Trends in the Patna Real Estate Market.

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“The Patna Real Estate market has not even reached 20% of its potential. Any investment in real estate in Patna is bound to be profitable!" This statement clearly summed up the Patna Real Estate market in last ten years. Going by the recent trends in the Patna property market, it's for the first time in last ten years that we are currently facing a consolidation or even correction in some areas of Patna real estate, especially commercial space. We need to realize that a slow down or a breather was in demand for a fast growing property prices in Patna. After a lull of at most three years once again Patna real estate will embark its growing trajectory in the next 10 years.

 In fact for the investors in property market of Patna; the mantra is that this is the time to go shopping for property in Patna; as the market has started firming up or correcting already. As the organized Real estate market develops in Patna, real estate as an investment will become much better option in Patna. In fact the main growth thrust will happen due to favorable demographics, increasing purchasing power, existence of customer friendly banks and housing finance companies, professionalism in real estate Patna and favorable reforms initiated by government.

So which would be the potential growth areas to look for? The main growth sectors include residential real estate, commercial real estate, retail sector, industrial sector, hospitality and healthcare sectors in Patna. The commercial real estate sector will get a boost if Bihar is able to attract the IT/ITES industry in the coming decade through more friendly policies for the sector. The commercial real estate will also gain from if state government allows FDI in retail.

Development of the real estate segment is crucial for Bihar’s economic growth.

Moreover, land in Patna is mostly freehold land. In fact, Patna can see a dramatic increase in land availability if lands in the heart of the city are opened up to redevelopment. The other big opportunity, say industry sources, is the involvement of state governments in large-scale government projects like development of the surplus land of sick public sector firms. Bihar State government needs to realize that they can make more money if they get into joint ventures with private developers than just selling the land. This is an ideal opportunity for investors because such arrangements reduce entry-level costs.

But not all real estate investments are so easy. In Patna, it is very difficult to find large plots. Foreign investors prefer to stick to larger cities because returns there are more lucrative. The other problem that acts as a dampener for foreign investors is the insistence of local financial institutions on a personal guarantee from property developers over and above the land as collateral. Another problem is that local banks and financial institutions also tend to loosen their purse strings when property prices are rising because that raises the value of their collateral, but when prices fall, they pull out, triggering a bust.

Still, all agree that the potential of Patna's real estate sector is huge. It is one of the most attractive markets for two reasons. One, with a 10 crore plus population, the opportunity is huge; no other market is going to witness this kind of growth both in commercial as well as residential and retail markets. Two, the industry has an average rate of return on capital in excess of 30% in Patna in the last decade and it is not unusual for local developers to achieve IRR of as much as 50%.

We should see the lull in the market as the opportunity.