J Padmapriya, ET Bureau
The real estate market in Bangalore, dubbed as India's Silicon Valley, mirrors the India outsourcing story. The last decade or so saw trees give way to residential towers and steel- 'n' -glass office campuses targeting largely the young and upwardly mobile IT professional, a community that may be close to 5 lakh in the city.
With the economic slowdown coupled with fears of job losses and pay cuts, the target market has developed a cold feet on house buying, sending the Bangalore realty market on a downward spiral.
Residential realty market trackers say Bangalore is truly a buyer's market today. Developers are bending backwards to sell their stock by offering price cuts and marketers are seen going overboard with freebies.
Realty giant DLF came out in the open with an over 30% drop in its upcoming project in Bangalore's Bannerghatta Road from Rs 2,750 per sq ft to Rs 1,800 per sq ft. In fact, DLF also modified the project from row houses to budget apartments. Residential segment major Sobha too is offering across-the-board price drop of 15-22 % in its mid-end range
According to a broker, "Builders with huge stock supply have seen price drops between 15% and 25%. In Bangalore suburbs such as Whitefield , Outer Ring Road, Hennur and Sarjapur Road, residential prices could be down up to 30% while in the CBD, the average drop would be around 15-20 %." Having said that, ready-to-move-in apartments may be better placed compared to those that will be ready in six months.
According to Cushman and Wakefield Research, there is an oversupply situation in the apartment segment in the eastern locations (especially Whitefield and Marathalli) and there are plenty of options for both leasing and sale market.
Hence the values are expected to witness further drop in the coming quarters. "North and north west Bangalore zones have witnessed insignificant activity in the last 6-9 months with very minimal sales and with very limited upcoming projects. Hence there is not much price variation expected in the coming quarters," it adds.
Bangalore is also witnessing a sudden surge of new project announcements in the sub-Rs 30 lakh range targeting the new class of buyers where there is a pent-up demand.
High-end developers such as Mantri, Sobha and Nitesh have already started the spadework on these plans while companies such as Golden Gate, Ozone and Purvankara (through its subsidiary Provident ) have launched projects in this category, largely targeting professionals in the income bracket of Rs 20,000-50 ,000 per month.
Says Mantri Developers chairman Sushil Mantri, “This is the target market that missed the realty boom phase in the early years of the decade. We see good demand from this segment. We have launched two projects in the sub-Rs 40 lakh range and we are also looking at entering the Rs 20-lakh bracket.
”New supply of apartment units are expected in the coming quarters from builders such as Brigade, Renaissance, Purvankara , Prestige, Mantri, Sterling, Sobha, Skyline and Adarsh across locations such as Malleshwaram, Rajajinagar, Yelahanka, Bannerghatta Road, Kanakapura Road, Banshankari and Outer Ring Road.
In the commercial space too, availability of office space in the sub- $1 rental regime in the suburbs is making corporates shift from high-priced central business districts. There is an increasing trend of relocation, consolidation , renegotiation of rentals and sub-leasing of idle space in some cases, a senior property consultant said.
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For the slump-hit IT/ITES sector, which dominates office space in Bangalore, rentals and wages constitute bulk of its expenses. While the HR issue is being addressed by layoffs and pay cuts, companies are now putting lease costs under the microscope.
According to Cushman & Wakefield India, "Commercial rentals are expected to correct in the range of 4 to 14% largely on account of current demand scenario, economic slowdown, excessive supply in peripheral locations and second generation buildings entering the supply in CBD/off CBD and suburban micro markets."
Real estate intelligence service of Jones Lang LaSalle Meghraj estimates that there will be a 4-17 % correction in the commercial rental values between the first quarter 2009 to the end of the year in Bangalore.
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