Property, Budget, Locations: An Evaluation of Bangalore’s Realty Market

Being the fifth largest city of India with a population of 9+ millions, Bangalore is one of the most preferred investment destinations of India. It is also known as Silicon Valley is one of the fastest growing cities of southern India since past few years. Being a major IT hub of India, it is a metropolitan city which is experiencing a robust real estate development. The city has premier educational institutes, hospitals, shopping centres and other infrastructural amenities which makes it one of the qualities. With the growth of IT companies, rapidly increasing number of high net-worth individuals and expanding road network are the major driving factors behind the growing real estate.

 

The realty market of Bangalore is dominated by residential and commercial projects, where the demand for 2 and 3 BHK apartments are high. The potential buyers are looking for affordable housing which are equipped with world class amenities and adds value to the living standard. The renowned builders coming up with highly advanced commercial and residential properties which is providing more options to the buyers due to mushrooming IT companies that are expanding amenities in the city. Some of the most developing and flourishing areas of the Bangalore are Electronic city, Begur Main Road, Whitefield, Bannerghatta Road, Rajajinagar, Malleshwaram, Richmond Town, Kormanagala, Ulsoor and more.

 

Luxury Housing

Talking about the luxury housing, Bangalore is the third-largest hub for High Net worth Individuals (HNIs). There is an increase in demand for high-end residential apartments chiefly in Secondary Business District (SBD), Central Business District (CBD), Outer Ring Road sub-markets, North Bangalore and Whitefield. Silicon City is one of the most capable market for villa projects and row houses which are most active in Northern part of the city, ORR, Sarjapur Road and Whitefield micro-markets.

 

Mid-Income Housing

The Mid-income segment is primarily driven by the professionals working in ITES & IT industry. The basic requirements for this section are social infrastructure, recommendable physical infrastructure, proximity to workplace, easy access to educational and medical facilities and smooth commute. Electronic City, Whitefield, ORR, North Bangalore has the potential which can foster these requirements at competitive prices.

 

Affordable Housing

The demand for affordable housing comes from the price sensitive buyers, hence, such projects are developed in the suburban locations where land acquisition cost is low. These concepts gained popularity due to the presence of few graded builders like Shriram properties, Golden Gate Properties, Ozone Group, Brigade Group, Nitesh Estate and Purvankara who are predominantly focused on the affordable customer section.  There is a constant demand of budget houses in the outskirts of the city and the availability of land at lower prices has led to an increase in the launch of new projects. Areas such as Mysore Road, Kanakpura, Hosur Road have witnessed high demand. Due to land acquisition and construction, there is a substantial rise in capital values therefore the developers has redesigned their projects to cater he demand of the target buyers.

 

Budget Based Property Analysis

According to reports, more than 15,000 projects are in ready-to-move status and a number of them are flat within 40 lakh and this has garnered maximum demand from the buyers. The long-term realty masters have sensed the opportunity for affordable housing. Eastern and Southern Bangalore has lead the race with the maximum share of such stockpile.

Catalyst for the Developers

Due to the shrinkage in the built up area and minimum scope of bargaining, the affordable housing segment has become the favourite of developers. With new FAR or FSI, there is a gradual drop in the average built-area offered by the builders especially in residential projects. This has turned an abrupt decline in unit prices and hooked mid-income homebuyer community. Now, the developers are stuck to this trend which is leading to increased profit margins from the dominating section of the society.

 

Advent of peripheral areas

Bangalore has expanded topographically, with the suburbs and peripheries emerging as new realty hotspots. Owing ample land at relatively lower prices than the city centres with improved infrastructure and connectivity have stimulated the builders to introduce more budget projects equipped with top-notch amenities.

 

Budget Analysis

The first preference of Bangalorite’s is the affordable properties priced within 40 lakh. However, the deficit in supply directs the developer’s fraternity’s inability to fulfil the demand of budget bracket. One-tenth of the realty market is captured by the luxury and ultra-luxury segment projects which are priced above Rs 1 crore. South Bangalore is the most preferred location as most of the affordable and mid-housing, income segment projects are available here.

 

The concentrated Commercial Sector

According to reports, Bangalore has an inventory of more than 96 million sq. ft. of commercial/ office space till first quarter of 2016. The overall commercial vacancy stands for around 4%, which is the lowest ever recorded by any metro city. The office space is dominated by Secondary Business District (SBD) where 58% is followed by Whitefield. The top builders such as RMZ Corp, Prestige Group, Embassy Group and the other developers are bringing very high commercial and office space, in coming time both RMZ Corp and Embassy are likely to be listed under REIT.

 

Rental Analysis

The rental growth of residential projects has gained a momentum in Bangalore. It has reported an upward price movement of four percent in Jul-Sep 2016 as compared to 2015. Whitefields, Marathahalli, electronic city are the favorite amongst the professionals due to close proximity to IT hubs. The average weighted rentals of the builder floors increased by 3% in last 3 months. The major driving factors behind the booming demand of these locations are improved metro connectivity, proximate civic facilities are adding value to these locations.

 

Locations at the Top

While making a final decision for purchasing a property, infrastructural development of particular area should be checked. There are various factors that should be considered before making any final decision, such as proximity to workplace, international airport, schools, colleges and shopping centers. Over the years, North Bangalore has come up as one of the prominent real-estate destination which is offering residential properties at affordable prices. The major stimulation in realty sector has been due to the presence of IT companies along with the key infrastructure projects. According to the latest 99acres Insite Report, South Bangalore and North Bangalore are offering most of affordable residential properties that are equipped with all modish amenities. East and South Bangalore have entrenched themselves as the cost-effective housing hubs with respective shares standing at 25% and 41% of the total budget. Jallahalli, Peenya, M S Palya, Jakkur, Abbigere are few of the fastest emerging new affordable locations which are offering 2 and 3 BHK properties within a decent budget

Let us have a look at the localities and the major growth drivers of Bangalore.

 

Peenya

Peenya is primarily an industrial area which owes various manufacturing units, godowns and warehouses. However, to avoid the travelling time between workplace and home most of the professionals are opting home in nearby areas. Hence, gradually Peenya is turning up into a residential area too. With the introduction of Green Line Namma, the connectivity has been improved and the travel time is reduced. Along with that, the region is strategically located at off Tumkur Road, which is connected with Bangalore-Nelamangala Expressway and linking the major parts of the city.

 

Jakkur

Located between the growth corridor of Hebbal and Bangalore international airport, Jakkur is an upcoming prime realty spot. It is situated away from the hustle-bustle of the city, where a number of IT professionals are residing. According to reports, Jakkur is the proud owner of most of the ready to move inventories available in North Bangalore under affordable segment. The area is well-connected via rail, road, bus and taxi with Bellary Road, which further gets connected with National Highway-7. In addition to that, Jakkur is also known to house Jakkuru Airfield along with Bangalore Flying Club and other flying schools.

 

Jalahalli

With low-density area and ample of greenery due to the presence of Jarkabandi state forest, Jalahalli is one of the rapidly flourishing societies of Bangalore. The area is marked as “Special Investment Region” by the state government. The area is well-connected by road to National Highway 4 and to Whitefield and Kormangala where one can easily get state transport bus service.

 

Ms Palya

MS Palya is located in North Bangalore and known for the presence of small scale industries. It is boosted with several infrastructural amenities such as educational institutions, hospitals, adequate power and water supply and entertainment avenues.

 

Abbigere

Abbigere basically the extension of Malleshwaram, Mathekiri, Gokula, RMV extension and New BEL Road. The demand for affordable housing has been surging into the area due to presence of business parks such as Manyata Tech Park, smooth connectivity to Hesarghatta railway station and the presence of established organizations such as Hindustan Machine Tools (HMT), Bharat Electronics Limited (BHEL), CMTI among others.

 

East Bangalore

 

KR Puram

Factors such as better connectivity, easy accessibility to public transport, high living standard and liveablity index has nurtured the interest of buyers. The area owns more than 200 ready-to-move in projects which comprises of world-class amenities.

 

Sarjapur

Sarjapur is prevalent locale among the buyers and investors, it is the host for number of tech parks, RMZ, Sesna and tech parks. The ongoing capital prices for the residential apartments ranges 2,700 to 3,300 per sq ft.

 

Hoodi

Hoodi is one of the biggest IT zones in Bangalore which hosts several corporate houses and business parks. A recently built railway station at Hoodi has smoothened the daily transport of thousands of commuters. The average price range here is around Rs 4,200 to 5,100 sq. ft.

 

South Bangalore

 

Arekere

Arekere is well-connected to ITPL ring road which allures several ITPL workers and the professionals in adjoining areas. The area has well-built infrastructure, educational institutes, shopping marts and the average capital value hovers around Rs 4,100 sq. ft.

 

Bannerghatta

With a well-built infrastructure and presence of IT firms in proximity drive housing demand to Bannerghatta. According to reports, the current ongoing price for residential apartments is around 4,800 per sq. ft. whereas the neighboring Kormangala is on higher side and rates hover around 9,800 per sq. ft. There are abundant of other localities available offering cost-effective/budget and ready-to-move in projects.

 

Electronic City

Electronic City is the information technology hub of Bangalore, the developmental activities in the area has been escalating steadily since last few years. The area is spread over 332 acres and consist of 3 zones called Phase I, Phase II and Phase III. It is embraced by the localities such as HSR Layout, Kammanahalli, Bilekahalli and Bommanhalli. It is offering commercial as well as residential accommodations at extremely affordable prices.

It is located at a distance of around 18 km from the city center via Hosur Road. With a well-developed social infrastructure like shopping centers, educational institutes, public transport mediums and hospital, E-city is one of the ideal locations to live in.

Contrary to several hot realty markets in Bangalore, E- city is a planned township, where government has acquired 330 acres of land in 1978. Buying property in Electronic City is a profitable investment as it is laced up with several amenities.

 

Easy Connectivity

Electronic City is connected to highways and connected to other parts of the city. To make the commute easy and fast, the metro phase II is also started and it will enhance the connectivity between E- city 1, E- city and Hebbagodi.

% Change represents yearly rental movements

Let’s have a close look at the recent realty trends and analyze the SWOT.

 

Strength

  • To reinforce Bangalore’s physical and civic infrastructure, the Karnataka government has approved numerous innovative methods for spawning funds. It includes premium for FSI, betterment levy and cess for new layout approvals.
  • Implementation of the single-window clearance system for a smooth sanction of MIG building plans. This will lead to reduced red tapism and pushing the average housing prices up.

Weakness

  • There is limited stock of ready-to-move office space that led to a drop in absorption volumes in H1 2016.
  • The Karnataka Urban Development Authority (Amendment) Bill threatens to diminish the mandatory share of the open space and at the same time they promote greater concretization.

Threat

  • Though the sale of projects are quite stable but Bangalore recorded muted sales in anticipation of price correction.
  • Realty market observed a relatively low sale in flood affected areas such as off Sarjapur Road, Gottigere and Bannerghatta Road.

Opportunity

  • The infrastructural growths such as completion of Hennur flyover will ease the traffic jamming between Lingrajpuram, Bagalur and ORR.
  • The newly proposed metroline between Whitefield and Marathahalli, this will reduce the congestion and this will give propulsion in nearby areas.

Author: Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles by others on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to editor.webposts@gmail.com