It's raining real estate
Real estate players, analysts and developers expect a stable 2014 and 2015 for Bangalore’s real estate market compared to Delhi, Mumbai, Hyderabad, Ahmedabad and Chennai. In fact, they are bit upbeat, as the 2013 sales of both residential and office space have been exceptionally good. There are major projects set for launch in 2014, which should enthuse buyers. The year will see a continuation of the demand witnessed in 2013.
The Prestige Group is coming up with the Prestige Lake Habitat at Whitefield, close to Varthur, east Bangalore. The property covering over 100 acres will see as many as 3,000 flats for sale, including luxury ones of all sizes. Zayed Mahmood of Silverline Realty says that nearly 1,000 flats have already been sold during pre-launch activity. “The project is almost like a township, and will be designed in collaboration with Disney. You can expect a worthy product.” The Brigade Group is also not far behind.
The company is set to launch properties at Devanahalli, North Bangalore and also at Whitefield, east Bangalore. The Sobha Group too is coming up with a project close to Electronic City, addressing the needs of the mid-range population. In southwest Bangalore, Provident Group is coming up with a project on Mysore Road, close to the Nice Expressway.
President of the Confederation of Real Estate Developers of India (Credai) — Karnataka, Nagaraj Reddy said, “The IT sector has done well in 2013. Around nine million sq feet of office space was generated. This space will mean employment of nearly nine lakh professionals.
This increased the demand for residential space, as professionals will want to have a home closeby. Assuming 10 per cent of the nine lakh go in for new houses, we have a readymade residential market for 90,000 people. Bangalore’s capacity to generate residential space is around 45,000 flats a year. Take the same for two years, it would be 90,000. My reading is that the massive office space will increase the demand for residential space as well.”
Too many options
The new projects would have a mix of conventional and luxury apartments and luxury villas. The pricing may range from Rs 50 lakh to about a crore and a half. High net worth individuals have apparently evinced interest in the all three projects — Devanahalli, Electronic city and Whitefield. According to real estate analyst Karun Varma, the Bangalore real estate market is doing fairly well in the overall national market. “The US is doing well and the rupee-dollar equation is much better than a few months ago and exports are also doing alright. Taking all these factors into account, you can expect housing demand to remain stable. There are atleast three to four active deals that are likely to materialise this year. And buyers can look forward to more residential space following creation of office/commercial space.”
According to real estate analyst Naveen Nandwani, the residential realty market will continue to be dominated by the mid-end segment primarily driven by the end-user buyers. “The demand will be primarily concentrated for residential units in range of Rs 6-10 million price brackets in submarkets like south-east, north and east owing to ongoing commercial activities and numerous options in these submarkets. Given the anticipated demand, capital values in these locations are also expected to witness an upward trend. Considering the ongoing infrastructure initiatives like Metro Rail, Hebbal-BIAL Expressway and Peripheral Ring Road locations like Kanakpura Road, Tumkur Road, Mysore Road, Thanisandara Road and Hennur Road are expected to witness increasing traction of residential activities.”
The IT factor
Suresh Hari of Credai Bangalore said, “Going by the trend witnesses in the last couple of years and given the ground reality of election year, the expected off take in residential real estate should be in the range of 25 to 30 per cent more. The price appreciation should be in the region of five to 20 per cent. In the supply front, the level will be same as 13, if not slightly more. As regards commercial realty — again based on the earlier trend, office and retail space should see a growth of five to 10 per cent over the previous year. Rental appreciation should be in the region of five to 20 per cent on an average. On supply front, an increase of five to 10 per cent over previous year is expected.
According to Brotin Banerjee, MD & CEO, Tata Housing, Bangalore has outperformed most of the other metros in the country, with minimum impact of the current slowdown. Bangalore is touted as the 10th most favoured property investment destination in Asia-Pacific. With improvement in infrastructure and connectivity to Bangalore International Airport Limited, north Bangalore has been the best performing locations in the city. Banashankri and Devanahalli in particular may outperform due to their locational advantages in coming quarters.
Developers seem confident because they are creating supply much ahead of demand. This can only mean that they are confident people will buy what they build. The confidence comes from their realisation that the IT sector has done well over the last year and things are improving for lead companies like TCS, Infosys, HCL and Cognizant. Most of these companies have announced salary hikes. Infact Infosys is going in for a second hike to keep employees happy. More disposable income means more money to spend. One of the major expenditure for IT employees is housing. It is common to see professionals paying high EMIs. So a stable IT sector means a stable growth for real estate.
Future expansion of IT would take place in Sarjapur, south east Bangalore. IT companies have bought large parcels of land in the area to enhance their staff strength. Employees would typically not want to travel far to reach their work place. Sarjapur’s residential space is therefore expected to see good demand. The only factor hindering the rapid expansion is the poor water supply. Borewells in the area are supposed to have dried up. Unless a different line is extended from Cauvery, the pace of expansion of industrial and residential spaces is an open question. The area adjacent to Sarjapur, Marathhalli too is expected to see more residential space given its proximity to Sarjapur and Koramangala from the ring road.
Developers are hoping there’ll be some relief from approval issues, and in the floor space index. If government permits vertical development beyond 3.5 FSI, it would be a big bonus for the real estate community, as they can build more units given that demand is showing stable signs so far. Unless there is massive cancellation of office space creartion, it is expected that whatever is built in 2014 will sell.