Ram Mandir Inauguration: Is This The Right Time To Invest In Real Estate In Ayodhya?

With just a day left for the Ram Mandir's consecration ceremony, the real estate market in Ayodhya is literally on fire, with land prices in some pockets going up by four to even 10 times than what was prevalent four to five years ago.

It is primarily the limited organised real estate supply in the market and the tourism potential of the temple city that is fuelling demand, say real estate experts. The upward trajectory is bound to continue till such time that new real estate stock gets built on ground in the next one to two years, they add.

Invest in Ayodhya

According to figures from the UP Tourism Department, it is reported that in the year 2021, only 3.25 lakh tourists visited Ayodhya, whereas in 2022, the number of pilgrims and tourists visiting the city increased 85 times to 2.39 crores. In 2023, the number is expected to surpass 3.5 crores. It is said that the UP government anticipates a daily influx of at least 1 lakh pilgrims to the city after the consecration ceremony on January 22, reported Hindustan Times.

Several townships and private hotels are expected to be established in the city, with the government having sanctioned land for this purpose. These land parcels are situated around Chaudah Kosi Parikrama, Ring Road, and the Lucknow-Gorakhpur Highway.

Until now, the state government has allocated land for hotels and has also established a few tent cities. Reports suggest that Ayodhya is poised to have India's first 7-star vegetarian hotel featuring a completely vegetarian menu. Apart from Radisson, Taj, and ITC, other reputable hotel chains are purportedly contemplating Ayodhya for their expansion plans. The Abhinandan Lodha Group is also planning to introduce a luxury hotel in the city.

The launch of a 25-acre plotted development project in Ayodhya after the inauguration of the temple is planned by the Mumbai-based real estate developer, the House of Abhinandan Lodha (HOABL). The project is situated approximately 15 minutes from the upcoming temple.

Once infrastructure in the temple city is fully developed, tourists, who typically spend a few days, may extend their stay by a week, potentially boosting business and the overall economy in these areas.

Experts suggest that if new malls and other tourist attractions emerge in and around the site, more tourists may choose to stay for a longer duration. Demand is anticipated to be driven by small housing units, managed holiday homes, senior living, and wellness centers in the long term, according to HT.

Ravi Shankar Singh, Managing Director for Colliers' Residential Transaction Services in India, notes that there might be a focus on holiday homes, senior living, and wellness centers, with the pilgrimage tenure potentially increasing from two to seven days.

Small-sized developments are expected to cater to small families, serving the purpose of both pilgrimage and short holidays. Some individuals may opt to invest in housing projects offering the choice of having an agency maintain the asset for them and renting it out in their absence.

"Having said that, these are anticipated to be small-sized developments, suitable for small families, serving the purpose of both pilgrimage and a short holiday. The option of having an agency maintain the asset for them and putting it on rent in their absence may be chosen by some individuals," he explains.

Focus on return on investment and rental income generation

The current focus of all investors is expected to be on return on investment. In the long term, the development of senior living is also anticipated in this city. "For peace and quietude, senior citizens may want to visit the temple town. NRIs may also want to invest in properties, but the focus would be on return on investment.

They may visit the place once or twice a year but would want their asset to be monetized the rest of the year. There may be a desire to invest in temple towns, but there has to be scope for rental income generation," said Singh, reported HT.

A serviced apartments product in Ayodhya may be launched by Sandal Suites, a company in the managed residences space, in the next two to three years. However, its immediate focus will be on launching a serviced apartments project in Shirdi this year, according to Neeraj Gulati, promoter of Sandal Suites.

Does it make sense to invest in a religious tourism destination such as Ayodhya?

Due to limited land availability and escalating demand, property prices in certain zones have reached almost unaffordable levels. With various townships and private hotels slated to be constructed in Ayodhya, significant opportunities and substantial returns on investment are anticipated by developers.

Both commercial and residential projects in the area can be explored by investors, according to Ravi Nirwal, Sales Director and Principal Partner at Square Yards, as per HT reports.

Property prices in Ayodhya have risen by 5-10 times ever since the construction of Ram Mandir broke ground. Based on the type of property and proximity to the temple, the price of land and properties has escalated, with rates fluctuating between ₹2000 per sqft to almost ₹20000 per sqft within 5-10 kms of the temple site.

With lakhs of visitors expected to visit the temple city post-inauguration, it is expected that the prices can go up by 12-20 times in the next decade, he said.

Chaudah Kosi Parikrama, Ring Road, Deokali, Nayaghat are some of the places that are best to invest in Ayodhya. These places are located within a 5-15-kilometer radius of the temple. Also, land parcels across the Gorakhpur Faizabad Highway are also experiencing heightened investment activity, he added.

Opportunity for NRIs

"Investing in real estate in Indian religious tourism destinations can be considered a good alternative for non-resident Indians. The stability of the local real estate market, prospective rental yields, resale value, and the long-term appreciation of real estate should be taken into account by them," said Santhosh Kumar, Vice Chairman - ANAROCK Group, according to HT.

It is crucial that the legal and regulatory framework for property investment in India, including any tax ramifications and property regulations, be comprehended by them, as many NRIs are not familiar with the country's real estate market. Future growth plans, upcoming infrastructure, and the state of the local economy should also be taken into consideration. It is also important to note that not all such destinations will yield comparable returns, he said.

Fractional ownership models may emerge in the long term

Fractional ownership is the shared owning of an asset among a group of people. Each owner holds a part of the asset and typically shares the benefits and responsibilities that come with it. This includes any increases in the value of an asset.

The view is expressed by Prudhvi Reddy, founder and chief executive officer, Assetmonk, that as tourism increases in this temple town, demand for quality hospitality spaces will also increase.

Over time, options are expected to emerge wherein an operator may be appointed for a fee to manage housing units bought by investors. These units may then be offered on short-term rentals. Yet another model is to do with a property being owned by six to eight co-owners who may appoint a manager to run the rental facility with the rental income being divided equally among them.

At the end of the day, the product has to be good and has to be valued right. Most importantly, it should make money for the investor, he adds.

Shravan Gupta, founder and CEO of YOURS, a platform for fractional ownership of luxury second homes, that the company may enter Ayodhya after Rishikesh where it is planning to launch a project under the fractional ownership model, reported HT.

"There is demand from HNIs and NRIs. We have started basic groundwork. We will construct or buy from other developers. Rishikesh will be a priority as we have buyer interest but we are also exploring Ayodhya and should have something in the next 12-18 months. It would typically be a 4-5 BHK fully serviced housing unit that would have eight shareholders," reported HT.

The scope of asset appreciation is definitely 8-10 percent, almost similar to Goa. This is because housing supply in Ayodhya is limited right now, he adds.

According to Rohan Sharma, senior director, Research and Real Estate Intelligence Service, JLL, fractional ownership stock in the housing space will emerge only after there is enough residential stock available in the city to buy. At the onset, one may witness only unorganized housing stock (hostels/homestays/local hotel stock) becoming available to tourists. One may also witness an influx of investors who may primarily invest in land and this may drive up property prices further.

Depending on how long-term demand shapes up, a few organized developers may launch small-sized housing units in the next 12 to 18 months. Investors are likely to invest in these projects with the intention of providing serviced apartment opportunities to tourists. Even property listings like Airbnb would find new opportunities in the city, he adds.