Tuesday, 10 June 2014

The Mumbai Metro – A New Turnaround in Real Estate

By Ramesh Nair, COO - Business, JLL India 

Several years after New Delhi, the country's political capital, witnessed a transformation with the implementation of the Delhi Metro, the financial capital of Mumbai is set to experience a similar phenomenon with the imminent commissioning of the Versova Andheri-Ghatkopar (VAG) corridor of the Mumbai Metro. With equity participation from Reliance Infra and Veolia (a French transportation major), this Public Private Partnership initiative has all the hallmarks of a game-changer for the city's transportation and realty landscape.


Many facts about the VAG have already been well documented : A project investment of $720 million, a fleet of 16 rakes with 4 fully air-conditioned coaches with an individual capacity of 375 passengers, travel time reduced to 21 minutes from the current 90 minutes between Versova and Ghatkopar - and of course, improved East-West connectivity. However, the impact on the Mumbai realty market is likely to be far more pronounced.

Transportation infrastructure economics have historically proven to have a positive impact on real estate values in a city like Mumbai - residential and commercial properties located close to transportation infrastructure tend to command a premium. Independent analyses of pricing reveal that proximity to a Metro station can single-handedly account for a 22 per cent variation in land values, the other factors being location, distance of the land from the central point and income groups.

On the back of the execution of a string of surface transport infrastructure projects - viz. the Jogeshwari-Vikhroli Link Road (JVLR), the Santacruz Chembur Link Road (SCLR) and the Wadala-Chembur Monorail - the VAG corridor will further stoke the already buoyant Mumbai realty market
Each of these transportation infrastructure initiatives have had a tonic effect on the adjoining realty micro markets - for example the expected implementation of the Monorail had pumped up property prices in Chembur and Wadala by more than 100per cent in a short span of 4 to 5 years. This also applies to the SCLR, with which the Chembur micro-market again witnessed a perceptible price rise due.

The areas which will benefit from Metro connectivity have already seen price rises of 400per cent over the past eight years, and this trend is set to continue with this imminent launch.

A more detailed impact analysis follows below:

Near-Term Impact
Developers' interest in projects near the Metro has been increasing since the start of construction. With the commencement of the project, the surrounding region will definitely experience a certain boom in terms of new offerings and price hikes. Rates on both the commercial and residential market will increase, as the properties of northern SBD, BKC and SBD central are the most preferred locations for investors. 

Medium - Term Impact
Intra and inter-connectivity in SBD North and the Eastern suburbs will increase tremendously, given the capacity of 7 lakh passengers per day added by the Metro. Concurrently, East-West connectivity will benefit the maximum by this project, which will reduce the burden on JVLR and SCLR (the current East-West corridors). 


Source: Times of India

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