Tuesday, July 19, 2005

Software’s superwallet gives real estate a hard push

Software’s superwallet gives real estate a hard push
New Indian Express

BANGALORE: In 1996-97, when Karnataka Housing Board (KHB) built the National Games Complex and tried to sell flats at a rate higher than market value, the response was so poor that five years later, it had to slash the price by almost 50 percent.

Even then, there were few takers except those who wanted to make an investment. But as prices in neighbouring blocks of Koramangala climbed steadily within a year, the asking rate for the flats doubled. That perhaps sums up why land prices in the East and Southeast have doubled.

The proximity to MG Road was not the only reason. Construction of the four-lane Intermediate Ring Road (IRR) and two IT Park buildings at Whitefield have contributed to the rise in rents and prices.

According to industry observers, the new sunshine industry led to Bangalore being called as a Silicon City and prices sped upwards. There was a sudden demand for housing and office space - for rent - and this fuelled a further increase.

In Indiranagar, Domlur, IRR, Koramangala, HSR Layout, BTM Layout, Mico Layout, and most big properties in BDA layouts have been occupied by software and related service companies. The demand for housing too grew sharply.

Most of the demand was for paying-guest and one-room apartments, which came up on the first and second floors of existing houses. As the industry entrenched itself, demand for bigger residences, independent houses and flats grew. Work nearer home was the new mantra.

At the same time when interest rates dropped and rents became higher, those with purchasing power bought property, which had then, appreciated by 30 percent per annum.

A good example is HSR Layout. Described as a Koramangala in the making, this BDA layout with sizeable pockets of revenue land is the next big investment. Or rather was.

Five years ago, a 30X40 site was available for around Rs. 6 lakh. After nearly 100 bungalows came up in Cosmopolitan House Building Society belonging to senior government officers, a couple of schools and some posh apartment complexes, the land prices shot up 400 percent in roughly two and a half years.

Now the a 30X40 site is available for Rs. 30 lakh (roughly Rs. 2,500 per square foot) and with building, its nothing less than Rs. 45 lakh.

The landscape changed dramatically after the construction boom. As there is no fear of the BDA acquiring any lands here, there seems to be no cap for rents and prices.

In a revenue pocket abutting HSR Layout, an owner of a two-bedroom flat on the third floor expects a rent of Rs. 10,000. There are takers as it is very convenient for IT employees whose workplace is within a 7-8 km radius on the Ring Road around the layout.

But with increasing rents, those with higher incomes feel that it is better to buy a house or flat as the EMI will only be a bit higher than the rent they pay. ‘‘Eventually the house is mine. And what better investment than real estate.’’


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