In spite of the overall real estate scene being lukewarm in terms of launches and absorption in the Indian market, Bangalore is witness to an encouraging residential demand. A look at some market researches by Ranjani Govind

Growth of GDP and real estate are generally inter-related. The depressing economic scenario, high inflation and depreciating rupee are parameters that could make it difficult for the Reserve Bank to reduce interest rates drastically to bolster growth, says Shishir Baijal, Country Head and MD, Knight Frank.

Knight Frank, an independent global property consultancy, launched its Residential & Office research reports in the city while giving exclusive macro-detailing of the real estate market prevalent in Bangalore. The reports are a study of real estate markets with respect to six cities — Mumbai, NCR, Poona, Bangalore, Hyderabad and Chennai.

While the half-yearly figure in 2013 has witnessed a huge launch of units in the residential sector in Bangalore, showing a quantum leap of 33 per cent over the last year (Jan-June 2012), South Bangalore dominated the number of launches, explained Samantak Das, Chief Economist and Director, Knight Frank. “The areas around Outer Ring Road would see increased demand for housing with connectivity bringing in healthy pricing too,” he said.

The city witnessed the launch of around 28,000 units this year till June, and mid-end homes seemed to the most popular, being sold easily in spite of the economic environment. “The fact underscores the strength of the market here. In comparison to the Mumbai and NCR markets, there has been a rather smooth progression in Bangalore. The best seems to be the non-speculative safer market with end-users coming into the picture. This is what makes the price be steady and attract buyers,” commented Samantak Das. “The best reason for Bangalore having sold this many units with prices remaining reasonably stable is the fact that there is abundant choice of competitively priced products coming up in the suburbs, and this is what the IT/ITES sector prefers. And there are markets such as Rajajinagar which has grown from 2000+ to nearly 10,000+ in terms of its sq. ft pricing in central areas,” he said.

Currently, the report said, there are around 1,20,000 units under construction in Bangalore, and the unsold inventory is pegged at approx 50,000 units. “This is also expected to be absorbed in about one-and-a-half years,” said Mr. Das.

Self-sufficient

The Knight Frank Residential Research says East Bangalore has evolved into a self-sufficient micro-market. Corporates have made large investments in Whitefield and ORR East while infrastructure too has fructified at the same pace. This is one reason for the East Bangalore attraction of the IT group. Earlier too the ground was set up with public sectors units such as HAL, BEML, ITI and NGEF making their presence felt. Whitefield and adjacent Hoodi, Mahadevapura and Brookefields were responsible for 61 per cent of the total units launched there.

South Bangalore, though, witnessed the highest number of new launches in 2012, taking 51 per cent of the total pie in the first half of the year, and this year too, the region maintained a lead. West Bangalore and North Bangalore too witnessed a number of new launches, leading them to account for 14 per cent and 22 per cent of the total pie.

The city’s office market recorded an absorption of 3.98 msqf (million sq. ft) during the first half of 2013, showing a decline of 37 per cent over the last year. IT/ITES has brought in 61 per cent of this total absorption pie. Right now Bangalore has an overall developed office space of 105 million sq. ft, with 13 per cent vacancy.

While Whitefield and the ORR stretch between Marathahalli and Sarjapur Road will dominate as preferred office destinations, newer office markets are expected to emerge in North Bangalore.

Real estate index

Knight Frank and FICCI joined hands to sign a memorandum to launch India’s first Real Estate Sentiment Index, to capture the perceptions and expectations of industry leaders. “This would help people in gauging the overall sentiment of the Indian real estate,” said Mousumi Roy, Senior Director, Real Estate, Urban Development, FICCI.

ASSOCHAM report

The total new investments in real estate across the country had dipped by over 50 per cent in the past one year, industry body ASSOCHAM has said.

According to a paper ‘Current State of Real Estate Sector in India and Its Revival,’ released recently by ASSOCHAM, Uttar Pradesh has been ranked top with the maximum share of about 40 per cent in new investments attracted by the real estate sector among top 20 States across the country during the first quarter of current fiscal. “Real estate projects worth over Rs. 2,971 crore got completed during Q1 of FY 13-14 across India, registering over 50 per cent growth in rate of project completion. Realty projects worth only Rs. 1,976 crore had got completed in Q1 of the previous financial year,” the paper pointed out.

Maharashtra has acquired the second highest share of 17 per cent in attracting new investments in the realty sector in Q1 of FY 13-14 followed by Tamil Nadu (17 per cent), Uttarkhand (nine per cent) and Karnataka (six per cent).