JOIN USBengaluru real estate market has witnessed a moderation due to a slowdown in demand and sales volumes as per recent study by ICRA.
Real estate developers have responded to the changing market conditions by slowing down new project launches, especially in the premium segment, and reconfiguring project specifications in new launches to improve affordability by lowering unit sizes and providing basic specifications. The focus on affordable/mid-category of projects as compared to the premium segment is supported by the marked divergence in pace of inventory absorption in both the segments, according to ICRA.
In terms of the various micro-markets, the highest share of ongoing development is concentrated in the East micro-market with Whitefield, Mahadevapura and Old Madras Road being the main pockets of activity. Proximity to the main IT/ITES hubs of the city continues to remain the driving force for this market. Considering that a majority of commercial office absorption in Bengaluru continues to be in this region, residential real estate activity is expected to remain stable in this micro-market going forward also, according to ICRA.
With respect to the commercial real estate segment, Bengaluru has seen the highest level of absorption of office space across the country for the fourth year running. With supply levels falling short of the absorption in each of the years, there has been a gradual reduction in vacancy levels to around 10% by end of 2016, according to ICRA.
The supply pipeline for Bengaluru market remains strong with an estimated 30 million square feet (msf) of stock under construction which is expected to get gradually completed over 2017-2019. Around 60-70% of the office space absorption in the city is estimated to be in the Outer Ring Road and Whitefield micro-markets, with the areas between Silk Board and K R Puram along the Outer Ring Road witnessing the maximum activity, according to ICRA.
"The Bengaluru residential market has remained subdued in the last two years on account of moderate demand, weak consumer sentiments and demand-supply mismatches in certain product segments. The commercial real estate segment, on the other hand, has continued to report strong supply and absorption levels. The growth in commercial office space off-take and recent regulatory developments should support improvement in long-term demand profile in the residential segment in Bangalore though the near term outlook is challenging," ICRA group head K Ravichandran said.