Unravelling Kerala

Kerala ready to ride India’s tech boom

Kerala is a state on the making. Situated in southern India, it has long been overshadowed by industrialised powerhouse cities such as Bengaluru, Hyderabad and Chennai. But with the state good governance and government paving the way for a booming technology sector, created significant direct and indirect employment opportunities as well as created opportunities in the growth of real estate sector and also opened up avenue for investment.      It has to be noted that, as per Public Affairs Index 2018, Kerala stands as the best governed state for the third consecutive year since 2016 among the large states in the country.

Non-resident Keralites working in the Gulf countries have typically fueled the state’s largest most urbanised cities, with remittances accounting for more than one third of Kerala’s economy, helping to make the state one of the wealthiest in India.

Kerala has earned the reputation of being one of the country’s top consumer states, exceeding India’s average spending on food and non-food categories. Tourism, which accounts for almost 10 percent of the state’s GDP and 24 percent of its employment, has been a vital sector in the growth of its economy.

Preparing for change

The potential for Kerala’s future prosperity is undergoing a transformation, with hopes pinned on its ability to emulate highly successful technology-driven neighbouring states so as to create its own world class cities.

The Kerala government has already built large scale commercial hubs- Thiruvananthapuram (Technopark), Kochi (Infopark) and Kozhikode(Cyber Park) and also invested in physical infrastructure like national highways, airports, ports and Metro Rail. It is now considering funding to get the state’s startup economy booming, complementing the conducive policies in place to gear for this transformation. With the strong physical infrastructure and human resources strength, Kerala has adopted digital facilities.

Kerala started Startup Mission in the year 2007 as ‘Technopark Technology Business Incubator’, presently being called as Kerala Start up Mission (KSUM), which is a nodal agency of GoK for implementing the entrepreneurship development and incubation activities in the State. In order to the strengthen the mission, Kerala has introduced Youth Entrepreneurship Development Programme targeted to foster entrepreneurship skills among the youth in Kerala which includes key initiatives like Raspberry Pi Programme, Startup Box Campaign, Startup Boot camp, Start up Leadership Academy and Training programme, International Entrepreneurial Exchange Programme, FABLAB Programme, Entrepreneurship Driving Programme, Performance Linked Scheme and Patent Support Scheme. As per Annual Plan 2017-18, the state has earmarked INR 7999 lakhs for startup mission, which is about 15 percent of the overall share.  

As a result of this groundwork, the state’s two main southern cities – Trivandrum and Kochi (its part of Ernakulam district) – are modernising at great speed and have above average rates of urbanisation, prompting an evolution in all core real estate asset classes (Commercial, Retail,  Residential and Hospitality development). Though Kochi being the financial capital and Thrissur being the major commercial & business hub of the state as well as for the south India, bordering Ernakulam district, similar kind of impact and trend is where being witnessed till date. Further Cochin International Airport borders and caters the regions significantly, which further attributed real estate development.

Thrissur – fast emerging commercial market

In the commercial asset class, Thrissur is regarded as a fast emerging market. Thrissur is also referred as the Golden City of India as the region has a strong base in manufacturing sector especially with respect to Gold Jewellary, Diamond cutting & Polishing. Unlike Kochi and Trivandrum, it is yet to build large-scale Grade A office spaces, but with the state government initiative and augmentation on InfoPark at Koratty  and buying large parcels of land on the outskirts of the city for industrial (includes Food & Agro Industry, Engineering Industry, Electronics & Hardware, IT / ITES Sector & Gems & Jewellery), this is tipped to change the existing scenario. Also, most of the industrial investments in Ernakulam district is more towards the northern region of Kochi bordering the Thrissur.      

The other two cities both have noteworthy technology-focused commercial office developments. Trivandrum’s Technopark is owned and administered by the state government and home to multinational IT firms. Kochi’s Info Park was also developed by the state government. But whereas Smart City project, which adjoins Info Park is in tandem with Dubai Holdings – a joint venture between Dubai government backed financial investment arm (84% share) with Kerala Government.

Thrissur is considered to be a support (Spoke) to primary IT markets in Kochi and Trivandrum, providing tenants a more cost-effective alternative. It has also reaped rewards for its easy connectivity to Info Park and Technopark via a national highway bypass.

A luxury retail market

Keralites have a penchant for luxury homes, with more than 55 per cent owning large residential properties and only 5 per cent of the population living in dilapidated homes.

Currently, Trivandrum’s Technopark is the prime driver for real estate developments in that city, but due to the region’s high numbers of educational and healthcare institutes, and the expectation of more infrastructure projects, this may change.

There is scope in the future for alternative residential market categories such as student housing so as to cater to a diverse population. Trivandrum and Kochi currently have a 38 per cent share in student enrollment in the higher education space, but the capacity of hostels on university campuses cater to less than 10 per cent of total student enrollment.

Kochi’s waterfront location is also proving to be a boom for developers, with properties selling well and commanding premium prices. Even though Kerala as witnessed natural calamity, post flood, still the waterfront properties commands premium. Thrissur is jumping on the luxury bandwagon too, with the majority of proposed and launched projects targeting the upper-middle income population.

Our data reveals that up to 70 percent of stock in Trivandrum and Kochi is sold, while well-developed Thrissur stands at 75.8 percent sold. While the residential supply in the three largest cities used to be marked by disorganised developers, over the last decade, members of the Confederation of Real Estate Developers Association of India have made significant regulatory impact on the market.

This has improved the quality of new projects since these developers account for a dominant share in terms of supply. This may help to institutionalise these burgeoning markets and make them more lucrative for investors.

Key Statistics:

• Tourism accounts for 10% of Kerala’s GDP and 24% of employment
• 55% of the state live in larger houses, only 5% live in dilapidated homes
• 70% of stock in Trivandrum and Kochi is sold
• Thrissur is 75.8% sold
• 46% of Kerala’s university students are located in focus cities (Kochi, Trivandrum, Thrissur)
• 38% share is in Trivandrum and Kochi alone
• University hostels cater to less than 10% of enrolled students.
• Poor maintenance of university campus accommodation has resulted in 30% vacancy in Trivandrum
• The three focus cities account for 60% of Kerala’s tourists
• Three cities account for 45% of hotel stock in Kerala