The backbone of any civilised society is its social and civic infrastructure. Social infrastructure can be defined as the construction and maintenance of facilities that support social amenities like schools, hospitals, banks and would also typically involve civic infrastructure like roads, drainage, water supply, disposal of solid waste, street lights, rain water harvesting etc.
Social infrastructure has a lot of bearing and influence on the real estate sector. It is deemed important as it sustains and enhances the living condition of people living in a particular place. The market value of a property significantly increases when the social and civic infrastructure around it is developed. A property in a well meaning locality where infrastructure is in a developmental phase or an infrastructure initiative has been announced could also boost market value.
In the year 2015, the Union government made affordable housing as one of its key focus areas. The target was set for 2022 within which affordable housing would be provided to all under the “Housing for All by 2022” mission for urban areas. Another significant development was awarding infrastructure status to the largely overlooked affordable housing sector. This gave a big boost to developers as it would help them seek institutional finance which would in turn reduce their borrowing costs.
The Union Budget of 2018-19 has announced several initiatives to help increase infrastructural growth thus converting it into a positive sign for the real estate sector. Some of the noteworthy initiatives announced this year which could have an impact on real estate sector in general are as follows –
- To cater to the growth of the Bengaluru metropolis a suburban network of approximately 160 kilometers at an estimated cost of 17,000 crore is being planned. This ensures that far flung areas are well connected spurring a growth in real estate prices.
- An outlay of Rs 14,264.60 crore for Metro projects across the country was made in the Budget. The national capital Delhi was allocated Rs 50 crore to expand the cover of the metro network in the national capital region.
- Apart from the existing 124 airports in the country there are plans to increase the number by 5 times. Thus cities with airports shall see a stature growth, thereby increasing their real estate value.
- National highways exceeding 9,000 km to be completed in 2018-19 under the ongoing Bharatmala scheme and seamless connectivity will be provided to interior and backward areas and borders of the country. Better roads mean better access to properties near them and increased prospects.
- The Union Budget aims to focus not only on metropolitans but also ensuring good connectivity and infrastructural growth in Tier-2 and Tier-3 cities as well.
- Increased allocation on making the cities safer, it is surely a thumbs up as safety is a major concern and could negate a healthy real estate environment. The home ministry’s budgetary provisions have been aimed at over Rs 92,600 crore with a special emphasis on improving infrastructure of the police forces
Your Property and Infrastructure Around It
Infrastructure both social and civic in and around a property is an important factor to consider while investing into the real estate space. A good infrastructure around a project ensures better returns for people who are looking for investment options. Even the announcement of a new infrastructure initiative by the government tends to soar consumer expectations and in turn inflate property value. The presence or absence of social or civic infrastructure makes a property livable and increases property value at the same time, thereby ensuring good returns on investment. Some of the things that are considered indispensable with regard to infrastructure while hunting for your dream property are as follows. It has to borne in mind that even an infrastructure under construction could be vital in the long run.
- Roads – One should look at how the access roads to the property are. A broken, road filled with potholes is certainly detrimental to living in that particular area . A well lit road with proper street lights and also accessible by 2 wheeler/4 wheelers including the cab/taxi system is an affirmative sign. The safety aspect is of utmost importance. An unsafe neighbourhood with dimly lit street lights and bad access roads can bear a negative effect to value of the property.
- Drainage/Sewer system – Any property near a open/covered drainage poses a health risk due to many diseases emanating from it.
- Water supply – The availability of good treated water is an elementary need. To reduce dependency on groundwater, potable water from sources like Cauvery in Karnataka or Ganga/Yamuna in Delhi-NCR region would help advance real estate worth of the property.
- Airports/Railway station/Bus Terminal – Frequent travellers for work or leisure would find merit in investing in a property close to airports/railway-station/bus terminals/metro. A well connected transport network connecting the suburbs or remote areas to the centre of the city also spurs enormous growth.
- Healthcare system – Presence of good hospitals, dispensaries, clinics, diagnostic centres is critical to the young and old alike.
- Financial services – Availability of banks, ATMs is mandatory in today’s day and age.
- Educational institutions – Existence of schools, kindergartens, creches, colleges and other educational institutions is an attraction to the young and middle aged crowd who would want to invest in properties near such educational institutions.
- Marketplace – A common market to buy groceries, fruits and vegetables is an essential requirement for sustenance.
- Parks/Open spaces/Recreational places – Open spaces like parks, gardens and recreational places like malls, cinema halls, eateries definitely make the property hot in terms of livability and investment purposes.
Infrastructure Charges: A Home Buying Component
Apart from the base price and other charges levied by the developer for parking, maintenance, a buyer also has to pay infrastructure charges. These charges are of two kinds and are known as Infrastructure Development Charges(IDC) and External Development charges (EDC). These charges are imposed by the developer for developmental work in and around a real estate project.
Infrastructure Development Charges(IDC) –
These charges are levied by the respective State governments from the developers. These charges may differ from area to area, city to city. These charges are taken by the government from the developer who in turn takes this cost from the buyer. The IDC largely refers to the charges taken for the development and maintenance of infrastructure within a project. Infrastructure within a project would include civic infrastructure like roads, footpaths, street lights, parks, fire and safety, community buildings like gym and clubhouse, jogging track, drainage, treatment and disposal of sewage and also social infrastructure like healthcare system, educational institutions and financial services. Such infrastructure would be for the benefit and utility of the members of the said project.
The infrastructure development charges are taken on per square feet basis and are levied under various heads like infrastructure charges, water charges(BWSSB), electricity charges(BESCOM), generator charges, waste infrastructure charges and in some cases home automation and centralised gas connection as well.
From the above two examples we can see that a developer levies infrastructure charges from a buyer under various heads. These charges are to be utilised and maintained for the benefit of the residents of the concerned project.
External Development Charges(EDC) –
External works has been described under section 2(w) of RERA as which ” includes roads and road systems landscaping, water supply, sewerage and drainage systems, electricity supply transformer, substation, solid waste management and disposal or any other work which may have to be executed in the periphery of, or outside, a project for its benefit, as may be provided under the local laws”. This concept is largely prevalent in Haryana as laid down by the Haryana Urban Development Authority(HUDA). Each homeowner or intending home buyer has to pay his proportionate share of EDC demanded by the builder for the external development works that are carried out by the HUDA.
Infrastructure is deemed to be the backbone of any modern society. The relationship between infrastructure and real estate is a very important one. Infrastructural growth translates into better real estate growth as well. This growth particularly holds true for property investors and rentals as well. Any major social or civic infrastructure coming up will see a spur in growth of low level and mid level income residential property as any new social or civic infrastructure would require manpower and such a manpower would need to live in the immediate vicinity.
However a short term negative impact could be that the construction phase of any major infrastructural project may see a temporary halt of rentals till the operational phase due to being incomplete and also noise and crowding. But once the infrastructure is developed, prices per sqft in that particular area could see a steep rise.
People looking to invest in property around a current infrastructural upgrade or a future infrastructure initiative can expect good returns on their investment. While investing in such properties one must however calculate as to whether the sudden increase in price due an infrastructural upgrade is justified and future returns from the property balances out the increase in price. Apart from an infrastructural upgrade, other factors also need to be taken into account while investing in a particular project to deem it as a genuine investment potential.
With the Central and State governments are constantly pushing for improved infrastructure be it urban or rural through its various initiatives, the infrastructure framework is definitely going to see a positive rise translating into a real estate growth.
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