Kochi Metro Rail may enter into realty sector

If all goes as planned the Kochi Metro Rail Ltd (KMRL) will soon enter the city’s realty sector. The Metro agency’s entry into real estate targeting middle class home buyers is expected to redefine the sector.

In a recent talk delivered by KMRL managing director Elias George, he firmly stated the Metro agency’s readiness to plunge into the sector. “We are going to do real estate business,” he said, adding, “We are confident that we can give the best possible fittings and flats.”

KMRL expects to generate revenue of approximately Rs 1,000 crore through the sale of these apartments.

Kerala government has provided 18 acres of land to KMRL at Kakkanad, where old NGO quarters are located, and the flats will come up here.

The Metro agency intends to develop European-styled apartments which are of 1,000-1,200 square feet. These apartments would cost less than what the front runners in the sector are selling now, he said.

The KMRL managing director said there is going to be a huge demand for it. “We are clean dealers and we got the KMRL brand equity. We can give a young couple say for Rs 30 lakh a level of sophistication in our flats, which only the best guys in Kerala can provide,” said George. This indicates that the Metro agency will be able to sell flats at the rate of Rs 2,500 per sq feet.

 Though Credai representatives view such challenges positively. However, they cautioned that it would be tough task for KMRL to sell apartments at such low rates. “As the land is provided by the government the land cost might not be a major factor for KMRL. Moreover, they will be able to get tax exemption, and also there is a possibility of government intervention to facilitate pre-contracted rate system. These factors are expected to help KMRL in offering apartments at lesser rates,” said a Credai representative.
It is pointed out that prominent builders offer premium apartments in Kakkanad at a rate of Rs 5,000 per sq feet. The construction cost of these are between Rs 2,750 to Rs 3,000 per sq feet.
Apart from this there is land cost which is between Rs 1,000-Rs 1,250. Then there are other costs which is involved in getting approvals and funding. This will take the cost to Rs 4,000 per sq feet. According to builders while it is almost impossible to bring down the cost involved in the construction of the structure, there is a possibility to reduce the cost involved in executing works involved in the final stages like bathroom fittings, flooring, fire and safety and landscaping.
“The builders normally charge a margin of 10 % -15 %. When we take into account all these factors mentioned above it will be a real challenge to sell apartments below the rate of Rs 3,750 per sq feet,” said the Credai representative.