Bangalore, the capital and economic hub of Karnataka, is one of the fastest growing metropolitan cities in India today. Bangalore has an estimated population of 6.5 million, making it India’s third-most populous city and fifth-largest metropolitan area.

The city has been a magnet to IT/ITES companies and financial institutions, to set up their base owing to the favourable government policies. Bangalore is to see a large investment worth Rs 25,000 crore for the development of 11 integrated townships for IT, BT, and ITes sectors.

Stepping up efforts to take IT and Karnataka real estate on high, the state government has given the nod to eleven local, national, and international developers to set up mega townships in the city. The state high-level committee has recently approved 59 construction projects worth over Rs 60,000 crore. The committee has also agreed to IT related real estate projects, each involving an investment of around Rs 2,000-3,000 crore. The projects will come up at Sarjapur Road, Whitefield, Magadi, and Bidadi. 

Sounds quite a mouthful indeed! And if you really reflect on these rather mind-boggling numbers, you will realise that all said and done, investment in real estate is still an attractive option. DH Realty checks out the ground realty, oops reality!

Emerging destinations

Over the past few years, owing to increasing real estate costs in the Central Business District (CBD), Secondary Business District (SBD) and the need of companies to have larger campus style developments (with inbuilt options to expand and scale up), the city is seeing growth in some specific areas.

Outer Ring Road stretch between Sarjapur Road (starting adjacent to Koramangala) and KR Puram flyover, Kanakpura road, Bellary road upto Devanahalli, Mysore road upto Bidadi, and Yelahanka, highway stretch connecting Yelahanka to Chikballapur, Vijayapura, SEZ area near Nandagudi (Hoskote), are among the front-runners in terms of future growth areas.

Kanakapura road, right from Bangalore to Harohalli, Nice Express corridor and Nelamangala on the Bangalore Tumkur highway, are other viable investment areas apart from Bangalore East especially Whitefield. Huge residential townships, IT parks, SEZs, malls, both—on-going as well as proposed, are springing up in these locales. The city centre areas such as Brunton Road, Richmond Road, Langford Town, etc, are seeing high end premium development.

 The new airport that will be open for the public in early 2008 in Devanahalli has led to increased real estate activity in north Bangalore. The airport and the new 6-lane expressway acting as key drivers in the areas around Yelahanka, Bellary Road, Doddabellapur Road and surrounding areas, are witnessing a spurt in supply and demand for residential and retail segments.

Agrees S Vijaya Kumar, Director, Nimisha Corporation, “Undoubtedly, the International Airport has contributed to spontaneous growth in and around Devanahalli area. Lands which were costing 25 to 50 lakhs a year back, are costing 5.5 to 7 crores per acre on the highway, 3 kms away from the highway— 2 to 4 crores, while land near Vijayapura that was 25 lakhs a year back, costs 1.2 crores today.”

Projects galore

Mantri Developers currently has the residential projects, Flora and Espana, on Outer Ring Road and Tranquil on Kanakpura Road. The company also has premium projects coming up shortly in Jakkur and Marathahalli, both on fast emerging prime stretches. “Easy access to ring roads (in close proximity to proposed peripheral ring road as well as other new proposed roads), good infrastructure with required civic amenities, work and live concept, hold these areas in good stead,” says Hari Menon, VP, Marketing, Mantri Developers.

 Bhoruka Tech Park is located in Whitefield just off outer ring road and coming up with 5 million sq ft of quality office space in ten state-of-the-art buildings of approximately 50,0000 sq ft each, with planned integrated facilities such as 5 star hotel, serviced apartments, food courts, ATMs business centres, etc.

Says Siddhartha Agarwal, Bhoruka Park Pvt Ltd, “Bangalore East is already a proven haven for investors for a long time. Already, existing residential enclaves are destined to become self-sustained locations in the coming years that make the same more lucrative from an investor’s perspective.”

Another player, DivyaSree has been in the forefront in development of real estate to meet the demands of discerning clients in Bangalore. “Over the last 10 years, DivyaSree has built approximately 2 million sq ft of IT space in Bangalore that houses clients such as Oracle, Sun Microsystems, Cisco and Accenture among others.

Over the next five years, DivyaSree will be developing over 7 mn sq ft including the development of 3 large IT focused SEZs in Bangalore. DivyaSree Élan, the luxury segment residential development on Sarjapur road, has received great response from primary and secondary buyers from Bangalore and outside.

To harness the demand for quality living spaces in north Bangalore, DivyaSree plans to develop an integrated development providing multiple housing and commercial solutions,” says Santosh Martin, CEO, DivyaSree Developers Pvt Ltd.

Prices

The residential market has witnessed growth in capital values of over 50 percent over the last 24 months.  However, the increased supply in some areas such as East Bangalore (areas such as Whitefield), has resulted in a slowdown of this growth as well as absorption.

The increase in home loan interest rates has also played a dampener. Prices were stable for some time throughout Bangalore. However, huge expansions by IT majors during recent times and their new recruitments have taken demand to a different level all together.

“Currently the rates vary from Rs 2,000- to 6,000- (for apartments) per square feet and the appreciation could easily be in the range of minimum of 10-30 percent per annum,” according to Menon.

Cushman & Wakefield research indicates that the areas of Brunton Road, Lavelle Road, surrounding the CBD, have seen a growth of 2 percent in the past 6 months, with current average capital values ranging between Rs 13,000-13,500 per sq ft.

The off CBD locations of Richmond Road, Cunningham Road, Indiranagar, have witnessed capital rates growing from Rs 6,000-6,200 to Rs 7,500-8,000 per sq ft, resulting in a 24 percent growth in the past six months. Southern and South East Bangalore localities of Koramangala and Basavangudi have seen a 20 percent rise in capital values, with average capital values currently prevailing Rs 5000-5400 per sq ft.  

Time to diversify

Real estate prices in Nelamangala are steady. The growth in this area has taken 3 to 4 years to reach the peak with land per acre costing Rs 2 to 4 crores. Bidadi has also seen heightened interest due to announcement of the township by the Government, industrial and commercial activity and demand of layouts. Along the highway, cost per acre will be Rs 3 to 4 crores per acre.

“In most of the places, prices have reached the boom peak level and further investments on the land at the prevailing rates may not fetch windfall returns. We expect only marginal returns—say 10 to 25 percent. We recommend now it is time to invest in 2-tier cities like Mysore, Ramanagara, Channapatna and Belgaum. In these areas also land is costing between Rs 2 and 4 crores per acre,” says Kumar.

Majority of the micro markets discussed above have seen unprecedented growth in capital and rental values in the past two years, which have now tapered into a stable mode.

Thrust toward the planned growth of commercial and residential sectors across the micro markets, will, in turn, offer a value proposition to the buyers and investors alike. Thus these areas offer an avenue of stable returns on investments.

And if you want to invest in Bangalore, now you know where to!

Rising yields

The IT corridor comprising the Outer Ring Road and Sarjapur Road have seen a 22 percent rise in value, currently ranging between Rs 3000-3500/sq ft.

The micro markets of Marathahalli, Whitefield and Airport Road in the eastern part of the city, have witnessed a 2 percent rise in capital values, currently ranging between Rs 2,800-3,000 per sq ft. Hebbal, Bellary Road, Yelahanka in North Bangalore, have seen a one percent growth in capital values, with current rates between Rs 3,000-3,200 per sq ft, owing the infrastructural developments still in progress.

“With the above inferences we estimate the yields in the residential segment to range between 6 and 8 percent and in the commercial segment, to offer a yield of 11 and 12 percent over the next few quarters,” says Santosh Martin, CEO, DivyaSree Developers Pvt Lt.