BENGALURU: Bengaluru, the most resilient property market in the country is seeing cooling off too with deserted marketing offices and desperate salesmen. The property sales in the city have fallen by as much as 30% in the last three quarter due to slow job creation and low salary hikes by IT companies. "The market is really bad, even festive season did not bring in buyers back to the market despite offers. Our sales fell by around 40% during the year," said a senior official from a listed property builder. According to him, around 70% of the residential property sales in the city is driven by IT professionals who are fence sitting, impacting overall sales.
A recent Bloomberg poll of over 50 IT analysts says that IT services companies like TCS, Infosys, WiproBSE 0.83 % and HCL will struggle to reach double-digit growth. This will be the slowest pace of growth for IT service behemoth since the global financial slowdown following the 2008 Lehman Brothers crisis.
"IT companies are not hiring in large numbers like earlier days. People who are buying now are mostly upgrading. There is no new buyer in the market and it's looking rough," said a senior official from one of the top two mortgage companies.
Most of the listed real estate firms in Bengaluru reported a drop in net sales in the second quarter of FY2016 as buyers continued to hold back residential purchases. For instance for Q2, Brigade's net sales dropped 8% to Rs 327.77 crore, Sobha's net sales fell to Rs 450.4 crore for the September quarter, from Rs 669.5 crore a year earlier and Nitesh's sales dropped 40.2% to Rs 49.1 crore. However, Puravankara Projects reported flat sales, while Prestige Estates Projects was the only builder in the city that reported higher sales.
"Sentiment is bad nationally and that is percolating into the Bengaluru market too. The sales are not as good as last two years as during tough times, buyers' confidence further comes down," said Syed Mohamed Beary, CMD, Bearys Group.
Even real estate brokers in the city are also feeling the pinch of slow sales. "Slowdown is the order of the day , cost of apartment, right ticket size, job risk and relocation are impacting the sales," said Prashanth Sambargi, partner at Mars Realty, a real estate brokerage company in Bengaluru.
"We are at a 2-year low, it reminds us of 2008, our cash flows are monitored and planned for the next two quarters," he added. According to a Magicbricks-IIM-B Housing Sentiment Index, Bengaluru showed a decline of 14% for the first time in the past two years in Apr-Jun 2015 for property priced between Rs 40 lakh and Rs 60 lakh. "Delayed reforms have weakened the present business sentiment, which explains the downward trend in the current score. The supply-side stakeholders (developers and financial institutions) believe that today's situation is worse, compared to what it was six months ago," said Samantak Das-chief economist & national director - research, Knight Frank India in a recent overview on India's Real Estate Sentiment (Residential and Commercial) for Q3 2015.
The mismatch between buyers' expectations and property value of the existing stock needs to be addressed. Until then, the housing market in Bengaluru is going to remain subdued. The residential market's unsold inventory remained high at 1,01,992 units in the first half of 2015 valued at Rs 87,501 crore.