Wednesday, November 30, 2011


■ Correction in the Bangalore realty market

The Bangalore real estate market is a stable, healthy and mature market. The momentum seems to have picked up since the second half of the calendar year 2010. The pace is expected to slow down in the short run and prices are expected to stagnate amidst high interest rates and inflation, which is adversely affecting the purchasing power of the end users.

However, the uptrend in prices in the long term shall remain, largely supported by the inherent end-user demand, which is largely fuelled by the growth in the IT industry. According to a recent survey by manpower firm Ma Foi Bangalore stood second in terms of salary hikes (16.9%) in the first half of the calendar year 2011. The IT/ITeS sector continues to record double-digit growth and has added 91,000 jobs in India in the first half calendar year 2011.

■ Demand for apartments in the range of INR 3.0-5.5 million is high

The real estate market in Bangalore is an end-user and budget-driven market, i.e. budget emerges as the main determinant as well as constraint for end-users.

Demand is high for units priced in the range of INR 3.0-5.5 million; however, it dips to moderate levels for
apartments, priced at INR 6.0 million and above.

In terms of supply, while premium builders are in the INR 6.0 million and above bracket, there is a high level of small builder presence in the INR 3.0-5.5 million segment, almost to the extent of 75% of the total supply in the INR 3.0- 5.5 million bracket. Moreover, most buyers do not mind investing with a smaller builder subject to the builder having a good track record.

■ Is there an oversupply in the realty market?

As of today, there is no oversupply in the market as there were only a few launches during the recession. There is a lack of ready-to-occupy properties. New launches announced after the recession are expected to hit the market by 2014-15 and the future off-take trend is likely to be highly correlated with the performance of the IT industry.

■ Bangalore real estate market is predominantly IT-ITeS driven

The IT-ITeS industry has been the primary driver of real estate in Bangalore. The development of IT-ITeS
catchments along South and East Bangalore, has led to the unprecedented growth of the city during the past
decade. Micromarkets along Whitefield, Outer Ring Road Sarjapura, Bannerghatta Road and Electronic City, have developed into self-sustaining hubs. Areas along the northern corridor of the Outer Ring Road, such as Hennur Road and Thanisandra are also emerging as attractive locations catering to the housing requirements of the ITITeS catchments present along the north-eastern corridor.

■ Water is a predominant infrastructural challenge emerging in Bangalore

Water is emerging as a major issue in Bangalore, with the problem more pronounced in the northern and eastern regions. On a relative basis, the problem is not as acute in south and west Bangalore as it is located much nearer to the water table.

IT and commercial office developments in these markets are overshadowing the infrastructure constraints.
Builders are trying to overcome the problem mainly by providing methods like rainwater harvesting and water tankers.

■ Huge volume projects have showcased a mixed bag performance
Homebuyers should execute caution while looking at projects, which have huge volumes. Traditionally, large
format projects, unless supported by commercial presence in the vicinity have not done well.

■ 'Namma Metro' set to change the dynamics in Bangalore real estate

Real estate prices in Bangalore are yet to completely factor in the metro effect. The north-south corridor from Nagasandra to Puttenhalli and the east-west corridor from Byappanahalli to Mysore Road, once completed, can lead to a rise in property prices as Bangalore gradually wakes up to `how the metro can make life easier and simpler'. A few builders are holding up to 30% of their available stock, which will be launched at a 25-30% premium once the metro in the particular region becomes operational.


⇒ Public-sector companies like Bharat Electronics Limited, Hindustan Machine Tools, Bharat Heavy Electricals Limited and esteemed institutes such as the Indian Institute of Science and University of Agricultural Sciences are present in this region.

 The north-eastern belt has developed into an IT catchment, creating demand for housing and driving growth in this belt.

Easy accessibility to the International Airport and the Outer Ring Road has helped improve connectivity.  

To read the full report:: BANGALORE REAL ESTATE