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BANGALORE REAL ESTATE An OVERVIEW

Bangalore, Indias SILICON VALLEY, has always been a dense middle class borough with a strong investment mindset. With the city comprising of a large middle class salaried segment, real estate investment has always been on top of their investment agenda. Most of the developers have based their inventory absorption projections for the coming quarters banking on this unique trait. In spite of dangerous inflationary trends the inherent nature of the Bangalore real estate buyer that of a highly educated, visibly aware and risk averse investor - has helped the industry maintain decent positive trends. In India it is always seen that the change in property prices during economic cycles has a more profound impact on the buyer than change in interest rates. PRESENT SCENARIO
The housing market in Bangalore is expected to stay positive, given that the key determinants driving real

estate absorption have shown a positive trend Lowering of Home Loan Interest Rates and a Continued Stable Job Environment. In spite of small bumps, the IT sector has not seen a decline in either their recruitment or remuneration. This is largely indicative of a healthy industry and job environment, resulting in positive investment trends in the city. As of Q1 2012, almost 88% of the property seekers are looking to buy a property within the next 4 months. The market has done well to bounce back from the dip in Q3 of 2011 when only about 46% of property seekers were looking to buy a property within the next 4 months.

Source: IndiaProperty.com

The southern region of the city has seen maximum project launches over the last 9 quarters with Bannerghatta Rd, Kanakapura and Sarjapur Rd being the main locations in focus. With majority of the projects

launched in 2008-09 period nearing completion, most of the developers have gone for new launches bringing into the market a good number of Under Construction projects.

Source: IndiaProperty.com

This is happening only because the housing demand is sustained by the salaried class which banks on Home Loans to fund their property purchase. And with the rates coming down, the inventory overhang is expected to narrow down very soon. Apart from the interest rates, another important factor that is expected to boost absorption rate is the steady decrease in supply - demand price gap. For eg., in Sarjapur Road, the difference between the price demanded by the buyer & the price at which projects were available in the market was about 21% in Q1 of 2011. This gap has now narrowed down to 13% in Q1, 2012 (Refer Table 1).
Avg. Price (Rs/Sq. feet) Sarjapur Road Kanakapura Road Whitefield Q1, 2011 Supply Demand 3701 3059 3177 2583 3116 2513
Table 1: Supply Demand Data Source: IndiaProperty.com

Q1, 2012 Supply Demand 3563 3153 3377 2886 3749 3260

With the buyer sentiment looking up, the above said 3 localities are where the action is going to be for the next couple of years.

Supply - Demand Price Difference


Q1 - 2011 Q1 - 2012 31% 27% 25%

29% 21% 13% 23% 17% 24% 15% 24% 23%

Sarjapur Road

Kanakapura Road

Whitefield

JP Nagar

Bannerghatta

Marthahalli

Source: IndiaProperty.com

In line with this, Kanakapura Road & Whitefield have seen a spike in the % of investors that are entering the market. The figure is almost 11% each in these localities compared to the average of 5.2% in Bangalore, as a whole.

Purchase Intention
Self Occupation Investment

8% 92%

7% 93%

7% 93%

11% 89%

5% 95%

11% 89%

Source: IndiaProperty.com

In Bangalore, there is a clear movement with the preference for 2 BHK units going up by up to 50% in Q1 of 2012 compared to Q1 of 2011 in localities like Kanakapura Road, Bannerghatta & Sarjapur Road. There has been a gradual shift in the preferences of property seekers from 3 BHK to 2 BHK units in these localities over the last 5 quarters.

BHK Preference trend (2 BHK)


Q1, 2011 77% 68% 56% 46% 47% 56% Q1, 2012 78% 74% 50% 33% 70% 68%

Source: IndiaProperty.com

OUR VIEW We would recommend new Home Buyers to look at the Ready to Occupy properties before going ahead and booking New or Pre-Launch offers. For an end user there could not be a better opportunity to invest in a new property especially with the availability of Ready to Occupy flats with comparable amenities at discounted rates as compared to new launches happening in the same locality. (Refer Charts 1 & 2 Below) What this means is that today a buyer can own a Ready to occupy flat starting from 47 L in Bannerghatta Road instead of 61 L for an Under Construction flat What we see post the revision in the Home Loan rates is a renewed hope among the developers that the Bangalore home buyer would return once again and help stabilize the real estate market.

Chart 1: Rate per sq.ft across locations in Bangalore SOURCE: IndiaProperty.com

Starting Price - Ready-to-Occupy vs Under Construction


8000000 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0

Bannerghat ta Rd Under Construction 6100000 Ready to Occupy 4700000

Sarjapur Rd 6200000 5500000

JP Nagar* 4100000 4800000

Kanakapur a Rd 4750000 4766667

Marthahalli 6100000 4933333

Whitefield 7575000 5600000

Chart 2: Property availability across locations SOURCE: IndiaProperty.com