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Public Transport A Convenient Connectivity Approach To Real Estate
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When the British Govt started laying down the tracks for Bombay’s local trains back in 1853, little did they know that it would become the lifeline of one of the world’s largest metropolitan areas. Mumbai’s local train system has helped the city accommodate about 1 crore migrants from Maharashtra and Gujarat (and other parts of the country) within itself. The local train route is about 465 km long today and ferries around 2.64 billion people annually.
Apart from being home to Asia’s oldest transportation system, Mumbai is also reputed for its costliest real estate. This city has given the best returns on investment consistently decade after decade. This makes us ponder on whether there exists a correlation between public transportation investment and increase in real estate prices?
In my opinion there is a strong correlation as most of the increase in the prices of real estate has been in the land and properties around the local train tracks. A home in the vicinity of local train stations makes it convenient for people to commute and hence the middle class buys properties in these areas. The pointer is there is a 20-30% premium for properties that are within walking distance from stations, compared to other properties in the same suburb.
A similar story is being written in the NCR region where about Rs. 40,000 crore has been spent on building the most modern Metro system of the country. It started in 2002 and as of now it has 200 km of line with about 600 million annual users. It will be about 300 km in next 3 years and that will make it the fastest growing metro network in the world. Identical to the correlation seen in Mumbai, Delhi has also witnessed property prices spiral north wards which has given a steady return in the last decade.
Both the cities have invested heavily in public transportation systems. Delhi Metro has cost the exchequer about Rs. 200 crore per km. This kind of investment is difficult for India to make in all top 10 cities especially with the GDP growth slowing down.
Gujarat has experimented with a different kind of public transportation, which is BRTS or Bus Rapid Transport System. It costs about Rs. 20 crore per km to set up a BRTS network and it is quick and easy to implement compared to railways. Basically there are dedicated lanes for special buses to travel on the road. These lanes are not open for any other traffic and hence these buses can avoid all sorts of traffic jams. Started in 2009, the Janmarg (as BRTS is called in Ahmedabad) has set up 66 km of network. It annually carries 40 million people and has invested about Rs. 1500 crore till now. Needless to say the real estate prices in Ahmedabad have been steadily increasing especially in the areas in which this network has been established. The state govt has increased the FSI on the BRTS corridor which has further increased the prices of property around the corridor.
A Public transportation project takes more than just investment to get the outcome required for a steady increase in real estate prices. As any meaningful project requires more than 5 years to reach its outcome, only a government which is re-elected can finish such a massive project. Changes in the ruling power would mean a shift in priorities and the existing projects stand a grave chance of being sidelined with other projects taking over.
A government like that of Sheila Dixit or Narendra Modi has been able to work wonders as they have been stable in their respective states. So in effect nothing boosts real estate like a well performing Chief Minister with the best interests of the people at heart. Investing in improving or laying down convenient public transport systems helps a city to develop quickly and leads to a property boom apart from being chosen by more people as the desired place to live in. We can say that a city’s popularity index goes up when there is a convenient and fully functional public transport system.
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