Wednesday, May 9, 2007

Removal of Octroi - Impact on Real Estate Market in Gujarat

Removal of Octroi - Impact on Real Estate Market in Gujarat

Since long, different Chambers of Commerce in Gujarat demand for removal of Octroi from the state and recently they have started agitating against the state government to fulfill their demand.
What and how would it affect the Real Estate market of almost all major cities of Gujarat if the state government decides to remove the octroi.
All business enterprise related to trade & commerce within the city normally keep their warehouse/go-downs, stock yards at places outside the octroi limits of the city, over years which results into development of commercial hubs at the outskirt of the city with developed infrastructural facilities like Transport Nodes and other necessary allied activities. Similarly manufacturing companies also establish their units outside octroi limits which results into growth of industrial area at the outskirts of the city.
If the octroi is removed what will happen? One does not need to have his go-down at outside the city much away from his trading place instead he can have a new place more convenient and of better choice within the city and nearby to his present trading place resulting into considerable fall in demand for go-down estates outside the city. Similarly manufacturers may shift to a more convenient industrial area within the city resulting into fall in demand for outskirt properties suitable and meant for small industrial units.
This is how properties within the city will have an increased demand and properties outside the city will witness a considerable fall in demand. This will result into a fall in the market value of properties outside the city and rise for properties nearby to established trading/market places and well developed industrial areas/localities within the city.
Ahmedabad city is an interesting case study in context with the captioned subject.
In the recent past, limits of the Ahmedabad Municipal Corporation were extended up to the Sardar Patel Ring Road passing through the outskirt/periphery of the city which was recently developed by the AUDA. Due to the said extension in the AMC limits, major go-down estates and industrial area/localities including GIDCs became a part of AMC area falling within the city octroi limits which was previously outside the octroi limits.
This newer situation arising out of the extension of octroi limits compelled almost all traders and manufacturers to shift their places who had their go-downs or factories falling within the newly included areas to new destinations away and outside the new octroi limits. Due to this during this period the Real Estate Market at the outskirts of the city was affected considerably. For example 'Sarkhej' which happens to be the prime locality for warehousing/go-down activities for decades became a place of Vacated Estates with no fresh demand.
Within the short span of period mass shifting to a nearby new convenient place took place which resulted into a sudden rise of almost 50 to 70% in the market value of properties outside the new octroi limits (for example Changodar & Sanathal).
Now what happens if the octroi is removed? The answer is simple, people who shifted outside will start comming back to their old localities or to a new more convenient place even much inside the city somewhere nearby to their trading place and if it happens market value of properties at the outskirts will fall considerably and a newer demand for properties within the old developed city area will be seen.

News Letter -
Date : 09 May 2007.


At April 21, 2013 at 11:06 PM , Blogger HcoRealEstate said...

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