BANGALORE: Bangalore has outpaced bigger property markets such as Mumbai, Delhi and Chennai with 140% growth in the quarter to June over the year-ago period, even as sales in most other cities stagnated or even plummeted.
In the first quarter of the current fiscal, 15.58 million sq ft of residential space was sold in the city, giving it a total market share of 13.9% and beating other domestic markets in homes sales, property research firm PropEquity said.
In comparison, property sales in the bigger markets of Mumbai Metropolitan Region and National Capital region fell by 60% and 57%, at 15.98 mn sq ft and 28.86 mn sq ft respectively. The trend continued into the second quarter.
"Bangalore is witnessing higher offtake as compared to other bigger realty markets in the country despite challenging times," said Pirojsha Godrej, managing director and chief executive officer of Godrej PropertiesBSE 2.12 %, which is in the process of launching projects totalling 4 mn sq ft over the next few months.
Experts say Bangalore's real estate market is growing due to a combination of factors such as a greater percentage of end users among buyers than in the other cities and a relatively moderate rice escalation.
"Land is not priced out in the south as compared to other cities. The property market in the city has performed even during the slowdown," said Prashanth Sambargi, partner at Mars Realty. The company is looking at mid-sized residential sector and standalone retail for luxury projects as its revenue drivers this fiscal.
In 2011-12, the southern cities including Bangalore contributed nearly 40% to the country's home loan disbursals of Rs 1.95 lakh crore. Since April, LIC Housing FinanceBSE 0.27 % garnered around 14.5% of the total home loan business from the Bangalore region, compared with 12% in the corresponding period last year.
"Bangalore property market is leading both in terms of loan disbursement and sanction. There is a turnaround in the real estate market in Bangalore, which is mainly due to slower growth as compared to markets like Mumbai, Delhi and Chennai," said VK Sharma, CEO of LIC Housing Finance.
Delhi-NCR and Mumbai witnessed a sharp drop of over 40% in property sales in 2012, compared with the previous year, mainly due to multiple increases in home loan rates and inflated property prices. The southern cities, including Bangalore, did not see such a sharp downturn partly due to the turnaround in the IT sector.
"Sentiment was bearish due to worries about macroeconomic growth trickling down to job security and increments. But policy level changes will result in improvement in sentiments and the pent-up demand is likely to be converted hereon," said Niranjan Hiranandani, managing director of Hiranandani Group
As per the Confederation of Real Estate Association of India (CREDAI), fewer projects approval in the Mumbai and Delhi regions also contributed to the more benign fall in sales in Bangalore. New launches in these two bigger markets fell by 50% and 57% respectively.
"Lack of project approvals has restricted new property supply. Additionally, margin contribution requirement from home loan seekers has gone up to 40-45% as loans are now being disbursed excluding stamp duty, registration and other taxes impacting sales," Lalit Kumar Jain, president, CREDAI.
"NCR has seen a drop in home sales because work in Noida extension was stalled for many months. The Noida region was also impacted because of elections in Uttar Pradesh and there were not many new launches," said Sameer Jasuja chief executive officer at PropEquity.