Realty demand drops by 15% in Bangalore

Realty demand drops by 15% in Bangalore
SUPRIYA UNNI
Bangalore


Article Rank





DEMAND for residential properties in Bangalore has witnessed a drop of 10-15 per cent over the last year thanks to rising realty prices and home loan rates.

“The 10-15 per cent is essentially a drop in speculative sales,” Sandeep Trivedi, national head - development consulting, India Cushman and Wakefield told Financial Chronicle.

Over the last three years, Bangalore witnessed supply of over 100,000 residential units across micro markets, of which approximately 10 per cent can be estimated as unsold property, according to the consultancy.

Sharp rise in property prices, high interest rates, and rising inflation have seriously hit demand for new homes and potential buyers are now waiting for prices to fall in India's Silicon Valley. Property brokers in the city say the slump is in the Rs 25 lakh – Rs 70 lakh range.

“The drop has been seen in suburbs like Sarjapur and Hebbal. There has also been a dip in the number of first-time buyers in the mid-segment,” said Saif Ahmed, a Bangalore-based property broker. “People going in for second and third homes in these segments are also being cautious,” he added.

Recently, the Karnataka chapter of the Confederation of Real Estate Developers' Association of India (CREDAI) increased rates of all projects by 3-8 per cent with effect from June 10 citing higher input costs.

According to CREDAI, only 26,000 units were sold in 2007 compared with 30,00032,000 units a year in 2005 and 2006.

However, developers in the city attribute the drop in demand to the cyclical nature of real estate industry. “The market has been steadily growing since 2003, it peaked in 2006 and is plateauing in 2007-2008. That's how the industry is,” said CREDAI Karnataka, president A Balakrishna Hegde.

The realty sector, which has seen substantial appreciation over the last few years, is most sensitive to RBI decisions on lending rates. Industry watchers though expect some respite by the end of the year when demand is likely to pick up after the monsoons, when demand is generally low.