Tuesday, June 12, 2012

Bangalore residential mart resilient

Bangalore, home to about 60% of US-based MNCs, has been driving residential property demand in all price ranges. As of March this year, nearly 119,000 residential units are under various stages of construction. About 35% of the upcoming supply will be ready for possession by the end of the year with the spill over effects of some of the projects launched as early as in 2007 and 2008.

According to a survey by Knight Frank India, most of the residential projects are focused towards northern and southern part of the city. On the northern front, the Hebbal-Devanahalli stretch is considered to be one of the fastest emerging commercial and residential hubs. In the eastern part, Whitefield is one of the most preferred residential locations, primarily for IT employees. The western part of the city has not been able to compete with the newer locations.

Demand for residential units has been more evident in the mid-end category, where most of the affordable housing projects are located. During the FY2012 the city has witnessed the launch of approximately 9700 units which are scheduled to be completed in the next 2-3 years.

On the pricing front, nearly 39% of the total number of residential units launched in FY 2012 fall under the Rs 25 lakh - Rs 50 lakh ticket size category, implying that the mid-end segment is the prime demand drivers of residential market. Residential units in the price range of Rs 25 lakh - Rs 75 lakh were altogether responsible for around 70% of the total number of units launched during FY2012.

1123_Greater Bangalore

Although the threat of global economic turmoil looms large over residential property segment, Bangalore residential market has been relatively resilient and has a somewhat healthy sales level. South Bangalore has the highest number of residential units up for sale, has a vacancy level of approximately 32% as of March 2012, while East and West Bangalore has vacancy levels of 34% and 35% respectively. The northern part has a lower vacancy level of 29%, which reflects the saleability of the residential projects in the region.

It has been observed that nearly 34% of the absorption in FY 2012 has been in the ticket size range of Rs 25 lakh - Rs 50 lakh, followed by Rs 50 lakh - Rs 75 lakh at 31%.

This illustrates that mid-end segment has been responsible for the absorption of around 65% of the residential units booked or sold, while only 5% of the absorption has taken place in the Rs 2 crore - Rs 4 crore ticket size.

Over a period of time property developers have realised that demand exists for those properties which offer quality, value for money and transparency in deals. A majority of the upcoming supply will be concentrated in the suburban and peripheral locations towards north and south Bangalore, with gated communities offering various amenities. On the price front, capital values of properties are not expected to increase considerably due to slowing down of the economy, though marginal appreciation is projected in a few micro markets like Hebbal and Sarjapur road.

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