By Raghavendra Kamath
Increased hiring and hefty pay hikes by infotech and start-up companies are fuelling the demand for residential properties in Bengaluru like never before.
All the top Bengaluru-based developers such as Prestige Estates, Brigade Enterprises, Shriram Properties and Puravankara saw record sales in FY22; companies and analysts expect the uptick in sales to continue in the coming quarters.
While those changing jobs in IT companies after some years of service saw their salaries doubling, many firms gave double-digit hikes to their employees in FY22. IT companies such as HCL Technologies and Happiest Minds even increased freshers’ salaries.
The IT/ITES segment constitutes about 75% of Bengaluru’s residential property market. Now riding on the boom in IT salaries, real estate companies are laughing all the way to their banks.
Real estate firm Prestige Estates recorded highest-ever sales of Rs 10,382.2 crore, up 90% y-o-y during FY22. “Sales have been driven primarily by the huge demand that is prevailing in the mid-market and affordable housing segment and restricted supply. The increased hiring in both the IT and ITeS sectors and consistent growth of start-ups have contributed significantly to growth,” said M Murali, chairman and managing director of Shriram Properties.
Murali said that the demand has been primarily for units with an extra room to accommodate the work-from-home aspect. “Market trends suggest that these professionals prefer to invest in real estate, both from a property perspective as well as in real estate-related stocks,” he said.
Shriram Properties reported a record high sales volumes of 3.76 million sq ft for the full year, up 25% y-o-y in FY22. The company had 12 successful launches during the year. Correspondingly, the aggregate sales value reached an all-time high of Rs 1,482 crore, up 19% y-o-y in FY22.
Similarly, Brigade Enterprises recorded the highest-ever sales of 4.72 million sq ft with a total value of Rs 3,023 crore in FY22.
“Our target demography includes salaried workers in IT/technology/research/BFSI and similar white collar jobs, who have not had high discretionary spends over the last two years and have also seen salary growth; so from an affordability standpoint, we do not expect the increase in interest rate to have a major negative impact,” Pavitra Shankar, executive director, Brigade Enterprises, said.
Shankar expects a positive momentum in sales for the coming year. “The market is very receptive to new project launches, which is a sign that appreciation is expected and that real estate will be a good investment. Also, given the volatility in the stock market, real estate seems like a safer bet. Investors expect prices to increase further which is why they are investing now in real estate despite higher prices,” she said.
Not only primary sales of properties, resale has also gone up by 25%, said Prashant Thakur, head of research at Anarock Property Consultants.
“Not only FY22 was the best year for IT/ITES, a lot of start-ups were listed. Esop money was given to IT employees. All that money is flowing into real estate,” said Thakur.
Thakur added with most of the IT employees being called back to office locations and schools reopening, the demand for rental properties has gone up, putting an upward pressure on rents. “Many are buying properties,” he said.
Mayank Saksena, chief executive land services at Anarock, said that post-Covid, IT employees got hefty hikes and they put money into stock markets but after shares started correcting, they didn’t see it as a safe option.
“Real estate prices are going up and increasing in rents are supporting it well. Real estate has become an investment vehicle for IT employees. They are buying properties and putting it on rent.”
He believes this trend would continue for another three to four years and IT companies typically give job contracts for three to four years.
Saksena said land prices have shot up in Bengaluru. On an average, prices of residential plots have shot up from Rs 2,000 per sq ft to Rs 4,500 per sq ft in the last two years, indicating a 2.25 times growth in prices.
Rising interest rates
Anarock’s Thakur said that even if home loan rates go up by another 1.5%, it is less than that a decade ago when rates touched 13%.
Developers have not increased prices too much. They have increased prices of ready-to-move-in inventory by 20-25% and increased new launch prices by 5 to 6%, he said.
“They are increasing prices a little bit and absorbing price increases in raw materials themselves. ,Hence it is a win-win for both developers and buyers. Developers can make money and clear their inventory whereas buyers can buy homes without execution risk and no GST,” he said.