There is an inherent value in real estate that can be attributed to the intangible community factor. Across the many cities I have lived in, which includes most metros, I have found this aspect reflected in the realty market. For instance, there are areas like Malleshwaram in Bangalore, where the traditionally wealthy locals live. Then there’s Whitefield, where most of the NRI and expat dominated residential complexes are located. In Mumbai, there is a Parsi Colony in Dadar (the name says it all) and there is a concentration of Tamils and Gujaratis in Matunga. Ghatkopar is another residential area with a high Gujarati concentration. Chembur is home to a large population of north Indians. And then there’s Bandra, where the affluent reside.
It isn’t uncommon to find residential areas conversationally referred to as China town or Sikh colony or Muslim colony in several cities. There needn’t be a religious or cultural bias at all — it’s just that many people belonging to a particular community tend to live closer to each other. To illustrate further, caste, culture, religion or colour needn’t be the binding theme. In the National Capital Region (NCR), for instance, Gurgaon is considered more cosmopolitan, and people with such a mindset tend to live there.
When looking for a home, we often take into account community considerations and we are willing to pay a premium, in addition to the normal per-square-foot rate in that part of town. This is very important in determining future property value as well. If this is a strong factor in the area and the stock of homes is limited, the appreciation may be disproportionately high.
Let’s illustrate this with an example. A Jain friend in Mumbai once explained to me why apartments in a relatively old complex commanded a premium as compared to a swanky new complex just about a kilometre away. The value multiplier was a Jain temple, just a stone’s throw away from the older apartments. The convenience factor ensured a premium being attached to the property by members of this wealthy community.
Being part of an elite club by virtue of living in a particular residential area is another manifestation of the community value in real estate.
You might have heard of the hefty sums, running into hundreds of crores that some wealthy families have paid for homes and apartments on Napean Sea Road and Pedder Road in Mumbai. To most of us, the per-square-foot rates paid by the buyers for the sizes of these homes and apartments might seem completely irrational. However, for many of the buyers, the satisfaction derived from living in that area far outweighs the cost. In Delhi too, living in Lutyens’ area, is a privilege many are willing to pay special prices for.
If there is a strong reason for people to be living in that area, besides general infrastructure and accessibility, a little premium paid today may translate into bigger gains in future.
Former Editor, Outlook Business and Executive Editor, NDTV Profit, the writer is a personal finance expert. Mail him at propertyplus@thehindu.co.in
