Bengaluru: the year ahead...
The reduction in interest rates by certain banks is a positive and welcome move for the real estate sector. This would improve the buying sentiment, thereby encouraging prospective home buyers to complete their purchase. The new buyers would stand to benefit from this interest rate reduction, and provide existing buyers an option to restructure their current home loans. The demonetisation move alters the macros of the economy due to higher liquidity, resulting in lower inflation and cost of borrowing. This would lead to interest rate sensitive sectors like real estate to expand its growth through high sale volumes and push for fundamentally push for ‘uniform pricing’. These factors are set to boost consumer confidence, transparency and trust in the sector.
Possession of ready-to-move-in apartments are fast increasing, as buyers are looking to save rocketing rentals and avoid the hassles of late delivery, which results in a loss of tax incentives. Ready-to-move-in apartments solve many such concerns and are preferred by buyers.
Bengaluru is emerging as the top real estate destination in the country. Though the real estate market in other metros and regions of the country has not been very promising this year, the Bengaluru market has been fairly stable with sales going up. This is mainly due to the fact that end users constitute as much as 80% of the realty clientele here in the City.
Bengaluru also remains the premier choice for working professionals and for NRI investors and buyers. There are several locations in Bengaluru that are attractive at present, we find the following to be the most promising:
Kanakapura Road corridor
We envisage a large upside in the Kanakapura Road corridor, as it offers best value for money to customers, with prices still well below its true value, especially
considering the significant infrastructure developments that are expected to change the landscape of this micro market. While this location has lagged behind other locations within the City with respect to infrastructure development over the last five to seven years, there is a significant catching up that is expected to occur in the next five years, which can potentially provide a huge scope for price appreciation, in the nearby real estate projects.
The proposed connectivity of the NICE Corridor to the Peripheral Ring Road would facilitate reaching NICE Road and Bellary Road in a short time. The widening of the Kanakapura road, the Metro connectivity, the Bangalore-Mysore expressway being a large development close to the highway, including large entertainment parks that are coming up here are expected to change the face of this location in a few years. The price for A-grade under-construction residential property is in the sub Rs 5,500 per square foot range, and one can expect it grow at a brisk 15% to 18% compounded annual growth rate (CAGR) in the next five years.
Thanisandra – Hennur Road belt
This location is very promising with its connectivity to the airport and central business district (CBD) areas through the Outer Ring Road. This locality has the
lowest levels of unsold inventory within the City.
The Hebbal junction which is close to this area has seen prices hovering between Rs 9,000 and Rs 12,000 per square feet. Hebbal, while remaining an attractive destination for many, however, continues to be unaffordable for most Bengalureans. It’s in this context that we see the demand for housing spilling over to the neighbouring Thanisandra-Hennur Road belt, where prices are in the range of Rs 7,000 per square foot. Due to the multitude of commercial, IT and IT-enabled business activity in this area, we can expect the prices to rise by 15-20 % CAGR in the coming years.
Bengaluru city centre — CBD
Like gold and government securities, city centre real estate around the world, be it Central London, Mid-town Manhattan, South Mumbai or Central Bengaluru, remain as the most stable and liquid investments in the world and continue to be a primary investment choice for Hight Net worth Individuals (HNIs) around the world. Many locations within the CBD are seeing frantic demand for high quality prime residential properties. Exclusive high-end developments among other things in these areas have led to soaring prices, which are expected to remain stable with a strong upward bias in price appreciation. If the choice to invest is backed by an ability to invest upwards of Rs two crore, then buyers can seriously consider lower Indiranagar and areas around Lalbagh as good destinations for property investments.
The Mysore Road belt is one of the most affordable spaces in Bengaluru with land prices being low and the average selling price for apartments being lower than Rs 4,000 per square feet. The Metro Rail is likely to kick off in the next three to six months which will facilitate better connectivity.
(The author is CEO, Puravankara Limited)