Slowdown in Bangalore realty boom seen

Bangalore, Jan 2 | Updated: Jan 3 2006, 06:37am hrs
The euphoria over real estate demand in Bangalore due to IT and ITES boom is likely to be subdued in 2006. The city witnessed a tremendous growth in real estate sector with more than 9 million sq.ft. of commercial office `A' grade space being leased out in 2005. However, industry players expect the figures to range in between 7 million sq.ft. and 8 million sq.ft. this year.

"The last three years saw all the major IT firms consolidating their space requirements and hence the demand drivers in 2006 would primarily be expansion plans of the US and Europe-based tier II companies in ITES sector," said Shrinivas Rao, vice-president for Asia Pacific operation, Equis Corporation. Moreover, Bangalore's infrastructure issues are a major concern for all multinational companies (MNCs) wanting to set up new ventures or expand their operations in India.

Other growing markets like Chennai, Pune, Hyderabad and Gurgaon and Noida are also attracting investments. Companies are also looking at tier II and tier III cities such as Coimbatore, Jaipur and Mysore as potential destinations from an ITES standpoint, industry players said. All these factors are likely to have an impact on the demand for real estate in the city.

However, despite these factors Bangalore will still continue to be the hot spot for real estate in the country. "Frankly, the gap is too large to be covered," said Mr Ankur Srivastava, managing director, Debenham Tie Leung DTZ, an international property consultancy firm. He said that compared to Bangalore in 2005, other competing destinations such as Chennai, Hyderabad, Pune, Mumbai and Delhi (including Gurgaon and Noida) leased out 3.5 million sq.ft., 2.5-3 million sq.ft., 3.5-4 million sq.ft., 1.5 million sq.ft. and 3.5 million sq.ft. of land respectively, for commercial space.

"More than 9 million sq.ft. of commercial office `A' grade space was leased out in 2005 in Bangalore alone while most of the other top Indian cities did not even crossed 5 million sq.ft. mark in `A' grade office space absorption," he said.

According to Mr Srivastava, "firms operating in the higher value added segments of IT and ITES finds Bangalore more acceptable as a compared to low value added firms."