Garden City 'bangalores' own-house dreams
For the average Bangalorean, owning a house in the city will remain a dream
BANGALORE: “While "outsiders' are not the ones to be blamed, we cannot wish away the fact that "locals' cannot afford the high rents that IT professionals can pay and the general increase in the prices of every commodity because of a small percentage (may not remain small for long, though) of these men and women. Those who are non-IT professionals are shooed away when looking for a rented house (I have seen and experienced it myself) because the landlord prefers "Software" engineers. The disparity will, in my opinion, encourage increased corruption among the government employees.”
Thus wrote a blogger on the plight of Bangalore's locals. This is one of the subtler blogs, which represents the rising resentment of an average Bangalorean chasing the dream of his own space in this small city.
For an average middle class Bangalorean employed in the government sector, or many other sectors other than IT, the dream of owning a house in Bangalore will remain a distant dream. Real estate prices have spiraled in the past two years that he cannot even hope to rent a decent two bed-room house or apartment in any decent locality even in the peripheries of the city.
Appreciation in price has been almost 70 per cent in residential apartments, and land values have gone up by over 100 per cent in some cases.
Today, a two-bed room apartment in the outskirts of Bangalore will cost you nothing less than Rs 1500 per square feet. A 1200 square feet site will cost anywhere between Rs 650-Rs 1500 per square feet compared to Rs 150-350 in 2002. And the outskirts defined here are places beyond Devanahalli, Whitefield, Sarjapur, Electronic City, Hoskote, Kanakpura, Kengeri, Bannerghatta and even farther, which are a good 25-50 kilometers away from the city.
Rentals have also hit the roof in the past couple of years. No two-bedroom house is available in the peripheries of the city, for less than Rs 5000 per month (excluding, electricity, and water bills) and an advance ranging between Rs 50,000 to Rs 1 lakh.
The impact? To quote from T N Ninans' article in 'Business Standard', “High real estate prices lock the majority out of the housing market, and make more distant the dream of owning a home-in a country where the majority in our cities are not home-owners, and the majority of home-owners crowd their families into one- or two-room apartments. The second negative consequence of high real estate costs is that they drive up wages-because it has become more expensive to live in a big city. In other words, the competitiveness of Indian companies suffers.”
In 1991, with liberalization, Bangalore saw an influx of industries especially in the IT sector. This changed the face of the once sleepy city of Bangalore to one of vibrant industrial growth. With it, the real estate prices and rents started booming driven by increased investments by the IT industry and high salaries drawn by its employees.
Between 1991-94 Bangalore saw one of the major property price hikes even up to 200 per cent in some areas. Investments by NRIs also added to the boom.
From the peak level, prices started plummeting in 1995. Between 1995 and 2000, the property bubble built on speculations burst and prices declined by almost 30–40 per cent all across India, including Bangalore. There was a slight recovery in 1999-2000 period, riding on the dotcom boom.
However, between 2000 and 2001 came the dotcom bust, the stock market crash and UTI scam taking the property prices down.
The year 2002 saw the first signs of recovery in real estate prices, both residential and commercial and there has been no looking back after that. IT sector started flourishing taking investing in huge office spaces. Also started the influx of people from all across India and even from outside to one IT destination – Bangalore.
IT services sector grew leaps and bound and created many millionaires out of the burgeoning middleclass in the city. Soon followed the ITES/BPO boom. The IT sector with hundreds of thousands of companies acquired large chunks of the prime property within the city and moved on to the outskirts and beyond.
Another real estate boom started. Property prices for both residential and commercial spaces saw an increase of over 100 per cent and the rise continues in a frenzied pace. However, according to real estate research firms like Cushman and Wakefiled and Jones Lang Lasalle, unlike the 90's this time the rise in prices is not a bubble, but is driven by genuine demand from end users.
According to Jones Lang Lasalle, Bangalore accounted for 32 per cent, that is. nearly a third of all demand for office space in the metros across the country in 2004.
Where does this demand come from? The present real estate boom is riding on the growth of Information Technology sector in the country added with liberal home loan policies of banks.
It is estimated that between 2003 and 2006, IT companies acquired a total of 20-million sq. ft space. This also means large-scale recruitments taken up by IT firms. A recent reports also reveals that around 70 per cent of the IT professionals who earns big buck in Bangalore are outsiders.
The average age of a homeowner today is between 28 and 32. True to their age and purchasing power, the aspiration levels have also gone up. Today, the much read and traveled techies are looking for luxury apartments and villas and are willing to pay a premium for their dream houses.
An apartment or a villa worth Rs 1 crore and above is no more exclusive for business tycoons. It is an easy buy for a middle level manager in an MNC IT firm.
Many of these professionals are on a property-buying spree not only for accommodation, but also as a future investment. Real estate has become part of investment portfolio for many. So despite the skyrocketing prices, the demand for property is increasing.
Added to this, the government is also on a land allotting spree to IT firms and other industries in the name of technology parks and integrated townships. Soon after the news that Infosys is expected to get over 800 acres of land, a prominent English newspaper reported that huge chunks of land (1200 – 1700 acres of land are being developed in and around Bangalore, not only by big firms like Shapoorj Pallonji, but also by little known entities.