As a bustling city of trade and commercial capital of Kerala, Kochi, known as “The Queen of Arabian Sea”, has much to offer in terms of real estate and investors are enjoying the rapidly spiraling prices.

The current real estate boom started during the last quarter of 2004 and the announcement of each new project, particularly developments in the IT sector, has a direct impact on the real estate market. Multiple factors continue to promote Kochi as one of the leading real estate destination in India. However, one of the prime areas under fast development is Kakkanad, commonly referred to Kochi’s IT hub.

The reasons behind Kakkanad’s industrial and real estate boom

Kakkanad is attracting a great deal of interest from both Indian and international corporations wanting to open offices there. The reasons for Kakkanad becoming a real estate hotspot within Kochi include:

• The Infopark, an IT park with IT/ITES companies started in 2003-2004 and promoted by Govt. of Kerala, is the foremost reason for the sudden boost Kakkanad has enjoyed. Infopark has a total area of 98 acres and close to one million square feet of floor space, expected to expand to 5.14 million square feet by the year 2012.

IBS Software services, Tata Consultancy Services, Wipro Infotech, Affiliated Computer Services and US Technology are some of the major corporations with a presence in Infopark. As more and more companies open up offices in Infopark, it is expected to create between 30,000 and 40,000 new job opportunities in the next three years.

• Dubai Internet City are planning to open a Smart City in Kakkanad - a proposed area of 246 acres for IT/ITES companies. By 2012, the project is expected to have a space of 6.20 million square feet. The proposed Smart City project will create around 90,000 job opportunities in the next decade.

• KINFRA Export Promotion Industrial Park is a 90-acre park for export-oriented units in different sectors.

• Foreign companies can enjoy special benefits through the Cochin Special Economic Zone (CSEZ).

• Kakkanad is also home to Collectorate, several schools & colleges and hospitals.

Kakkanad lies in the suburbs of Kochi. From a sleepy hilly village until around 10 years ago to one of the hottest property areas in Kochi, Kakkanad has been transformed beyond anyone’s imagination.

The rampant expansion of the Kochi metro area has now limited further possibilities for development in the city and this is another reason, why commercial enterprises and property developers are focusing on suburbs like Kakkanad.

Property developers are also well aware that since the major IT-based business expansions are located in this area, residential property in Kakkanad is even more attractive and the demand is higher than in other areas.

Kakkanad’s pollution-free environment, compared to other parts of Kochi and good drinking water are the other reasons cited for the boom in residential property development there.

Residential Property in Kakkanad

In 2007, the property appreciation rate in Kakkanad was a stunning 60%! Easy access to Kakkanad from both Kochi city as well as the International Airport makes it a very sought-after location. Most leading developers have at least one project in or around Kakkanad and some have several. For instance, Mather Projects & Constructions has four projects in Kakkanad, including apartment and villa projects. They cater to the higher-end property market and a total of 18-20 lakhs (180,000 - 200,000) square feet are under various stages of construction at Kakkanad. Apartments cost Indian Rupees (Rs.) 35-45 lakhs ($89,700), while villas costs Rs.1-1.5 crores ($26400-$39500).

Residential property is not targeted at the IT crowd alone. “While apartments find customers in IT crowd, villas are usually targeted at higher-end segment including doctors, businessmen and Non-Resident Indians (NRI),” says Raffi Mather, Director of Mather Projects & Constructions.

On the other hand, IT personnel moving to Kochi for a short assignment or for the long term prefer studio apartments and one-bedroom apartments to large ones with two and three bedrooms. This is for a variety of reasons, including ease of maintenance and affordability. The concept of studio apartments is still in its infancy, but with demand set to increase, you can expect to see more studio apartment projects in Kakkanad in the near future.

The average standard rate per square foot for apartments in Kakkanad is between Rs.2,000 and Rs.3,000 ($52 - $79). However, some builders offer apartments for cheaper at the start of the project. For instance, Desai Homes recently had a record sales when they introduced their new apartment for around Rs.1,400 ($36) per square feet.

Other major builders with projects in and around Kakkanad include Abad Builders, Skyline Foundation and Structures Pvt. Ltd, Skyline Builders, Jain Housing and Constructions, Heera Constructions, Purvankara Projects Ltd. and SRK Constructions.

As elsewhere in Kochi, the boom in real estate in Kakkanad is also demand based and a prominent builder in Kochi estimates this growth will continue steadily for the next 15 years. With current projects like Infopark and future ones like Smart City still to come, the area is expected to offer some very solid and high ROI investment opportunities.

Although the U.S. National Bureau of Economic Research is waiting for definitive evidence that a recession has started in the United States, many economists are saying that it’s already here. Because the Canadian economy is so closely tied to that of its American neighbors, a U.S. recession is an unwelcome event not just in the U.S., but in Canada as well.

In the last few years, the Canadian economy has been booming, but things are starting to slow down. About 75% to 80% of Canada’s exports head to the United States, so the U.S. downturn is already having an impact. However, most economists agree that regardless of whether the U.S. experiences a downturn or an outright recession, Canada’s economy will only slow, not stop altogether. Experts still expect a 2.2% increase in GDP in 2008.

Canadian investors see real estate as a lower-risk option

Despite the lack of an official declaration of recession, savvy Canadians are already gearing up to tighten their belts. After enjoying several years of higher-than-typical economic growth, especially in the real estate market, many Canadians are in a strong position to save some of their assets for a rainy day.

In the stock market, Canadians are starting to shift around their holdings in order to mitigate some of the looming risk. Many investors are steering away from the more volatile stocks in favor of more resilient investments that have a better chance of withstanding a recession. Real estate is once again proving to be a solid investment that grows the hard-earned dollars of homeowners.

Being financially prepared for a U.S. recession should give Canadians the breathing room they need to ride out the toughest times. The government has also lowered interest rates recently, in an effort to help Canadians buy new properties, as well as to afford the payments on their existing mortgages or other loans.

Canada expected to be largely unscathed by a U.S. recession

Many economists are predicting that, regardless of an impending recession in the United States, Canada will escape the worst of it with very few battle wounds. Yes, the economy will be affected, but not enough to start a full-fledged Canadian recession. It’s estimated that the effects in Canada will be both comparatively small and most likely temporary.

The growth that Canada has experienced in recent years has been truly remarkable. The prices of houses have skyrocketed and more people are living in Canada today than ever before. However, although this growth has been astounding, it has also been something difficult for many Canadian cities to manage. The demand for houses escalated so dramatically that properties became overpriced and completely beyond the means of many looking for a place of their own. Rental vacancy rates also dropped to practically nil.

Now, as a possible U.S. recession approaches, the Canadian market is beginning to correct itself. Prices of homes and many other things are once again becoming affordable. Canadian cities are getting a moment to catch their breath. Residents and investors alike are turning to real estate for a safer, more profitable investment. Yes, difficult times may be ahead, but with a bit of planning and budget tightening, it looks like Canadians will have the ability to weather the storm.