Gujarat realty may follow leasing formula

If the last year saw a drop in housing loans due to higher interest rates, the year 2008 may bring in further drop thanks to possibilities of lease out of properties. Developers in Gujarat are hopeful that the trend, common in the US, will pick up this year in the state.

The West is already witness to the success of leased out residential properties instead being sold out completely. Although, at present there is hardly any demand for leasing of properties, the trend will pick up by 2008, feel many.

"Until now a higher rate of interest had reduced housing loans, but in the coming year the advances might reduce further if the trend of leasing of properties picks up in Gujarat," says JM Patel, chief manager, Dena Bank, the convenor for State Level Bankers' Committee (SLBC).

"In United States and other developed countries, the rent on value of property is higher than the interest on value of property, which makes it lucrative for the developers to go for such schemes. But in India, the rent quoted is half to one per cent per month of the value of property compared with 1-1.5 per cent rate of interest on value of property," says Pankaj Shah, managing director, Bakeri, adding that with value of property constantly on the rise, the trend is all set to pick up here as well.

"A further 40-50 per cent rise in the property value should trigger it off," feels Shah, who is eager to introduce such schemes if and when the demand grows.

However, some developers say that leasing of property would be more towards corporates than individuals.

"It is more of a corporate phenomenon. Since the fund gets locked in purchasing these properties, corporates would rather go for leasing the properties to save the capital for other useful investments," says Rupesh Brahmbhatt, managing director, Safal Infrastructure Pvt Ltd.

The state is already witnessing a number of indigenous and multi-nationals setting up their base here. A number of corporates having bigger set ups and large number of employee base now prefer to opt for property lease-outs.

"We have been opting for lease out of properties, both commercial and residential, instead of buying them over a couple of years. Since the company is expanding in several ways, a lot of capital will be needed and we cannot afford to lock it up in buying them altogether," says Rajesh Gandhi, director, Vadilal Industries Ltd.

The company as of now pays an average rent of around 8-9 per cent on leased properties, adds Gandhi.