State notifies RERA rules and launches website
The quarter started on a positive note with Karnataka outlining its RERA regulations. Save the two exemptions pertaining to issuance of Sale Deed and 60 percent completion of a realty project, the rules were cherished by stakeholders. Soon after, the State launched its RERA website.
RERA tightens the screws on unregistered projects
The newly appointed regulatory body slapped notices to 130 developers across the State, along with Bangalore Development Authority and the Karnataka Housing Board, to ensure timely registration of projects. Approximately 100 of the 130 projects were from Bangalore. On the last date of registration, i.e., 31st July, the authority had received applications for 990 projects and 354 realtors.
City authority releases contentious Draft Zoning Rules
The development authority released the new draft zoning rules for the city and proposed commercial establishments in residential areas. The regulations were poorly received as residents opposed commercialisation of housing pockets.
Namma Metro receives international funding
The fast-progressing Namma Metro received a shot in the arm with a fund allocation of Rs 3,650 crore from the European Investment Bank (EIB). The funds are planned to be used towards the construction of the 23km long Gottigere-Nagawara stretch under Phase II.
Bangalore at a Glance
The quarter ending September 2017 showcased a silver lining in Bangalore’s residential landscape after two quarters of lull and uncertainty. With the State implementing RERA and developers getting accustomed to the new registration process, the market sentiment improved manifold, despite news highlighting dilution of RERA norms and loopholes in the system. Sales volume surged by over 15 percent in Jul-Sep 2017 against the same quarter last year. The festive season is likely to witness increased uptake of residential properties.
The impasse in new project launches, too, seemed to end, albeit two to three residential project takeoffs in the current quarter. Category A developers claimed to return with fresh projects in the ensuing quarters. The city also witnessed an outpour of resale inventory as owners attempted to liquidate their real estate investments.
On the RERA front, over 14,000 projects from Bangalore applied for registration by mid-September. Pre-emptive efforts from developers have been largely countered by the various system ambiguities, limiting the number of registered projects to 150. Despite the poor pace of registration, developers are positive of a faster response rate on the back of acknowledgement received from the authority.
The amalgamated impact of demonetisation, RERA and Goods and Services Tax (GST) extended the average buying cycle by approximately two months, bringing it to six to seven months this year. However, the fence-sitters are now expected to return and expedite the resurgence process. The upcoming festive season seems to hold the baton for Bangalore’s realty growth as developers seem disposed to offer lucrative deals.
Robust office space absorption also hints at healthy demand for the housing sector in the subsequent quarters.
SOUTH AND EAST BANGALORE
Average weighted ‘asks’ in the IT-dominated East and South regions witnessed marginal positive movement in Jul-Sep 2017 owing to enhanced enquiries and improved owner confidence. Implementation of RERA marked the homecoming of buyers fence-sitting for the last six to seven months. Construction of several delayed residential projects commenced post registration under RERA.
- Unlike the previous quarters, rising property enquiries in East and South Bangalore translated into deal closures as buyers gathered confidence in the sector. Proximity to IT workspaces remained a prime factor attracting housing demand to the regions. More than 50 percent of the tracked localities witnessed price appreciation in Jul-Sep 2017 vis-a-vis Apr-Jun 2017.
- Under-construction properties remained unpopular across Bangalore, whereas, recently delivered projects gained prominence amongst the buyer base. Absence of tax incidence under the new GST regime played a vital role in shifting buyer preference towards ready homes. Projects with an acknowledgment receipt from the regulatory authority, too, gained heathy traction from the buyers.
- From the southern region, Arakere and Doddathoguru emerged as the top capital grossers in the quarter. The localities offer price-competitive housing units as against their popular neighbouring residential locales such as Hulimavu and Electronic City, respectively.
- Demand for residential apartments outweighed supply in Panathur, translating into a five percent surge in average ‘ask’ rates.
- Ambitious seller community pushed apartment prices up by an average of five percent in the prime areas of Cooke Town and Indira Nagar on the back of news pertaining to the return of homebuyers in the premium segment.
- IT hubs – Electronic City in the South and Whitefield in the East, too, witnessed positive price movement in both the capital and rental markets this quarter. Piling inventory failed to discourage owners from hiking rates to reap maximum benefit of the slight revival in the market. Whitefield benefitted from the launch of a premium project from a renowned player - Godrej Properties - in the quarter.
- The rental landscape witnessed a mere three percent price movement between Jul-Sep 2016 and Jul-Sep 2017. The price variations in this quarter were largely triggered by the rain-fed floods in August. Higher floors commanded a premium as tenants vacated ground floors.
- Kadugodi continued to lead the top grossers in the rental market with an 11 percent price rise, YoY. Lower rentals than neighbouring Whitefield magnetised the tenant community here.
NORTH, WEST AND CENTRAL BANGALORE
The expansion of the commercial market and the Namma Metro did little to propel the property prices in the North, West and Central housing pockets of Bangalore. Cumulatively, the regions maintained a status quo in terms of demand and average property prices with the last quarter. Developers and buyers struggled to sail through the ambiguities of RERA and GST.
- Jul-Sep 2017 was marked by modest sales in West, North and Central Bangalore. After posting a marginal price hike in the previous quarter, West and North zones witnessed stable ‘ask’ rates in Jul-Sep 2017. Enquiries remained buoyant, and are expected to convert into sales in the upcoming festive season.
- Central Bangalore, on the other hand, succumbed to the market uncertainties leading a few areas to register a declining capital graph, QoQ.
- Amongst the top grossers, Hegde Nagar, Hebbal and Jakkur from the North reported a price appreciation to the tune of two to four percent, each, QoQ. The hike in average weighted prices is largely owing to the upward price correction of properties, which were earlier discounted in anticipation of RERA. These areas also boast of a robust ready-to-move inventory, thus, garnering healthy traction from homebuyers.
- Budigere, a flourishing suburb, benefitted from the proposed infrastructure overhaul - widening of Hoskote-Budigere-Kempegowda International Airport Road. The locality saw increased enquiries and marginal appreciation in average apartment rates.
- Vijaynagar in the West and Yeshwanthpur in the North are believed to have reaped the returns of the newfound metro connectivity in the previous year. The localities clocked a quarterly price rise to the tune of one to four percent.
- The marginal downward price correction in popular localities such as Hennur Road, Thanisandra and Ulsoor is a function of competitive pricing strategy by developers.
- Mysore Road in the West, too, witnessed a similar trend, resulting in slight capital depreciation in Jul-Sep 2017. Connectivity by Namma Metro failed to lure end-users to this outskirt location.
- The rental market, although submissive, narrated a gayer story in comparison to the capital market. The average weighted prices rose by nearly two percent in the last one year.
- Vidyaranyapura, equally priced but better developed than nearby Yelahanka, emerged as the top grosser with nine percent rise in rental values, YoY.
The recently implemented policy reforms such as RERA and GST limited fresh residential supply in Bangalore. This was countered by an equally active resale owner community, which entered the market three quarters post demonetisation in a bid to liquidate their real estate investments. The city witnessed an enhanced share of under-construction residential apartments on sale. While preference for properties priced within Rs 40 lakh c ontinued to be high, supply diminished owing to stringent laws under RERA.
- The inclusion of projects larger than 8 housing units or 500 sq m under RERA dimmed the sheen of residential apartments and shifted buyers’ focus towards other property types, especially builder floors.
- While demand for apartments dipped by six percent, supply reported a mammoth hike of approximately 20 percent. This is largely attributed to the resurgence of long-time investors who wanted to exit their investments.
- Absence of requisite approvals to implement affordable housing projects in accordance with RERA guidelines led to a decline in the number of advertised properties. This translated into a widened gap between demand and supply of properties priced under Rs 40 lakh. The category witnessed a shortfall of 25 percent in Jul-Sep 2017, as opposed to 14 percent in Apr-Jun 2017.
- Supply of properties priced within Rs 60 lakh and Rs 1 crore surged by five percent in the current quarter as majority of the middle and upper-middle segment investors chose to liquidate their real estate assets in the wake of ambiguous policy reforms and uncertain growth scenario.