REAL ESTATE BANGALORE

The year 2009 has been a mixed one for the Bangalore real-estate market. The one segment that saw considerable buzz was the residential segment, where there was a clear shift in demand towards the affordable segment, from the Rs 50-70 lakh mid-market segment.
However, the year was relatively dull for the commercial and retail real-estate segments. Given the significant demand for sub Rs 30-lakh properties in the city, property developers should try to “synchronise their project specifications and actual demand to create a sustainable business,” says Mr Irfan Razack, Managing Director, Prestige Group, in a press release.
Demand-supply gap
A well-planned and executed, mass housing project makes good business sense, considering the growing demand for such houses, the big push from the government and attractive interest rates announced by banks, developers say.
“Though there is massive demand shortage for high-end and luxury apartments, the demand-supply gap in the affordable housing sector is quite high. Banks have reduced their interest rates on quick loans and the prices for steel and cement have gone down considerably for developers to launch affordable housing projects,” says Mr Razack.
The developers now vying for their share in this ‘affordable' pie include some of the well-known names in the city such as Brigade Group, Puravankara Projects through a wholly-owned subsidiary Provident Housing, Prestige Group, Shriram Properties, Nitesh Estates and Ozone group, among others. Mr M. Murali, Managing Director, Shriram Properties, feels that for developers the affordable housing segment is purely cash-flow management. “We are able to take advantage of cost reduction available in the market on commodity prices and pass on the benefits to customers. The strategy is to achieve volume and consequently desired profitability goals. Quick turnaround and deployment of money in these projects will give developers the desired result,” he says.
Nitesh Estates plans to have a bulk of its future projects in the Rs 20-30 lakh price range, as “this is where the demand is. We would like to position ourselves in this category, and it is in this segment that 80 per cent of our residential projects will be focussed in the future,” says Mr L.S. Vaidyanathan, Executive Director, Nitesh Estates.
On property prices in the city, Mr Anurag Mathur, Managing Director of global real-estate consultants Cushman & Wakefield, says that over the last quarter of the year, the city continued to witness minor corrections of 1-3 per cent in capital values across select micro-markets such as high-end properties in off-central (Frazer town, Benson Town, Richards Town, Dollars Colony) and east (Whitefield) as well as mid-end properties in south-east locations (Sarjapur Road, Outer Ring Road, HSR Layout), north-west (Malleshwaram, Rajajinagar) and south (Koramangala, Jakkasandra) markets. However, over the last one year, property prices in the city have dropped by 5-19 per cent.
The next few months, he says, would see further corrections in certain corridors such as the east, south east, north-west as well as south-west. “The rental markets, on the other hand, are expected to remain stable over the short term,” adds Mr Mathur.
According to the annual year-end report by Cushman & Wakefield, though Bangalore maintained its top position as the market with the highest commercial real-estate absorption with 5.7 million sq.ft, the city also recorded the highest decline (53 per cent) in office space supply in the country at approximately 5.3 million sq.ft during 2009 as compared with the previous year. However, the city's total office space absorption was almost 45 per cent less compared with 2008.
However, Mr Mathur says that with gradual revival in the economy, mostly towards the second half of 2010, demand for office space is likely to increase and as a result construction activity is also likely to gain pace in the mid-term. “In the coming months, rentals stabilisation across all micro markets is likely,” he adds.
Retail segment
The highest mall supply deferment was witnessed in Bangalore, which saw almost 80 per cent less than the expected mall supply, ensuring the city maintained vacancy levels at 3 per cent, same as 2008, says Mr Mathur. This slowdown in mall construction need not be viewed as a negative growth indicator for the retail real-estate segment. The slowdown in supply could be attributed to the slowdown in construction activity that 2009 witnessed due to reduced retailer demand and funding woes.
“The slow pace of development helped maintain a healthier supply-to-demand equation, keeping mall vacancy levels in check. Mall and Main Street rentals are likely to remain stable over the next few months,” says Mr Mathur.
Another leading real estate consultant D.Srinivas says that areas like the Electronic City which saw a lot of buying in the last 5 years has come down by about 35% due to the global slowdown. Also the IT industry being hit by the recession has not bought enough land in this area.
"We hope to see a new high in this area due to problems in Andhra Pradesh and will bring people back to Bangalore which is the IT hub of India" quips Srinivas