Property price rise slows down

Property price rise slows down
Supply Of Residential and Commercial Spaces Outstrips Demand
The Times of India

Bangalore: Rapid growth in supply of property has substantially tamed the scorching pace of growth in real estate prices that Bangalore saw in 2003, 2004 and early 2005.

The phenomenon is visible across the city in both residential and commercial property. In some cases like Whitefield and Electronic City, prices have actually taken a dip.

“In 2004 and up to the first quarter of 2005, we saw rates of growth in residential property prices of 25 per cent every six months. That is over. In fact, prices in most cases have not gone up significantly in the last six months,” says Manisha Grover, associate director in property consultancy Jones Lang LaSalle India (JLL). She says it’s partly because of the rains, which has affected demand, but mostly because there’s lots of supply streaming constantly into the market.

According to a study by JLL of the top 25 developers (who account for about 80 percent of the residential units offered in Bangalore), more than 10,000 units were launched or under construction in 2004 in suburban Bangalore and 7,500 units in just the first six months of 2005, compared to less than 4,000 in 2003. In secondary areas of Bangalore (between the city centre and suburban areas), the number of units launched/under-construction in 2004 doubled to over 2,000, while this year, that figure was reached in the first six months.

It’s a similar trend in commercial property. In Whitefield, while demand for A-grade (high quality) space this year has been phenomenal at over 2.5 million sqft (more than for the whole of Mumbai city), the supply has been even more so. According to Ankur Srivastava, MD of property consultancy DTZ Debenham Tie Leung, the supply in Whitefield in the next 18 to 24 months would easily be 7 mn sqft, and may even go up to 10 mn sqft.

He says prices in Electronic City too are dipping, partly because of an over supply, but also because of the fear that the construction of the road-on-stilts from the Silk Board junction to Electronic City will create a nightmarish situation during the construction period.

Prices of commercial property in areas around Sarjapur Road, the outer ring road between Marathahalli and Sarjapur Road, Koramangala, Indiranagar, the intermediate ring road, Bannerghatta Road and the Bagmane Tech Park in C V Raman Nagar are still going up, but more slowly than earlier. Sarjapur Road is seen to be benefiting from the road widening project and the proposed hi-tech city.

The northern areas around Hebbal lake were badly flooded during the recent rains, so several potential occupiers are seen to be rethinking their plans for that area.

As for the central business district, rates are still going up because of lack of quality residential and commercial space. And Nitesh Estates managing director Nitesh Shetty says there is continuous demand coming for commercial space from companies in areas like finance, insurance, consultancy and airlines. But lots of space will come into the market once Hewlett-Packard, Philips and McAfee complete their planned move to the suburbs and when UB City is ready. It could then be a different story.