While Metro rail implementation has a huge impact on real estate prices along its corridor and ‘influence zone’, in the larger context it improves the standard of living of a large segment of urban population, and is also a catalyst for sustainable development across large urban areas
- In areas closest the stations, the visible impact is higher on commercial property values than on residential values, and the effect diminishes as the distance from the station increases
- Land prices are higher if a land parcel is located within walking distance, but not directly next to the station. The increase in the land values is reflected in the area served, especially around the stations
- There is a considerable increase in demand of retail and office spaces around existing metro stations.
- Most commercial properties near Metros result from the conversion of standalone residential units to apartments, mixed use properties to commercial use and new development on vacant land.
Needless to say, this imposes stress on the existing infrastructure available in the region, which the government must tackle along with the Metro development. In order to control development along the metro corridor, land usage needs to be revised – failing which unorganised commercial development will crop up on the heels of the higher rentals assured by the increased connectivity. Given the influence zone of 800-1000 meters from the Metro stations, the land use for this zone must be properly mapped in order to maintain a balance. Residential to commercial land use conversion will invariably be most prominent, as commercial spaces will fetch higher rentals.
JLL Property Consultants have worked on various assignments with Metro authorities across the globe and in India to analyse the impact of Metros on the respective property markets, including benchmarking property values.
CASE STUDY: Chennai Metro
The now operational Chennai Metro network has been planned in a manner which integrates it with other forms of public transport, including buses, suburban trains and MRTS. The enhancement and easement of connectivity has had a huge impact on real estate prices along the Metro corridor. With the amplified connectivity of Chennai’s suburbs to the city centre, more and more property buyers are considering settling down in the suburbs, away from the busy city and yet enjoying rapid connectivity to their workplace in the Central Business District (CBD).
Real estate demand along the Chennai’s suburbs saw a significant increase, and this prompted developers to unleash a number of new launches in these areas. North Chennai, which hitherto had limited real estate prospects, is now seeing the green shoots of growth after the Metro connected it to other parts of the city. The Metro is now expected to find solutions for unsold real estate inventories, resale and unoccupied commercial and retail spaces.
It will also restore the lost prominence of micro markets such as Anna Salai, which was the city’s earlier entertainment and business hub. The existing developments and infrastructure at Anna Salai had not been able to cater to latter-day demand, but will now doubtlessly see a lot of commercial redevelopment as a result of the easy access provided by the Metro.
Since the Metro’s announcement in 2009, Chennai has witnessed steady real estate price increases, especially along the Metro corridor. Prices near the Metro station have already reached Rs. 7000–16000/sq.ft. and are expected to increase further about 15% now that the Metro is operational. Residential rentals will rise as more of the population moves closer to the Metro to benefit from the faster and cheaper transport. If feeder services are strengthened, this impact will amplify out to a radius of 4-5 km from the Metro stations.
Likewise, home buyers are also attracted by the reduced commuting time to work, and this will lead to a significant rise in sales and increased capital values near the Metro stations. The return on investment is considerable, given that home buyers are willing to pay a premium for residential units situated close to public transit systems like the Metro.
Overall benefits of a Metro:
- Saving on travel time
- High service availability, reliability and quality
- Higher productivity and savings across the system