Bengaluru, which has emerged as the top destination for office market in recent years, is set to replicate this in the residential property market this year. For the second year in a row, the city stood ahead of the National Capital Region (NCR) in 2015. In fact, it is inching closer to that of Mumbai thanks to job creation in sectors like e-commerce, start-ups, robust demand for office space and affordability.
According to data available with Knight Frank, a global property consultancy firm, Bengaluru has seen sales of 50,130 units in 2015, about 10% lower than the previous year. Mumbai, which continues to be a top market for residential sales, witnessed sales of 62,600 units, a decline of 7.5% over the previous year. NCR, which once accounted for half of India’s sales, witnessed a drastic reduction in sales at 29,900 units in 2015, a decline of 26% over the previous year.
The sales decline in all cities is attributed to subdued sales resulting into unsold inventory. However, buoyancy in the office market is likely to help revive the consumer sentiment during 2016, say real estate developers.
“Bengaluru has been a buoyant market compared to Delhi-NCR and Mumbai last year. The robust growth in commercial leasing especially from IT and start up firms which generated jobs in Bengaluru led to the demand for residential units. Also, on affordability front, prices have been much lower in Bengaluru when compared to other cities like Pune, Delhi-NCR and Mumbai, which led to better sales,” Om Ahuja, CEO-Residential, Brigade Enterprises said.
He pegs the sales in Bengaluru at 68,000 units and pegs sales in 2016 to be 15% higher at 78,000 units. This according to him is possible due to robust demand for office space, which is expected to grow by 15-18% to touch around 16 million sq ft.
“Whenever a new job is created, employees look at investments in housing in three years’ time and we expect a good demand for housing in 2016 from e-commerce and start up employees,” Ahuja said adding that the city has created around 150,000 jobs in IT/ITeS and e-commerce sectors in 2015.
The Confederation of Real Estate Developers Association of India (CREDAI) estimates the residential property market at around 50,000 units in Bengaluru. “Every month, around 4,000 units are constructed in Bengaluru by our members. Of this, an average 80% units are sold. There is no proper data available on how many houses are built by other builders,” Suresh Hari, secretary, CREDAI, Karnataka chapter said.
Affordability is said to be one of the prime reasons for growth in Bengaluru’s residential property market. “When compared to small towns like Thane, where the average price is Rs 8,000 per sq ft, and Rs 7,000 per sq ft in Pune’s Hinjewadi area. Whereas, in Bengaluru’s Whitefield, average prices are Rs 6,000 per sq ft. It can be compared to Silicon Valley, which creates so many jobs. Whereas in Thane there are no jobs, everybody travels to Mumbai for work. So, Thane, MMR and NCR are losing out on affordability factor,” Ahuja pointed out.
Compared to 2014, supply has been low in 2015. The reason could be attributed to the subdued sales resulting in higher unsold inventory in the past year. Buoyancy in the office market currently could help revive the consumer sentiment, which is positive for residential sales in Bengaluru, said Jones Lang LaSalle (JLL), a global real estate services firm.
“The challenges of demand-supply mismatch and high unsold inventory across the country remain, but the signs are nevertheless encouraging. Cities like Mumbai, Bengaluru, Pune and Hyderabad are slowly but surely crawling back to positive growth. The year 2016 may well bring an end to the long and painful journey this sector has had, and signal an upward growth trajectory”, Ashutosh Limaye, national director – research, JLL India said.