA from Dubai, are also building elegant, if densely grouped, blocks.
Many boast luxury flats with Villeroy & Boch bathrooms, Scavolini kitchens, Italian marble floors and prices ranging from R3,250 (£45) per sq ft (slightly above the average for a new home in Cochin) to R15,000 per sq ft. Waterfront properties meanwhile cost R6,000-R7,000 per sq ft, which adds up, on average, to R8m-R9m per home.
Of course, the average wage for semi-skilled work in the city is lower than in northern India at R4,000 per month. So, not surprisingly, the majority of buyers – up to 65 per cent in the case of Prestige Developments – are non-resident Indians (NRIs) who have been working and earning abroad, mainly in Dubai. About 10 per cent of the buyers also come from the UK and USA.
Currently, only NRIs and people of Indian origin (PIO) can buy property directly in the country but other types of buyers typically work around this by purchasing through a business, says Neil MacLeod of estate agency Savills. “A developer will generally set up a holding company for each property in Mauritius,” he explains. “As long as you do not mind owning a company that owns your house, it is simple.”
Other options for homebuyers in Cochin include smart new apartments, priced from R2.5m-3.5m, in more affordable north-eastern suburbs, such as Palarivattom, Edappally and the slightly higher-end Mamangalam, as well as traditional Keralan bungalows and cottages in upper-class districts, such as Panampally Nagar in the east, starting at around R3.5m-4m. Further afield at the protected Cherai Beach, 26km from the city centre, there are simple two-bedroom beach houses on sale for R5-R6m.
At Fort Cochin, close to the small beach, traditional three-bedroom Keralan houses on more than 4,000 sq ft of land command R7m-R10m, while larger villas now fetch R20m-R30m.
Dr Mohammad Naved, an opthalmologist who works and lives with his wife and three children in Northampton, England, grew up in Kerala – so it was only natural that he consider a second home in the city. Three years ago he paid R4.5m for a four-bedroom apartment in Abad’s Silver Crest block, which is located in a quiet, leafy neighbourhood. He now visits every other year, letting the property for the rest of the time. “It is a larger, luxury flat and well-constructed with good views and slightly away from the main part of the city,” he says. “Cochin has changed quite a bit in the last two years. People have more money; there are more [shopping] malls and more traffic.”
He reckons his flat is now worth R8.5m-9m, though he concedes the value might well drop a little. “The market has flattened out but it is not as bad as the UK,” he says.
Najeeb Zackeria at Abad Developers says he expects sales volumes in Cochin to drop 30-40 per cent over the next three years with price corrections of 5-10 per cent. And Annie Joseph at Prestige Projects confirms that times are tough. “Many NRIs are waiting to see whether they have a job or not [before buying],” she says. Although most apartments in the company’s new Neptune’s Courtyard are sold, “if we were to launch a project now, we would not have many enquiries”.
Nevertheless, many feel Cochin can ride out the storm. “The fundamentals are still strong,” says Avinash Mirchandani at Jones Lang LaSalle. Financial Times story
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