Realty bites, for a good address

Attempts by civic agencies and developers towards the equitable development of the City have not met with much success. The demand in the realty market is driven more by proximity to workplace and access to amenities.

The unparalleled growth of Bangalore has spurted a drastic change in the skyline of the City. Once known for its calm and quiet streets, the City has grown to become a bustling metropolis, housing many information technology and ancillary industries.

To cater to this, Bangalore has expanded at an exponential rate. With the presence of software giants coupled with cosmopolitanism, Bangalore has attracted citizens from across the world who have chosen to make it their home.

However, over the past two years, the real estate boom, which was thriving on the growth in the technology sector saw a sudden slowdown, leaving many developers and builders in a spot of bother.

According to a recent study by Knight Frank India, Bangalore used only a quarter of the 12 million square feet of office space on offer - the highest in India - from January to March.

The lull in the global economy and the IT sector saw the demand for real estate drop drastically. But developers believe the growth will now pick up because the IT industry has started to revive business with new projects.

Neville Vaswani of the Vaswani group believes residential enclosures in the City will start seeing demand, following the modest growth in the IT industry. “With Europe and the US slowly but steadily coming out of the recession phase, there is likely to be modest growth in the IT sector. The IT industry is bagging fresh orders and projects, which is a good sign for real estate,” he said.

In the next fiscal year, the demand for office space is expected to grow to a modest 8 to 10 million sq feet, leading to better prospects for buyers coming forward to buy residential spaces.

However, M R Jaishankar, managing director, Brigade Group, dropped caution on this prospect, due to rising input costs. “With the price of diesel going northwards, we are expecting an increase in commodity pricing to go up by 10 to 15 per cent, making it that much more costlier for a project to be priced for the consumers,” he said.

Jaishankar said there was a possibility of healthy growth ensuing in the next fiscal because of the recent policy decisions to allow foreign direct investment (FDI) in retail. “The positive policies drawn by the Centre will see quite an increase in the real estate as well,” he said.

Premium pricing

Developers have tried to draw consumers to projects which are located mostly in the south-east and northern parts of Bangalore, targetting areas close to the technology industry’s hubs.

Places which were never on Bangalore’s map, have now become the focal points of the City’s growth. Residential projects in Sarjapur, Whitefield, Malleswaram, Devanahalli and many areas in between  are being priced at a premium because they are located close to technology companies’ offices.

 “Today one out of five consumers who purchase a property are employees of the IT or related industry. It is but visible that the focus still remains strongly on the industry for the real estate developers,” said Jaishankar. The real estate sector has increasingly moved away from trying to construct grand properties to more affordable and community centric ones.

According to builders, 85 per cent to 90 per cent of property buyers in Bangalore live in the properties they buy. They don’t purchase property as an investment or for renting it out. Builders believe that their products ranging from Rs 25 lakh (affordable housing) to the premium class (Rs 1.5 crore and above) have all the possible traction to provide the people with what they desire.

“Today, the only differentiation between any builder or developer is focus on soft skills like customer relations and better amenities. Previously considered luxuries like club houses and a swimming pool are a rule rather than a exception,” said Vaswani.

Other developers believe that the consumer is more driven by accessibility to amenities like schools and colleges or shopping malls, which shows that they want a ‘self-sustaining’ environment so that they can cut down on their travel time.

Bangalore’s lawmakers and civic agencies are trying to woo development away from the south-east and northern regions to make it evenly distributed. But they haven’t met with much success.

“With the concentration of better connectivity located in the north of Bangalore and IT industries in the south-east, it is their location which is driving the market,” said Jaishankar. Since the technology sector drives the market, it is hard to see builders taking their projects west or south - areas which have higher concentration of blue-collar jobs.

However, even though prospects for the real estate sector are looking bright, the classic problem of building norm violations is still coming in the way of consumers looking for good quality housing.

“There are always the possibilities of having developers trying to cut corners. But developers under the CREDAI (an industry body), have an edge with better compliance and redress system,” said Jaishankar.

He admitted that there were builders within CREDAI also trying to violate the building plan norms, but he said those registered with the association were more dependable.