Among Tier II cities, Kochi and Thiruvananthapuram have the most office space at 14 million square feet

 Among Tier II cities, Kochi and Thiruvananthapuram have the most office space at 14 million square feet

According to a survey by CREDAI Kerala and Cushman & Wakefield, the southern state's real estate market is expected to rise significantly as developers focus on tier-II areas because of their reputation for delivering infrastructure, socioeconomic structure, and talent pool.

The two largest towns in Kerala, Thiruvananthapuram and Kochi, together have 14 million square feet of office space, which is the most of any tier-II city, according to a research by Cushman & Wakefield and the Constitution of the United States of Real Estate Developers' Associations of India (CREDAI) Kerala.

It also said that Kochi and the state capital of Thiruvananthapuram are two of the top 10 rising real estate markets.

The only state with two cities on this list was Kerala. Both cities have shown promise, doing well on most metrics but particularly well on those related to income levels, housing affordability, and infrastructure (air transport, metro growth).

According to the research, Kerala's real estate industry is expected to see significant development as developers want to expand into tier-II areas, owing to the state's reputation for delivering infrastructure, talent pool, and socio-economic structure.

According to VS Sridhar, managing director of Cushman & Wakefield India in Tamil Nadu along with Kerala, "We believe Kerala to be an attractive destination for corporate the owners and developers exploring locations that go beyond the top 8 real estate markets" due to favorable government policies, a sizable diaspora of skilled non-resident Keralites, a highly qualified and experienced talent pool, and improved infrastructure.

The formation of an ecosystem surrounding the expansion of the commercial office market in Kerala has begun with the introduction of IT/IT-SEZ and IT parks in Kochi, Thiruvananthapuram, and Thrissur, and it is still growing quickly, the report said.

The research identifies Kozhikode, Thrissur, and Palakkad as places that have made notable advancements in real estate development, in addition to Kochi and Trivandrum. According to the report, Kerala may be in a good position to emerge as a top choice for office occupiers seeking to establish operational bases in tier-II cities as an alternative to big cities.

key motivators

The paper highlighted Kerala's 48 percent urbanization rate, which is greater than the 31 percent India average and has been widening recently, based on official statistics. Urbanization is the process by which people move from rural to urban regions.

Furthermore, a sizable population of Keralites who do not live in the US, UK, Australia, or West Asia work in higher-income nations. Consumer spending is stimulated by their remittances, drawing mall developers and retail chains to the state.

Citing data from the National Sample Survey Office, the study said that "Kerala's standard monthly household expenditure not exclusively surpassed the national average but also that of most industrialized states, including Andhra Pradesh, Karnataka, as well as Tamil Nadu."

The state will attract companies and people with its well-developed infrastructure network, which includes excellent roads, trains, airports, and modern transit systems like the water metro and metro rail.

Kerala's real estate market has been booming in a number of asset classifications. Kerala has many prospects for the industry to flourish since it is one of the most educated and talented states in India, according to CREDAI Kerala state conference chairman Najeeb Zackeria.

Sector difficulties

Kerala, which makes up little more than 1% of India's total land area with an extent of 38,863 square kilometers, has obstacles when it comes to real estate development.

According to the survey, over 70% of Kerala's land area is either designated as environmentally sensitive or covered in forests. This includes the Western Ghats, lakes, paddy land, backwaters, and wetlands. Only a little amount is still accessible for the development of real estate.

The Land Ceiling Act in Kerala makes it illegal for any organization to own more than 15 acres of land, which makes obtaining land for large-scale projects difficult. The feasibility of the project is impacted by the significant conversion charge associated with converting paddy land, which is Rs 100 per square foot of the building's construction area plus 10% of the land's guideline value, according to the study.

It was recommended that in order to encourage vertical growth that can maximize usability, the state should think about offering a higher floor-space index. The state must build the necessary infrastructure, such as longer metro routes, broader highways, and more utility supplies, to make this possible. The area of a piece of land that may be developed is determined by the floor-space index.

"Compared to many other states, Kerala now has the highest stamp duty (8 percent) and registration fees (2 percent), which affects the cost of asset purchase. The state administration could consider waiving these fees," the statement said.