When R J, a pharmaceuticals trader, bought two flats in the Bengal Unitech project coming up in Rajarhat, the new city being developed on the outskirts of Kolkata around a year ago, he paid Rs 1,800 and Rs 1,825 per sq ft.

Today, the company price for the fourth phase is Rs 2,750, a hefty 50 per cent appreciation over prices last year. R J says he expects prices to reach Rs 4,000-levels by December 2007, which is when he'll take a call on when to sell.

"I've been bullish on the property market for the past two years now," says R J. Besides Bengal Unitech, he's also bought a flat at Rosedale, the high-profile only-for-NRIs development, also in Rajarhat, and one at Silver Spring on the EM Bypass - all HIG developments.

But R J is also proud of his investments in MIG-housing projects - Diamond City and GenXX Valley - where appreciation has been the most this year. Taken together, R J has Rs 3 crore (Rs 30 million) floating in the real-estate market. Until now, he's booked profits on only one of his investments - an apartment he bought in Hiland Park for Rs 1,200 a sqft and sold 20 months later for Rs 1,800, a 50 per cent return.

Speculation in real-estate is not a new phenomenon, and neither is it restricted to Kolkata.

"In fact, in the city itself there are hardly any speculators; most of the buying is being done by end-users. The speculative activities are concentrated in Rajarhat," says Jitendra Khaitan, chief executive officer, Pioneer Property Management.

And the one project that has been the focus of speculators' interest has been the Bengal Unitech - at 100 acres the biggest and the most aspirational of all the HIG developments in the area.

Ranjan Arora, assistant manager (sales), Bengal Unitech Universal, acknowledges that in the first two phases, the number of speculators was a high 70-75 per cent.

"All 300 apartments in the first phase, Heights, was sold out in a day." Of these, 200-250 apartments have been re-sold at prices anywhere between Rs 2,300-Rs 2,400 a sqft, which despite being a lot lower than the price of Rs 2,750 that the company is accepting fresh bookings for, still means a 35 per cent return in a one year.

A lot of factors are driving the speculation in property, says Khaitan. "One, there is optimism, since it is the government which is promoting Rajarhat and inviting companies, especially in the IT sector, to set up offices there. Two, there is the proximity to Sector V [Kolkata's IT hub] and the airport. Three, there are the prosperous non-resident Bengalis who feel encouraged by the industrial resurgence of the east to buy property here. Four, a well-reputed developer. Then, of course, there are the rising income levels especially among young professionals who want to invest in real-estate for high returns."

It's the same scenario in Noida, Gurgaon, pockets of suburban Mumbai as also Ludhiana and Jalandhar in Punjab, reports Santosh Kumar, chief operating officer and director, TrammellCrowMeghraj. "The Gurgaon market, where property prices have appreciated 50-100 per cent, is 40 per cent speculator-60 per cent end user," a ratio, which, he says, "is acceptable".

While speculation may be good for image, in a sense, since it creates an illusion of demand and thereby helps escalate prices, not all developers look at it kindly.

Pradip Chopra, a Kolkata-based developer and secretary of the Bengal chapter of the Confederation of Real Estate Developers Association of India, feels that not only do they have the effect of driving away end-users, they may also be bad for a project in the long term because, having little involvement with a project, they may skimp on maintenance cost.

The other problem with speculation, of course, is that it cannot be sustained indefinitely without improvements in the larger economic scenario. And that's already happening in Rajarhat with prices at an all-time high, speculators like R J have already turned their attention elsewhere - the MIG developments in outlying areas like Garia, Behala, Madhyamgram and so on where appreciation in a six-month period has been highest.

Ironically, say realtors, it is these far-flung areas where the middle-class buyers, those who want a flat to stay in, were being pushed to by the sky-high prices within the city.

Funds, after all, will chase returns - the higher the better. But all the speculative activity does call into question the unqualified optimism with which we greet rising prices.