First-time buyers drive market

First-time buyers drive market

More people are buying apartments to actually reside in them compared to some buying the housing units as investment, says Prashanth GN

Owning a home in IT city is always a dream for professionals and double income families going in for EMIs is therefore not a surprise. Bangalore has been witnessing a very specific trend in the real estate sector for some time now - the number of people who invest in apartments to actually reside in them is getting to be higher than the number of people who buy apartments as future investment.

Farooq Mahmood, chairman and managing director of Silverline Realty tells Deccan Herald that the number of users of apartments is now higher compared to investors. “A large chunk of buyers of apartments are now first-time buyers and are in the age group of 27 to 35 years. They are largely from the information technology sector earning salaries in the mid-range of Rs 50,000-60,000 and above. Typically husband and wife both work and bring home a lakh and quarter rupee income. There are people who bring lakh and a half and even two lakh rupee income. It is this high money they are investing in a new house, typically an apartment. With two incomes, EMI is not a big issue. I would venture to say that nearly 80 per cent of the buyers in recent times are first-time buyers and new entrants to the residential market.”

The Bangalore market, according to Confederation of Real Estate Developers Association of India (Credai) Bangalore president Nagaraj Reddy, has been positive for some time and will continue to remain positive in the remaining part of the year. “Compared to last year, Bangalore’s real estate sector has grown 20 to 25 per cent this year. The demand, sales and absorption of apartments have all been good. Apartments in the range of Rs 35-40 lakh to Rs 70 lakh are the ones selling the maximum. And the buyers are again largely from the IT sector,” says Reddy.

Sanjeev R, 34, who works in an IT firm on M G Road has bought an apartment near Ramamurthynagar, just off the ring road, close to Banaswadi. His take is simple: “Look, if I go on paying Rs 17,000 as rent for a double bedroom house, why shouldn’t I add a little more money to this, pay instalments and actually own a home? I now pay Rs 30,000 and live in my own apartment with all amenties provided for. I’ve tightened budgets on other accounts and have ensured a stable and steady family life. I am happy the apartment is in my name and I know its value will go up in the next few years. Eventually, I would have gained. I don’t mind making a few compromises now for the long-term gain I am making.”

Real estate analysts say that a factor prompting a lot of young professionals like Sanjeev to buy and live in an apartment in Bangalore is that Bangalore is not only the IT capital, but its residential market happens to be the cheapest among all the metros in the country. The price at which you get apartments in 2, 3 and 4 BHK units are the best when compared to Mumbai, Delhi and Chennai. “Therefore it’s an interesting trend that middle-income families and mid-level apartments are the key drivers of the Bangalore residential market,” points out Mahmood.

While a major chunk of the first time buyers are locals, a good number are also NRIs. Mahmood points to economic developments that have prompted apartment purchases by NRIs. The rupee devaluation against the dollar has helped NRIs gain 20 to 25 per cent in their savings. The dollar value went up, which upped their purchasing power, and they began investing in apartments in Bangalore. Particularly due to the stability of the Bangalore market and its long-term returns, high investment continues in Bangalore, say real estate observers.

Most of the purchases are happening in the northern and eastern parts of Bangalore owing to better infrastructure development.

Buyer sentiment

What has also caused the increase in purchases of apartments in the city is the realisation among buyers that prices of apartments are not coming down. Many buyers felt they could wait, but when they saw that the prices climbed 20 per cent due to rise in raw material costs in the last few months, they went in for purchases fearing a further rise in prices. Builders could not avoid raising prices because cement and steel costs had gone up. “And post-Dasara it would go up further. Still, Bangalore is well placed compared to Delhi and Mumbai,” says Reddy.

Among the mid-range apartments between Rs 35-40 lakh and Rs 70 lakh, 2BHKs are selling the highest, followed by 3BHK and 4BHK.

Income and extent of EMI plays a major part in apartment sizes buyers prefer. Developers have noticed that over time, owners of 2BHK prefer to move to 3BHK as incomes of both husband and wife would have gone up. The rise in incomes enhances confidence among the young buyers that they can pay higher EMIs. And, typically, why they prefer 3BHK is that extra bit of privacy that comes with additional space. Couples living with their parents mostly prefer 3BHK and when couples have children, it becomes more of a necessity than a luxury.

Also working couples now buy apartments close to the workplace to reduce commute time and some even prefer gated communities where everything is well provided for and the entire campus is self-reliant. A number of self-contained apartment blocks have come up in the Sarjapur-Marathhalli and Whitefield belt as that is the region in which the IT corridor has been created in Bangalore.

At one point of time, 15 to 20 apartments would be built in one complex, but now almost 500 are built within a campus. Bangalore’s young working couples have a community right at their doorstep and the possibilities for an intimate, safe and secure community living are higher.

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