BENGALURU: Prices of office spaces in Bengaluru have increased enormously lately, only deep pockets will be able to afford these places. With guidance values for commercial spaces shooting up by 40 to 70 per cent last week, the market value of properties is also expected to see a northward trend by up to 20 per cent.
Revised guidance values came into effect on November 18, and will determine stamp duty and other charges to be paid during registration of property. The market value of commercial space, especially in the CBD, which accounts for nearly 40 per cent of total commercial space in Bengaluru, has already gone up from 5 to 15 per cent, realty sources said. This includes traditional business streets like Commercial Street, Brigade Road, Vittal Mallya Road, among others. The biggest guidance value increases of up to 70 per cent are in IT corridors like Whitefield, Sarjapur, Marathahalli, Hosur and KIA Road. Realty sources admit commercial prices are already up by 10 per cent in prime areas, ever since guidance values were hiked.
The real estate industry is obviously worried. Farook Mahmood, chairman and managing director, Silverline Group, said, "Whenever there's a hike in guidance value, expectations from property owners go up and they instantly quote high rates for their property, without logic or reason. This leads to a situation where transactions come to a standstill till the market catches up with this increase."
Some also feel real estate transactions will never be the same again. "Buyers, sellers or builders who strike commercial property deals will look to avoid payment of stamp duty and registration charges by using instruments like general power of attorney (GPA) or sale agreement (SA). The hike will definitely be a deterrent for the industry and state government, which is hoping to make big bucks," said Prashanth Sambargi, partner, Mars Realty.
Suresh Hari, secretary, Credai, Bengaluru, said the industry isn't worried about the increase in guidance values, but feels it should be in line with services provided, especially with regard to commercial properties. "Guidance value should reflect the situation on the ground. But that isn't the case now. I hope the state government takes note of it and fixes registration costs and charges more for value addition. This will not only ensure transparency but also make the real estate market vibrant," he added.
"We are yet to see a material impact as this is a new announcement. However, we anticipate a significant inflationary impact on the sector in Bengaluru, which will adversely impact business. Bengaluru has an even demand across most parts, but more so east Bengaluru. The maximum adverse impact will be in the CBD area which will push occupants to more decentralized locations. In a relative sense, east Bengaluru areas like Whitefield will become even more attractive for corporates. The government should improve infrastructure and make the city more attractive so that corporates increase investment, which will in turn improve their revenues," said Vishal Mirchandani, CEO (retail and commercial), Brigade Group.
"We've increased guidance values for commercial properties by 40 per cent across the city. I don't think it will have any impact on the real estate business as there is still a huge gap between the guidance value and market value," said N Prakash, Inspector General of Registration and Commissioner of Stamps.