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Bangalore: Should you buy a home in the next six months?

JLL-RealtyMyths (1)

The following is the report by Juggy Marwaha, MD– South, JLL India.

While overall absorption rate in 1Q 2015 stands lower than the rate in 1Q 2014, capital values have seen marginal appreciation across sub-markets.

During the first quarter of 2015, two significant market movements have been observed in Bangalore’s real estate market – an increase in new launches as well as a rise in the net absorption of units. While 13,400 units were newly launched in 1Q 2015, the corresponding figure stood at 11,170 units in 1Q 2014. The city also saw a net absorption rate of 8,310 units in the first quarter of 2015 compared to 7,210 units observed in the corresponding quarter of 2014, which is an increase of 15 per cent in total sales y-o-y. For the same time period though, the overall absorption rate stood lower at 10 per cent in the 1Q 2015 as compared to 11 per cent in 1Q 2014.

Capital values saw marginal appreciation across areas, with the highest being seen in areas like Hosur Road (4.3 per cent), Whitefield (3.7 per cent) and Kanakapura Road (3.4 per cent). As of the current time, the maximum residential project development taking place in the city is in areas like Whitefield (West) and JP Nagar, Kanakpura Road, Hosur Road, Sarjapur Road and Bannerghatta Road in the south. While Whitefield is getting good traction thanks to a lot of investor and end-user activity, all the other above-mentioned areas are largely popular only with home buyers.

Demand in areas like JP Nagar and Kanakapura Road is primarily driven by the upcoming metro line. Unlike Whitefield, where prices have touched Rs 8,100/sq ft, Sarjapur and Hosur Road remain good locations for budget housing with prices remaining below Rs 5,000/sq ft.

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Areas in North Bangalore are close to the airport, and demand is also catching up due to the development of IT parks and special economic zones (SEZs) such as Embassy’s Manyata Tech Park and Karle’s IT Park. North Bangalore is seeing many new residential project launches. Hebbal is seeing a lot of traction due to its IT parks, and Nagavara, Thanisandra, Bellary Road and Jakkur are all benefiting from their proximity to the airport.

However, the rate of price recovery in these areas is not as good as that seen in the eastern or southern areas of Bangalore, primarily because residential prices there are not as attractively low as those in the eastern or southern areas. To illustrate, prices in the Bellary Road area currently stand at Rs 5,775/sq ft.

Yeshwantpur (a key junction of the city) and Rajajinagar – both located in the north-west part of Bangalore – are seeing launches of primarily high-end and luxury projects. The average ticket size of transactions here is between Rs 70 lakh and Rs 1.5 crore, with prices ranging from Rs 5,500-7,500/sq ft.

Sadashivnagar, another posh area in the centre of the city well-known for its super high-end projects, has seen sales with ticket sizes ranging from Rs 9-10 crore for units admeasuring about 3,000 sq ft, translating into a market rate of Rs 30,000/sq ft. Vittal Mallya Road and St. Mark’s Road are also seeing very high-end residential projects, but much fewer launches as they are established and largely saturated locations.

Investment Advice

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Those who are looking to buy a home in Bangalore in the next six months can definitely go ahead. The city’s residential market is a very stable one and can provide good value on short-to-medium term investments, depending on the location and type of residential product. As the market is still not very seller-driven, there is a window of opportunity for end-users to negotiate in upcoming locations.

For end-users looking for budget projects, Mysore Road can be a good option. This area, which has primarily seen affordable housing projects launches so far, has a price range of Rs 3,050 to Rs 4,500/sq.ft.

For investors interested in buying villas, Whitefield and other parts of South Bangalore are a good option. Investors looking to buy plots can look at locations along Bellary Road all the way up to Yellahanka Dhoddaballapur in North Bangalore.

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