Real estate in Bangalore gets dearer

Real estate in Bangalore gets dearer

The Economic Times

BANGALORE: Is the Bangalore real estate market overheated? Is it a Mumbai in the making where supply is becoming increasingly scarce? The unabated tech boom, bigger pay packets, plans for a spanking new international airport and a modern metro rail system, have only increased the appetite of migrants, investors and the desire of non-resident Bangaloreans based in the west to grab a slice of land in the city.

Customers, corporate as well as individuals, say prices are too high while real estate consultants and developers argue that it’s a case of water finding its own level. Office space is expensive, especially in the central business districts (CBD) and difficult to get. Quality retail space is not readily available as customers gobble it up almost as soon as it hits the market.

Even residential accommodation is getting dearer by the day for the middle order citizens, even though housing finance is easier than ever before and more inventory is being created. In fact, developers increasingly want to put their money in super luxury apartments and villas costing upwards of Rs 1/2 cr each to deal with the increasingly visible community of high networth individuals (HNIs).

Cushman & Wakefield’s regional manager, tenant strategies, Ashish Singh, admits that residential prices are up 50% or more in prime areas over last 12-18 months. The appreciation has been too fast possibly because land rates are increasing, and many projects have met with strong response. The demand is being stimulated both by investors (local plus NRIs) and end use customers. While small parcels of capacity will keep getting added, significant capacity infusion will happen from the second quarter of 2006 as more projects get completed.

Some price correction may happen then with rising supply.
There is also an increased supply in the mid-price segment. A more aware and demanding customer has spurred builders to improve standards and do value adds -- for a price -- to residential accommodation. Analysts say compared to other markets, Bangalore had few luxury apartments till some years back.

However, higher incomes, desire to enjoy the best and demonstrate wealth, is creating a demand for super luxury housing. There is a rush to address this demand by developing more top end apartments and villas.

According to a recent Cushman & Wakefield report, an estimated 27,000 dwelling units are projected to enter market over 2005-06 in all categories.