Namma Metro puts realty on the right track

Touted as one of the largest infrastructural projects to be undertaken in Bangalore, Namma Metro has finally had a small part of its first phase inaugurated on October 20.

This stretch covers all of 6.5 kms between Byappanahalli and MG Road.

For those who have been waiting eagerly, this start is a sign of hope for things to come in relation to the other phases. Of course, when evaluated from the infrastructure point of view, the Metro is bound to ease the pressure on traffic on roads for starters. Besides this, its inauguration in the CBD area does a lot for the real estate here as well.

Fillip to East Bangalore

Now that the Metro is partially functional, it is quite obvious that East Bangalore is getting well connected to the CBD area. Does this necessarily translate into a real estate boom for the areas that fall on either side of the track from Byappanahalli to MG Road?

Not too much, opines Karun Varma, Managing Director — Bangalore & Kochi, Jones Lang LaSalle India. He says, "Since only a 6 km stretch is operational as on date, the potential impact on real estate due to the 'proximity' (reduced travel time) factor may not be significant at this point of time.

The 'real' impact of the Metro will be visible once the entire first phase is operational. As of now, it is only a 'feel-good' factor for the property owners and occupiers along this stretch. This sentiment-based factor may result in a marginal incremental increase over the short-term, approximately to a tune of 5-10% per annum.

Based on case studies on the impact of the Delhi Metro on real estate, one can expect 20-30% appreciation within a year or two of full-fledged operation of Phase 1."

R.Y.N. Rao, Head - Sattva Real Estate Solutions, believes that prices in the Byappanahalli and CMH road areas went up by around 15% to 20% at the commencement of the project.

There will be a correction in prices here but only when the project is complete. But the MG Road stretch is completely saturated at present and the chances of prices going up here are not too bright".

Irshad Ahmed, President, Bangalore Realtors Association-India, adds to these opinions saying that land prices in the Byappanahalli and CMH road areas will correct as much as 40% to 50%, but Indiranagar and MG Road will continue to remain the same.

The pros and cons of going commercial

With the chances of Metro areas being declared commercial, Karun Varma elaborates extensively for a better understanding.

He says, "As per the Revised Master Plan – 2015 of the Bangalore Development Authority, the greater part of the Metro line is passing through the zones under the Commercial Axes or Mutation Corridor.”

Commercial developments are permitted along the Commercial Axes, while mixed-use developments are permitted along the Mutation Corridor. In other words, the existing Master Plan has envisioned and provided a regulatory framework suitable for commercial development along the Metro line.

However, the Government of Karnataka, through its GO No. UDD 93 MNJ 2008 dated 2/3/2009, provides for maximum permissible Floor Area Ratio (FAR) of 4.00 for all permissible uses, irrespective of the FAR applicable for the respective uses for the land prices within a 150 meter radius from the outer boundary of the metro terminals.

This means that all properties located within this radius will be entitled for additional FAR of 1.00-1.25 because of the Metro terminals. This should cause a significant appreciation of the value of land which falls within this 150 meter radius.
 

Rent, sell or sit tight?

There is an opportunity here for those who own property in the area. However, there are doubts on whether to sell, rent, or just hold onto it for a while.

R.Y.N. Rao says, "Those who own existing residential properties along the Metro route and especially around Metro stations should encash on it by selling it, putting up commercial establishments or renting it for commercial or retail use. In any developing area, all residences are bound to become commercial in due course of time and existing residential properties must conform to the change or else they will be losers."

However, Karun advices that for those with residences located away from the main Metro corridors to the extent of 500 meters or more, it is advisable to stay where they are as they can benefit from the Metro in terms of connectivity as well as the increased real estate development.

He adds, "If residents are located along the corridor, it makes business sense to develop or sell their property for commercial developments."

A line of thought that most experts agree on is that the real impact of the Metro will only be seen once the entire Phase 1 is operational.

Therefore, the collective opinion is that any development or selling should take place 6-9 months before the full operation of Phase 1 for maximum benefits.