Despite a quarterly increase in the number of project launches, Bangalore reported a dip in sale of ready housing units. The trend is indicative of an overall tepid market sentiment in the city.

If new project launches are a measure of real estate market performance, Bangalore, the Electronic City of India, comes second only to Mumbai. The city reported about 70 new project launches between July and September 2019, up by a significant margin from April and June quarter when 50 new projects were added to the city.

North and East Bangalore remained the front-runners with around 80 percent of the new launches getting registered in these areas. Of all, some were re-launched projects after the registration with the Real Estate (Regulation and Development) Act (RERA).

A shift in the strategy from the developer’s end was also seen. Most of the category ‘A’ developers launched plotted development projects to increase the profit margins. To match the preferred budget of the homebuyers, developers reduced the average unit size to about 1,300 sq ft from 1,417 sq ft in the last five years. Despite this, the city was unable to achieve a higher sale conversion. (Source Bangalore insite report Resultantly, the city holds an unsold inventory of about 70,000 units, which still awaits buyers.

Are new launches in demand? 

When asked about the market sentiment in general and buyer’s interest towards new launches, Kiran John, Joint Managing Director, Terapact, a strategic sales and marketing firm, dealing in real estate, says “Buyer interest for new launches has been declining as customers are looking for certainty. A few Category-A builders are still launching projects and getting reasonable traction. A slew of reforms, along with the implementation of RERA, have dissuaded non-serious players. If the vision of the project is strong, and the marketing engine is well-thought-out, sales are happening. Since new launches have the luxury of a well-defined strategy, factors like location, type, pricing, and product become critical.”

North and East Bangalore remained the frontrunners

Reasons such as the inauspicious ‘Aadi’ period, delayed completion of the Namma Metro project, a ban on subvention scheme, water crisis and low office space absorption marred the real estate market sentiment in Bangalore. Despite this, localities of North and East Bangalore such as Whitefield, Sarjapur Road, Hennur and Horamavu registered 80 percent of the total new launches priced between Rs 60 lakh to Rs 1.20 crore.

The popular housing hubs of East Bangalore such as Panathur, Cooke Town and Ramamurthy Nagar clocked a capital appreciation of four percent, QoQ.

Sharing his insight about the prominence of North and East Bangalore with regard to new project launches, Prashin Jhobalia, Vice President-Marketing Strategy, House of Hiranandani, says, “In the recent times, North Bangalore has definitely taken dominance in the residential space, especially locations such as Hebbal and Devanahalli, which are fast becoming the leading investment hotspots and featuring on every investor’s radar. Bangalore has always been the most sought-after market for real estate developers due to its diverse population, high demand for housing and the ever-increasing job opportunities. Renowned tech parks, IT companies, manufacturing industries, prestigious schools, state-of-the-art hospitals and plenty of opportunities for entertainment and recreation adds to the demand of both residential and commercial establishments in North Bangalore. Another catalyst for renewed growth in this locality is the Kempegowda International Airport in Devanahalli. North Bangalore is also connected to several arterial roads such as the Outer Ring Road, Bellary Road and Tumkur Road. Improvement in connectivity with improved roads and metro will further scale development in this region. Along with increased real estate development in Hebbal and Devanahalli, both the locations have witnessed more than 10 percent rise in property rates in the past five years, and the value is expected to rise further.”

Future market sentiment

The fear of international factors affecting the local economy and a looming slowdown has affected the market sentiment severely. The potential homebuyers are treading cautiously. However, the faster resolution of cases under RERA, finance minister’s announcement of a special fund to revive the sector, coupled with the government’s continued focus on affordable housing might keep the demand sentiment afloat.

Policy measures such as RERA backed by infusion of fresh capital and continued focus on affordable segment has sent positive signals to the real estate market of India in general and Bangalore in particular. The facilitative approach of the government and revival of the economy will certainly help boost the real estate market in the near future.