The real estate market is slowly picking up its momentum in Bengaluru, thanks to sustained growth in market prices and end-user interests.
The real estate market is slowly picking up its momentum in Bengaluru, thanks to sustained growth in market prices and end-user interests. A redeeming feature of this market is that it allows flexible growth in many aspects, right from infrastructure and technology parks to educational institutes. Bengaluru has been one of the fastest-growing cities of India in the past few decades. The major growth drivers have been IT/ITeS industries, while medical tourism is also boosting the development in the city. Currently, the most promising residential micro-markets are located along the Outer Ring Road (ORR), Sarjapur Road, Whitefield and in North Bengaluru.
Scope of Affordable Housing in Bengaluru:
The 2016-17 Union Budget has provided the much needed succour to the real estate industry as compared to the previous year. The housing sector will get a push from both supply and demand side. The first time home buyers will be encouraged since they get an additional deduction of Rs 50,000 on interest repayment for loans up to Rs 35 lakhs and cost of the house is Rs 50 lakhs.
In 2015, the number of new launches in the budget category in Bengaluru, in the ticket size of Rs 25 lakhs and below, was around 4,150 units while the sale for the same period stood at approximately 3,900 units. The growth witnessed in the number of new launches in 2015 over the figure in 2014 was around 8%, while sales witnessed a slight increase of 4% in 2015 over the figure in 2014. Hence, with the RERA Act getting implemented, it will be in favour of buyers and the price has to remain competitive in order to boost up sales.
Bengaluru holds immense potential for development of affordable housing projects as it has huge demand, especially from the lower-mid level income groups. Affordable housing projects, at present, are located in peripheral regions such as Hosa Road, Begur, Bidadi, Kammasandra, Kengeri, Dommasandra, Chandapura, Hoskote and Rajanukunte. The city will continue to see more affordable housing projects in locations such as Attibele, Jigani and Anekal in South, Yelahanka-Doddaballapur Road in North, and Kumbalgodu and Tumkur Road in Western Bengaluru due to availability of land at relatively cheaper prices. The prices of such affordable projects range between Rs 2500-3200/sq.ft.
In most cases, the housing units are made affordable by reduced unit sizes, compromising on amenities which were typically provided as differentiators to the competing projects in the micro-market/city. Affordable housing has seen constant demand on the outskirts of Bengaluru, in all directions. Availability of large land parcels at comparatively lower price points has encouraged these developments. Also, the planned Metro Rail and Peripheral Ring Road have increased the demand on the outskirts of Bengaluru.
Scope of Mid-Segment Housing:
This segment is mainly driven by individuals working in the IT and ITES industry. The main driving factors for this segment are social infrastructure, proximity to workplaces, good physical infrastructure and access to medical and educational facilities. We have witnessed micro-markets like Thanisandra, Yelahanka and Nagavara in the North, Sarjapur Road and Kanakapura Road in the South, Panathur-Varthur stretch and Whitefield in the East to boast of mid-segment housing projects. These apartments are mostly 2 BHK and 2.5 BHK. We have seen an increase in buyers’ preference for a 2.5 BHK since it includes almost 3 bedrooms at a more affordable price. Most of these projects are developed on 2-3 acres land parcels and amenities like swimming pool, club house and indoor sports recreational facilities like table tennis or badminton courts are available in such projects. Some of the aforementioned micro-markets are still on a growth phase and with good infrastructure and increased connectivity to different parts of the city, these areas are expected to fetch a steep price.
Scope of Premium Residential Housing:
Bengaluru is the third-largest hub for High Net worth Individuals (HNIs). It is estimated to be home to over 10,000 individual dollar millionaires. Bengaluru has a large base of expatriates who live and work in the city. The residents are well travelled, cultured and have sophisticated tastes.
There has been increased demand for high-end residential apartments in the city, particularly near the Central Business District (CBD), Suburban Business District (SBD), and in Whitefield, North Bengaluru and Outer Ring Road sub-markets. We expect consumer demand for high-end residential projects in these sub-markets to be steady over the short term. Most of the residential apartments in the CBD are high end ones. Micro-markets such as Richmond road, Langford road, Kasturba road, Benson road and Cunningham road are areas in the CBD with high end ready to move in apartments. In the North, micro-markets such as Yelahanka, Jakkur, Nagavara and Fraser town have high end developments, while in the South, high end luxury developments which are ready to move in, are concentrated in micro-markets such as H.S.R Layout and Koramangala. In the East, most of the high end developments are concentrated in Whitefield, Brookefield and C V Raman Nagar. Factors such as exclusivity of the project, product differentiation, luxurious amenities and good connectivity to the CBD have helped these projects command a fair price growth despite a slowdown in demand. We expect this trend to continue and hence see growth in any investment in this segment.
Growth prospects that will propel profitable investments in Bengaluru:
The following factors are influencing the capital appreciation and rental potential in Bengaluru, thereby making it worthwhile for investments:
Growth in the IT Industry and a rapidly increasing number of High Net-Worth Individuals, and movement of expatriates. We have also seen the growth and development of E-commerce and startups along with medical tourism fuelling the growth prospects of the city.
The proposed infrastructure by the Government (Peripheral Ring Road, Metro Rail, Signal Free ORR, Elevated Expressway) along with the completion of Metro across all the zones will undoubtedly change the mobility across locations, thereby expanding the city and collapsing the distance which is required for development.
The proposed SEZ and IT parks in North Bengaluru (ITIR in Devanahalli, Aerospace SEZ, Devanahalli Business Park) will bring in volumes of business and employment which will in turn propel growth and development.
The author is chairman and managing director, Knight Frank (India) Pvt. Ltd.