Property price boom in Bangalore to end soon?

Land developers say the market situation will `correct itself'

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The situation of demand far outstripping supply is likely to ease

Most developments will be complete in about a year

FAST DEVELOPMENT: Apartment buildings coming up in the Sarjapur Road area in Bangalore. 

        BANGALORE: The boom in property prices over the past two years, averaging 30 per cent to 35 per cent annually, may end to a large extent in 2006, developers in the city anticipate.

        According to a spokesperson of Sobha Developers, the situation of demand far outstripping supply in the property market is likely to ease in about a year to 18 months when most of the new developments are completed.

        The Brigade Group, a major developer of both residential and office space, feels it will take another 12 months for the market to "correct itself" and for prices to stabilise. They and other builders feel demand will continue to grow with the information technology sector especially on a path of growth. Other market watchers also feel that the hiring of personnel now taking place in the IT industry can only push up the demand for quality housing.

        One interesting feature about the residential apartment complexes now coming up is the large extent of customisation within individual flats. "People want to go by `vaastu' in the positioning of doors and windows and certain indoor fixtures. Since most flats are booked in the pre-construction stage, it is not difficult to meet such requests,'' says an executive of Sobha builders. Choice of flooring, wall tiles and finishes of built-in wardrobes are other options now offered by builders.

        Whether there will be a price correction or not, the entry-level prices for apartments are about Rs. 1,500 to Rs. 1,600 a sq.ft, and in the Sarjapur area it can be as high as Rs. 2,000 to Rs. 2,500 a sq.ft. "You can buy a basic flat for about Rs. 20 lakhs to Rs. 25 lakhs or a premium flat for Rs. 40 lakhs to Rs. 50 lakhs. Penthouses and duplexes command a premium and prices can touch Rs. 1 crore,'' Sobha Developers says.

        Whitefield and Sarjapur are now preferred locations, and the North and North-east are where the building boom is on, most developers say. Another location to watch out for is Kanakapura Road. "Proximity to the IT corridor and the Outer Ring Road are deciding factors for location, and the Peripheral Ring Road, when it is built, will see many new developments along it. Accessibility matters to investors,'' says an executive of the Brigade Group. Bellary Road is another area which is seeing a lot of activity.

        Value addition, what developers call "add ons", are no longer just a clubhouse or a swimming pool.

        "These have become the norm; what apartment buyers now expect is more open space with scope for outdoor sports or just walking and jogging. This means we have to keep more space `unbuilt' and build vertically. Twenty-storey buildings will become more common soon,'' they explain. Potential homebuyers go both by location and the reputation of a builder, and are most serious about avoiding legal hassles over title later.

Real Estate Severely Hit in Bangalore

        Real estate developement in Bangalore and some of the other important cities of the State such as Mangalore, Mysore and Hubli-Dharwad has been severely hit with hardly any buyers for apartments. 

        The global meltdown is said to be having a disastrous effect on real estate business in Bangalore, one of the fastest growing cities. Housing here has now entered the buyer’s market, in contrast to what prevailed during the boom period when people desirous of shelter were at the mercy of sellers. Apartment prices, particularly on the outskirts of Bangalore, have taken a major beating given the fact that discounts, freebies and even a special interest rates for housing loans (with a certain per cent of the interest paid by the seller) are not bringing in customers. 

        Sources in the housing sector told The Hindu that “indications showed that the people now feel that real estate prices have touched realistic levels, given the response to advertisements for apartments over the past fortnight”. It is another matter that the discounts being offered on the outskirts of the city, ranging between 15 to 35 per cent, based on the location of the property and the amenities provided therein, have not produced the desired responses. People are now in a “wait and watch” mode with the hope that the real estate market takes a further dip and they can step in at that time.

        There are nearly 10 major and about 100 small apartment builders in Bangalore, with very few of them extending their operations to tier-two cities. Apartments are in demand only in Bangalore as independent houses are not very expensive in tier-two cities. Most builders are facing a crisis with hardly any buyers for apartments. This has had a cascading effect on material suppliers to the building sector, with builders unable to clear their dues. Some of them have gone back to the old system of bartering their flats to settle dues of suppliers.

        The apartment price band about a year ago was between Rs. 2,500 and Rs. 12,000 a sq.ft. The maximum hit is in the luxury segment — between Rs. 5,000 and Rs. 12,000 — although apartment builders in the core areas of the city such as Sadashivanagar , Malleshwaram, Cantonment areas, Koramangala and Indiranagar are still holding on to their price tags. The supply here is less than the demand and consequently builders have been dictating prices, more so, with the land values being very high in these pockets. However, apartments on the outskirts of the city — Hosur Road and all areas adjoining Electronics City, Sarjapur Road, Whitefield , Marathahalli, Yelahanka, Hebbal and Kengeri have been affected with the supply being higher than the demand. 

        While flats in the core areas of the city are purchased for immediate occupation, those on the outskirts are normally termed as speculative investments