Realty matters in the City

With a number of factors favouring Bangalore, the demand for homes in the City is on
an upward scale, writes Bindu Gopal Rao.

The Bangalore real estate market is arguably one of the most exciting in the country.

With an influx of migrant population, the demand and supply for both residential and commercial spaces are doing well.

Number crunching

In the Commonfloor report on Q4 2013, out of the total new supply across the country (including Delhi-NCR, Chennai, MMR, Hyderabad, Pune and Kolkata) Bangalore alone accounted for over 17 per cent of new launches in this quarter.

“Interestingly, Bangalore witnessed an increase of 8 per cent new supply in the same quarter while other metros saw a decline. This clearly shows that Bangalore market is somewhat resistant to the prevailing adverse economic conditions and builders continue to offer options both in the mid and upper-mid segments,” says Sumit Jain, CEO and co-founder, Commonfloor.com.

Commonfloor’s chronological data suggests that in 2012 an average apartment size was 1643 sq ft, which was around 43% higher than the national average.

However, in Q3-2013 there was a marginal reduction of around 10 per cent in apartment sizes in the city.

In 2013, Bangalore accounted for a third of all new property launches in the country. New units launched trebled to 40,000 units till September 2013.

Most residential launches were in the price range of 25 lakh to 1 crore.

Compared to the growing number of flats remaining unsold in markets such as Mumbai, Bangalore even saw a shortage of homes with a 50 lakh to Rs 1 crore price tag.

“The commercial segment, which was in the doldrums elsewhere in the country, was also resilient in Bangalore. Global majors such as LinkedIn started operations in the city, and local companies sought office space to expand. The City is home to around 2,800 IT/ITes firms and accounts for about 60 per cent of all biotech companies in India,” explains Advitiya Sharma, Co-founder and CMO, Housing.com.

Looking upwards

Bangalore real estate market had witnessed a considerable amount of increase in the number of residential project launches in the year 2013-14.

The absorption rate has slightly increased as compared to last year.

The Bangalore real estate market seems to have bounced back after a slightly slow October-December quarter.

The government has recently announced an investment of 9,000 crore towards infrastructure for Bangalore as well.

Brotin Banerjee, MD & CEO, Tata Housing, says, “Bangalore, as a market, has seen a good number of ‘A’ grade development with modern amenities and that has helped to get substantial demand from both the investors and end users. Bangalore has seen interests from a lot of young buyers and NRIs, which comprise the cosmopolitan segment. All these had added to Bangalore’s real estate market.”

Supply has only been going up with a lot of new launches.

“Also, developers from other cities like Mumbai, Delhi NCR and Hyderabad have been launching new projects in Bangalore. Demand has also been steady as the IT Industry, which is the mainstay in Bangalore, has been doing well. And recruitments have been steadily happening. Demand has been better in Q3 of FY14 as compared to Q2 of FY14,” says Viswa Prathap Desu, VP-Sales & Marketing, Brigade Group.

Location advantage

Focus is shifting back to conventional markets such as Whitefield, Sarjapur Road and Electronic City.

High demand in North Bangalore, over the years, significantly increased the weighted average prices.

As a result, prices have already gone overboard as compared to other peripheral micro markets in the city.

Traffic, congestion and high real estate prices are causing a shift to peripheral areas.

There is a marked preference to re-locate close to the place of work to reduce commute time.

Currently, the most promising residential micro-markets are Outer Ring Road (ORR), Sarjapur Road, Whitefield and North Bangalore.

There has been increased demand for high-end residential apartments in the City, particularly in the Central Business District (CBD), Secondary Business District (SBD), Whitefield, North Bangalore and Outer Ring Road sub-markets.

While BMRC plans to acquire about 100 hectares of land for Phase 2 of Namma Metro, the BDA has proposed to acquire 1,900 acres for its 65-km, 75-m wide peripheral Ring Road (PRR) project to connect Tumkur Road and Hosur Road, and develop new layouts by acquiring over 50,000 acres.

It estimates that about 1,000 properties spread over 100 hectares of land will be required for the 72-km project.

Trend check

There are new investment models being offered in the otherwise end-user Bangalore market to attract investors which gives an indication that builders are a little impatient to sell their stock.

“In addition, projects with innovative concepts and themes are being launched by developers to be different in the market, moving away from the traditional amenities-only projects,” says Vineet K Singh, EVP and Business Head, 99acres.com.

Bangalore is known for its high quality construction and the newer launches have displayed innovative additions to the project offering. One key trend is the emergence of a strong preference for global lifestyle.

“The Bangalore consumer has matured exponentially over time and appreciates fine living. Conditioned by extensive global exposure, his tastes and preferences have become more refined. Today, he is not just looking for a shelter above his head, but also for a bespoke lifestyle of international standards,” says Neha Hiranandani, Director, House of Hiranandani.

On a broader perspective, Bangalore as a market has evolved from being dependent on the IT/ITeS sector for timely increase in demand and supply to an avenue for innovative project development.

“Bangalore is witnessing all types of projects, namely apartments, villas, villaments, theme-based and more categorised into affordable, premium, luxury and ultra-luxury. To be more precise, the market is open for many commercial activities with the International Airport playing the trump card. Many of the developers are exploring the hospitality integrated segments for better returns around the airport. Sky scrapers are at its nascent stage but we are expecting this segment to flourish starting this year,” says Sanjay Raj, ED& CEO, Golden Gate Properties Ltd.

Doing the math

Realty prices have always been the subject of discussion and debate.

With interest rates on home loans looking to go up, there is pressure on realty prices as well. Koshy Varghese, Managing Director, VDB opines, “Of late, there have been more launches and the demand has picked up. In my view, there is not going to be any downward correction in prices. Unless the government makes some startling changes in duties or taxes, prices will continue going north.”

Adds Shreekant P Shastry, Vice President-Business, Ozonegroup, “The intent to relocate to peripheral areas has dampened the price increase in the City. However, the price appreciation in peripheral areas is good. Some of the areas like North Bangalore have delivered an annual appreciation of 22-24 per cent. However, on an average, we expect real estate investments in Bangalore to deliver an annual return of about 15 per cent.”

Adds Bijay Agarwal, MD, Salarpuria Sattva, “Due to the current economic scenario, buyers are a little cautious, so the market is just about steady. But I firmly believe, with the improvement in the economy, the market will also pick up. The prices will remain stable for a while, but eventually the prices will appreciate with the growth in the overall economy.”