Impact of commonwealth games on Delhi Residential prices

Sharing something I had written some time back on the commonwealth games...

In 2010, New Delhi will play host to the Commonwealth Games, the third largest multi-sporting event in the world, with tens of thousands of visitors descending upon the city. To prepare for this, Delhi is planning for a major overhaul of its urban infrastructure as well as its sporting facilities.

Interplay of the growth drivers

The 2010 Commonwealth Games are being touted as Delhi’s ticket to the list of world class, ultra modern metropolis. To determine what will lead to this transformation, we need to look at what the growth drivers for the residential real estate will be – developers and end users. Developers have been buying land prior to the games and will announce residential townships on this land post the games when the value of land has significantly appreciated. Land value will be derived from the infrastructure – roads, metros, buses, commercial establishments, schools, hospitals, hotels and other common amenities – that is being developed to ensure the smooth completion of the games. The society would gain at large from better infrastructure, amenities and commercial/ convention centers.

While the citizens in process would be the biggest gainers because of better living standards, the developers would announce residential townships post the games as the basic amenities would allow them to charge a premium. The citizens (end users) would be more than willing to pay the high prices for the given better standards of living. Both rental and capital yields will increase in the areas.

DTZ estimates that with the international tourist forecast for Delhi being 18 lakh in 2010 and of domestic tourists being 35.8 lakh in the same year, Delhi would need around an additional 10,412 star rooms for foreign tourists. This will be supported by significantly improved road and transport infrastructure, expansion of the Delhi airport and general up-gradation of civic infrastructure in the city. These, inter-alia, include the project of the Link Road from the Games Village site to the Jawaharlal Nehru Stadium and Bye Passes at Mahipalpur and Masoodpur for improvement in airport connectivity.

Examples of impact of other events on residential sites– Global and India

Sporting events of these kinds are increasingly being seen as vehicles for urban renewal, a catalyst to create jobs, increase investment and transform the landscape of the city. The 2002 Commonwealth Games in Manchester were aimed primarily to ‘regenerate’ the area. The focal point of the regeneration was East Manchester which had been the worst affected. Residential rates post the games have increased by over 80% in the region.

Closer home, similar changes are taking place in Pune that is preparing for the Commonwealth Youth games to be held in October 2008. Infrastructure developments are taking place, though at a slow pace, leading to an increase in the residential market prices. Developers have announced the building of townships around the infrastructure developed post the games. Belawadi, centre of the games in Pune has already seen residential rates shoot from Rs.2000 per sq feet to Rs. 10,000 sq feet.

Similarly, the build up to the Asian games in 1982 saw an unprecedented construction spree with stadiums, the games village, hotels, flyovers, roads and even Pragati Maidan being built. South Delhi was a region that had already begun being developed, but it was only after the 1982 games that saw this region increase in importance. Three of the four flyovers developed at the time, the Moolchand, Sewa Nagar and Oberoi flyovers were in south Delhi. The development of this site probably had the largest urban impact on the city due to its correlation with the development of south Delhi, the most expensive residential site in Delhi with rates of Rs 30,000 per square feet in some areas. The reason that the games had such a deep impact on the development in south Delhi was because they provided the region with the necessary infrastructure to develop. It provided the region with broad roads and flyovers for swift movement of traffic and other infrastructure as well such as water, electricity and other civic amenities.

The current state of affairs show similar developments in East Delhi

The urban landscape of East Delhi too, is set to change dramatically with many infrastructure projects being pushed through in time for 2010. Infrastructure investments have already increased dramatically in the region with a new bridge being built at Wazirabad, the metro phase 2 being constructed, and numerous flyovers and roads in the pipeline. There are indeed ambitious plans afloat ranging from improving street furniture to setting up more power stations before the 2010 deadline. Land has been amassed by builders like DLF, Ansal, Unitech and Emaar.

Delhi is attempting to give itself a major facelift due to the games, and develop a whole portion of the city, East Delhi and the Yamuna riverfront, which until now has been largely neglected. As Delhi expands rapidly and space runs out, the until now undeveloped Yamuna riverfront, largely inhabited by slum dwellers and vegetable growers, is looking like prime real estate. Townships that are expected to come up in that region would be able to charge high rental/ capital values given its infrastructure. The banks of the Yamuna are the largest open space left in the city, as well as the largest groundwater recharge zone. The 25 km stretch along the river has 97 sq km of prime land, 7 per cent of Delhi's total area.

Conclusion

Approximately 80% of the demand in the real estate sector in India lies in the residential segment. The housing sector is currently growing at 30-35% per annum. The present plan for the Commonwealth Games may be a recipe for an ecological and financial disaster, or they might finally put the city, and the country, on the world map. The Games, with some smart marketing, may just follow in the footsteps of Asian Games to transform East Delhi into a residential haven.