A study and vision of Bangalore housing sector in 2014

The rapid growth of Bangalore City in few decades in terms of infrastructure, educational institutes, social infrastructure, and the real estate sector is driven by the flourishing IT industry.

The city is now home to a large number of High Net-worth Individuals (HNIs) and is the third-largest real estate hub for HNIs who park their assets here and one of the topmost cities where NRIs want to settle down in the future.

Due to its multicultural ethos, the city attracts more populace and today the city houses around 10,000 individual dollar millionaires and also home to many NRIs who are professionals and settled down in the city, which drive the demand in the real estate sector especially the housing segment.

Particularly, in sub-markets like Whitefield, North Bangalore, Outer Ring Road, Central Business District (CBD), and Secondary Business District (SBD), the demand for high-end residential apartments in the city has increased.

Right now, the most optimistic and preferable residential micro-markets in the city are the North Bangalore, Whitefield, Sarjapur Road, and Outer Ring Road (ORR).

With many ups and downs in the sector, a study and outlook of different residential categories is given below:

High-end residential category
Property price - Rs.1.5 Crore and above
Residential Type - New villa, villaments, and row houses
Locations - Whitefield, North Bangalore, Sarjapura, and Outer Ring Road (ORR)
Study & Vision - Demand is likely to remain stable in the coming year

Mid-segment residential category
Property price - Rs.75 Lakh to Rs.1.5 Crore
Residential Type - Above 2 and 3 BHK luxurious apartments
Locations - Electronic City, ORR IT Corridor, Whitefield, and some areas in North Bangalore
Study & Vision – Demand driven by IT/ITeS professionals who look for home close to their office and focus on social infrastructures, educational institution, hospitals and many other facilities
 
Affordable residential category
Property price – Rs.50 lakh or below
Residential type – 1, 2, 3, BHK apartments
Locations – Outskirts of the city, Peripheral Ring Road (PRR), South Bangalore, North Bangalore, West Bangalore
Study & vision – The proposes infrastructure projects like Metro Rail drives the demand

Synopsis of reality market
In the fourth quarter of 2013 there was an increase in the absorption of residential sector against the third quarter of the same period. About 30 residential projects were launched in the fourth quarter of 2013 and a slight appreciation in capital value and the sales volume increased as the most of the projects were in completion stage.

Opinion about Bangalore Reality Market
It is likely that in the first half of the 2014 the growth of residential market will remain stable and a modest number of launches in residential projects will be witnessed, while leasing and capital values will remain stable and is expected to rise in second half of 2014.

Factors that drive the leasing and capital value of Bangalore residential segment:
•    Development in IT sector
•    Investment by more HNIs and NRIs in residential segment of the city
•    Proposed infrastructure projects by government like Elevated expressway, Metro Rail, and Peripheral Ring Road (PRR), many others
•    Projected SEZ and IT Parks in North Bangalore such as Devanahalli Business Park, ITIR in Devanahalli, Aerospace SEZ, Airport City and others

Aerospace Park in Bangalore Urged Not To Be Treated As a Real Estate Project

According to the head of UTC Aerospace Systems (UTAS), in Bangalore, the aerospace industry has the prospect to gain $20 billion in revenues over the next 10 to 15 years. This is possible provided the state government can encourage an ecosystem that pulls global companies.

Bangalore is considered to be the aerospace capital of India.

According to the VP of UTAS, the government needs to draw companies to invest here. It has been noted that the state has formed a 1,000-acre aerospace park near the Kempegowda International Airport Bengaluru. However, the project isn't pulling global tier I aerospace manufacturers. It is a known fact that Bangalore has the right talent pool. This talent pool has been cherished over the years by public sector enterprises like DRDO, ISRO and HAL. The VP stated that the government surges ahead about the project (Aerospace Park) by merely selling land parcels, then they would definitely not be giving rise to an ecosystem concept. He also stated further that in order to for the tier I companies to set up shop, an aerospace SEZ must have tier III and IV suppliers along with training and academic institutions.

He also laid stress on the fact that they were insisting the government to cultivate the park as an ecosystem. They were against the park being given to a real estate developer as they believed doing so would give rise to problems. Instead, the park must be given to an ecosystem developer.

He also stated that industry should invest in people and technology and not in infrastructure and land. Currently, the aerospace industry is focused in the US and Europe. China and India seem to be gaining increased attention what with majority of companies looking forward to expand outside of the given two markets. But given the fact that China has been facing issues over intellectual property rights, hence, aerospace companies are inclined towards India. UTAS gained a position in India with its global $19 billion purchase of Goodrich two years ago. UTAS produces lighting systems, evacuation slides, seating systems, cargo systems, integrated systems, electrical power systems and sensors for Boeing aircraft and Airbus.

He further stated that on an average around 60 percent of the global production of those products were done out of Bangalore. Moreover, UTAS employs approximately 2,000 people. It has also expanded its 700,000 sq. ft. facility which is situated in the IT hub of Whitefield. Apart from this, he added that they were looking forward to reach a stage wherein they can develop, design, support and manufacture products from India. Besides, there were many areas which needed attentions such as the design side, he stated.

Take a Reality Check before Buying a House

According to a recent report from property consultancy firm Knight Frank, it has been stated that real estate prices in certain Mumbai areas have come down by 10%. The report also states that nearly 45% of the new properties that are coming up in Mumbai are unsold.

According to real estate consultants, the situation is not any different in other cities too where prices have softened. The question that props up in the mind of the people is that whether it is the right time to invest in real estate.

According to national director, residential agency, Knight Frank India, he states that it is a good time for investing in property. Owing to the uncertain economic scenario and political situation, the prices are submissive across cities. These are considered to be the two macro factors which influence property prices.

He further states that post-elections in mid-2014, in case a stable government comes to power at the Centre, prices might shoot up due to improved confidence levels. However, in the event of a fractured mandate, the reverse might also be true. He added that it is a short-term trend wherein presently there is pressure on prices.

An executive from Cushman & Wakefield states that from an investment point of view, if some of the fundamentals like job or business security, financing options, etc are in place for an individual, then this might be considered to be a good time for real estate investments.

The report further states that, the fact that real estate prices are showing signs of weakening is indicative of the fact that the long-standing stalemate between buyers and builders is finally turning in favor of buyers.

It is advisable that by taking into account various factors, one must make an investment in real estate. To start with, one must be convinced about the potential of the location. Other key factors are existing and upcoming infrastructure developments and access to prime locations of the city.

Apart from this, the area must also have social infrastructure, which is necessary for attracting tenants. Proximity to places of work, colleges in the neighbourhood and quality of schools, entertainment and healthcare facilities, retail malls and other amenities are something that people usually look out for.

In case it happens to be a suburban location, it must have unabated access to the main city locations. Moreover, one must check for infrastructure development plans which are announced or the ongoing development projects. The chosen location must also have a development authority to make sure future development prospects.

Bangalore Real Estate Is On a Positive Note

It has been noticed that the Bangalore’s real estate market is on a positive note as the new government has gained stability and is looking forward to address some problems of the previous one. The interest rates too have fallen. What is making it more attractive is the fact that the property prices have been comparatively steady in the last past few.

According to a senior executive of a renowned realty firm, the mood among investors is positive. He also stated that good infrastructure and governance played a crucial role in the building Brand Bangalore. Moreover, the quality must be maintained in the ongoing projects and they must be completed on time.

With the rupee weakening, builders opine that Bangalore is attracting huge foreign buyers. In terms of foreign currency, a weaker rupee made Indian goods cheaper. According to an executive from a renowned realty firm, this was the ideal time to invest in Bangalore by foreign investors.

Besides, the home loan interest rates which had gone up to 11% and higher are currently down by around 10%. With the inflation rate dropping, the bankers are expecting the tendency to continue. Since most buyers take large loans to finance their property purchases, interest rates play a crucial role in real estate.

According to another executive from a renowned realty firm, what is helping bring buyers into the market is that systems like wherein the builder takes the ownership of the customer's EMI until the project is complete. What is keeping prices stable in Bangalore is that Bangalore is known to be an end-user market instead of a speculative one, according to him.

However, there seem to be major concerns about the job market. Though IT companies are not creating many jobs as they were doing earlier, still this is not an instant fear.

In this scenario, the realtors are looking forward to the latter half of 2013. This would be the time when the Rehabilitation and Resettlement Bill, and Real Estate Regulatory Bill and the Land Acquisition, are likely to be passed. In case the "The Real Estate Regulatory Bill, is passed, this will help in the growth of the country’s realty section. It would also give rise to a healthy business and erase all the unethical operators.