Why Uttar Pradesh Government’s focus on roads development and improvement is the step in right direction for realty sector?

Roads are the lifeline of a major growing economy. Not only roads bring people closer by improved connectivity, they also boost trade and commerce. India has second largest road network in the world. National highways in India cover a distance of 79243 kilometers. State highways cover a distance of about 131899 kilometers. And district roads cover a large distance of 467763 kilometers.

Among all the states in India, Uttar Pradesh has the largest road network. There are 42 national highways that pass through the state of Uttar Pradesh. Additionally, 83 state highways complement 42 national highways in connecting the densely populated state of Uttar Pradesh. Following are the list of national highways that pass through the state:

• National Highway 2 (NH-2): 752 out of 1465 KM passing through Uttar Pradesh
• NH-3: 26 out of 1161 KM pass through Uttar Pradesh
• NH-7: 128 out of 2369 KM
• NH-11: 51 out of 582 KM
• NH-19: 120 out of 240 KM
• NH-24: 431 out of 438 KM
• NH-24B: 185 out of 185 KM
• NH-25: 270 out of 352 KM
• NH-26: 128 out of 396 KM
• NH-27: 43 out of 93 KM
• NH-28: 311 out of 570 KM
• NH-28C: 140 out of 140 KM
• NH-29: 306 out of 306 KM
• NH-56: 285 out of 285 KM
• NH-58: 165 out of 538 KM
• NH-73: 60 out of 188 KM
• NH-74: 147 out of 300 KM
• NH-75: 110 out of 1175 KM
• NH-76: 587 out of 1127 KM
• NH-86: 180 out of 559 KM
• NH-91: 405 out of 405 KM
• NH-91A: 126 out of 126 KM
• NH-92: 75 out of 171 KM
• NH-93: 220 out of 220 KM
• NH-96: 160 out of 160 KM
• NH-97: 45 out of 45 KM
• NH-119: 125 out of 260 KM
• NH-231: 169 out of 169 KM
• NH-232: 305 out of 305 KM
• NH-232A: 68 out of 68 KM
• NH-233: 292 out of 292 KM
• NH-235: 66 out of 66 KM
• NH-330A: 227 out of 227 KM
• NH-730: 519 out of 519 KM
• NH-730A: 110 out of 110 KM
• NH-931: 114 out of 114 KM
• NH-931A: 60 out of 60 KM
• NH-NE2: 90 out of 134 KM

Uttar Pradesh Core Road Network Development Program (UPCRNDP)

Additionally, state government under Chief Minister Akhilesh Yadav has focused on developing and improving state highways. Uttar Pradesh Core Road Network Development Program (UPCRNDP) has been established under which new state highways will be built and old ones will be improved. In early 2015, World Bank assured a grant of Rupees 3500 Crores for the project. For the project, a total of 24095 KM of road network has been identified including state highways and national highways passing through the state. The money raised will be used for widening of 1000 KM of state highways, building 419 KM of new roads, raising the formation level, pavement rehabilitation/strengthening. The work is expected to be completed within the timeline of year 2017.

Agra-Lucknow 6 lane expressway received allocation of Rupees 3280 crore in UP Government’s 2014 budget. This expressway is expected to be completed by end of 2016. Meanwhile, work on Lucknow-Ballia Purvanchal expressway is expected to begin in near future. The Uttar Pradesh’s Government budget 2016-17 has provision of Rupees 28600 crore for roads and highways projects.

What does it mean for real estate sector?

• Impact on affordable housing

Road network is an essential part in the development of any city, state, or country. Therefore, focus of Uttar Pradesh Government to improve road network in the state is commendable. This will not only lead to improved connectivity but also enhanced economic activity. New jobs will be created and people will be able to commute from faraway places to cities for their employment.

Building and improving the road network will go a long way in eliminating the housing shortage in the state. Affordable housing can come up in areas where land is cheap and because of greater connectivity people will actually inhabit those places. Therefore, Uttar Pradesh Government’s UPCRNDP initiative will boost demand for affordable housing.

Steps taken in Budget 2016 and UPCRNDP Project will complement each other and housing shortage can be overcome in coming years.

• Impact on commercial real estate development

Improved connectivity will boost development of commercial real estate across the state. Office spaces, malls, as well as institutional real estate such as hospitals, schools, and universities can be developed on back of enhanced road network. Private investment in this space will pick up and this will further strengthen the eco-system of the state of Uttar Pradesh.

Data Source: World Bank

Current state of real estate sector in India and why investment in real estate in Uttar Pradesh can prove to be fruitful for investors

By: Sachin Gupta | Twitter Follow @sach_gupta

Current state of Real estate in India

Real estate sector in India is going through a rough phase. Demand is weak because of variety of reasons such as high interest rates, delivery issues, lack of connectivity, lack of social infrastructure, and high home prices. While on one hand, in urban areas alone across India, there is a shortage of about 20 million homes. Most of this housing shortage (about 95%) falls in the affordable housing category. However, on another hand, there are about 12 million homes that are ready but are not occupied due to lack of connectivity and lack of social infrastructure such as schools, colleges, hospitals. In tier 1 and tier 2 cities, project delays have also contributed to the slowdown in the sector. Home buyers are not willing to put their hard earned money in under construction projects because of uncertainties involved as far as completion of project is concerned. This has created a vicious cycle wherein buyers are sitting on the fence and developers are holding on to the prices, thereby, there is no liquidity in the sector.

Project delays and significance of real estate bill

As per Assocham study dated October 2015, over 75% of total 3540 projects across India have remained non starter. This means about 2300 projects have failed to get going. And about 1000 projects have registered significant delays of approximately 33 months. The total value of these projects across all Indian states is over Rupees 14 Lakh crores. Therefore, Government would do well to pass the real estate regulatory bill in the current budget session. The bill will give much needed confidence to the home buyers and safeguard their interests. This in turn, will build the momentum for steady demand and cash in hands of the developers to complete realty projects.

States that are going to benefit

Once consumer confidence picks up in the sector on the back of real estate bill and falling interest rates, the demand momentum will benefit many states across India. Of the total value of Rupees 14 lakh crores in outstanding investments attracted by real estate sector across India, Maharashtra accounts for 21%, Uttar Pradesh accounts for 14%, Gujarat accounts for 13%, Karnataka accounts for 12%, and Haryana accounts for 8%, and remaining 32% by all other states.

Of all the states, Uttar Pradesh is better placed to reap the benefits of demand momentum because of following reasons:

• Outstanding Investment potential

As highlighted above, Uttar Pradesh accounts for 14% of total outstanding investments attracted by realty sector. Which means about 1.96 Lakh crore (14% of Rupees 14 Lakh Crore). Passing of real estate bill, falling interest rates, improved GDP growth, and focus on urbanization will actually help the state of Uttar Pradesh in making this outstanding investment a reality.

• Affordable housing

Cities such as Ghaziabad, Noida, Greater Noida, and Meerut in Uttar Pradesh are part of the expanded NCR (National Capital Region). While metros across India have seen surge in property prices and therefore making them out of reach of a common man. These cities in Uttar Pradesh offer plenty of affordable housing options. Greater Noida West (earlier known as Noida Extension) is one such example, where 1.6 Lakh housing units are under various stages of construction and houses in this micro market are priced in affordable range of about 3000-3200 Rs/Sq.Ft. New micro markets in Ghaziabad such as Raj Nagar extension, crossing republic, New Indirapuram also fall in the affordable housing category.

• Improved infrastructure

The infrastructure in these cities of Uttar Pradesh has really come of age. Connectivity to national capital by road, or by rail is excellent. Metro Rail is already connected to Noida, Ghaziabad. Moreover, plans to expand Metro rail to Greater Noida and Meerut have been finalized. Recently, central government passed the development of 150 kilometers (93 mi) controlled-access expressway, connecting Delhi with Meerut via Dasna in Ghaziabad in India. This will further boost the realty sector in the state of Uttar Pradesh. Therefore, it provides ample opportunities for end-users and investors alike to invest in the growth story of realty sector in Uttar Pradesh.

In addition to physical infrastructure, social infrastructure in these cities of Uttar Pradesh has also leapfrogged. Schools, universities, hospitals, recreational centers have mushroomed in these parts of Uttar Pradesh.

Therefore, combining all these factors and the focus on urbanization, one can reap great dividends by investing in real estate sector in the state of Uttar Pradesh.


Data Source: Assocham, National Housing Bank