IT realty nexus of Bangalore
Sep 18, 2013
Source : The Economic Times


BANGALORE: The story of Bangalore’s real estate market is intrinsically linked with the city’s information technology sector. The city now has a reason to cheer as it has been named among the top eight technology innovation clusters in a global rating by the Massachusetts Institute of Technology’s Technology Review, a magazine on innovation.

The other seven clusters include Paris-Saclay in France, Tech City in London, Skolokovo Innovation City, near Moscow, Silicon Valley, Boston, Israel, and Beijing.

A lot of the IT companies established their offices in the Koramangla area. Now they all are expanding their activities outside this area due to several reasons. The first, being the limitation of space to expand. While there are no vacant plots to add to the construction, the movement in the lanes and by lanes has also become a challenge.

With every second house converted into a hotel or an eatery, the lanes are always found to be choked with vehicles. Even the multistory apartment market is not having much to offer. It is the resale market which is sustaining the realty business area in the area.

On the one hand a 2bhk is available in many areas of the city in the range of Rs 20 to Rs 25 lakh and a 3bhk is available in the range of Rs 30 lakh, on the other a 2bhk in Koramangla can be found at anything between Rs 60 lacs to Rs 1.2 crores.

The vast variation can be contributed to the demand and supply rule. As against Koramangla, there are some upcoming residential building projects promising delivery by the end of the year. These projects offer a 2BHK multistory apartment, providing 860 to 1060 sqft at a cost of Rs 20.25 – Rs 25 lakhs.

In the same project, a 3BHK providing 2355 sqft would be available in the range of Rs 30 lakhs. However, this would be available at Sarjapur, a locality developed more than 50 kilometers from the Yeshwantpur Railway Station.

Since takers for the project are flocking to the locality, the realtors are attracting investors with a baggage of facilities like, round the clock security, intercom facility, power backup, club house, gymnasium, etc.

All the upcoming projects boast of being Vastu compliant. One of the leading researchers has noted that Bangalore’s entrepreneurial culture can be seen in activity clubs like Open Coffee Club, Startup Sundays, Bar camps, and Mobile Monday.

Venture Intelligence estimates that startup incubators can accommodate about 60 companies in a year, almost twice the number of Delhi. In yet another boom to the real estate business of the city, a recent study by Knight Frank ranked Bangalore as the most affordable city.

With more than 77 percent of the total units under construction, falling below a ticket size of Rs 50 lakh, the city bagged the top position, followed by Chennai. “The deliberate strategy on part of the developers in Bangalore is to focus on peripheral areas. The right size of apartment area has ensured that the new supply does not breach the affordability level of the target segment,” says Samantak Das, chief economist and director for research, Knight Frank.

Das also said that the property market of Bangalore is in relatively better health in comparison to its counterpart cities of NCR, Mumbai and Hyderabad. By the health, it means that the residential market in the city has been steady over many years compared to the other regions.

Another important factor differentiating the city from other cities in the country is the excessive interest of NRIs for the place. With the IT infrastructure forcing the foreign partners to stick to the place, the foreign visitors are investing highly in the real estate, that too in premium housing projects.

With this being one of the determining factor for the rising rates of premium properties in some areas, at present only 5 percent of the residential properties in the city are held in form of premium properties.

Experts say, this could rise to 80 percent in the year 2013-14. This may also explain the shortage of low budget properties, with a substantial increase in the premium projects, says the study. The city seems to be in love with anything premium.

With rupee continuing to depreciate against the dollar, NRIs are investing heavily in luxury projects in the city. Very recently Jones Lang Lasalle (JLL) India facilitated a 25-acres land deal in Bangalore being purchased by L&W Construction for Rs 100 crores.

The Devanahalli sub-market is witnessing an impressive scale of activity on premium and luxury real estate projects. According to JLL, this is largely due to the ongoing and planned infrastructure developments in these areas, with the establishment of Bangalore International Airport being one of the primary catalysts for North Bangalore.

Over 10,500 residential units were launched in Bangalore in the second quarter of 2013, accounting for 31 percent of the total launches, says a report. East Bangalore registered the highest number, followed by northern submarket and south-east Bangalore.

“Healthy demand from the IT population resulted in property developers preferring these locations for new project launches. Mid-end segment accounted for the largest chunk of launches adding up to almost 50% followed by the affordable category with 34% remaining in the high-end segment,” mentioned the report.

Further, under construction properties in east registered price appreciation of up to 12% primarily due to their proximity to areas with developed social infrastructure and IT hubs. South-West market witnessed an appreciation of up to 11% in the capital values.

Rough estimates by international property consultants and local brokers suggest Bangalore has, in the past 24-30 months, got an investment of $100 million to $200 million across real estate asset classes from investors in AP and Telugu NRIs.

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