Housing dreams take wing in Garden City
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The IT industry, a growing number of migrants and easy loans have together led to a property boom in Bangalore. K. Satyamurty and Govind D. Belgaumkar analyse the scene
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FAST FORWARD: The Bangalore skyline is a changing — Photo: Sampath Kumar G.P.
WILL THE real estate boom in Bangalore remain for long? While builders and thousands of citizens who have invested in real estate hope for a further rise in property prices, many in the city find that purchasing sites or houses is becoming increasingly unaffordable for them.
Property prices trebled during the last nine months in most areas where moneyed people live. More so in the south: Bannerghatta Road, Koramangala, Sarjapur Road, Hosur Road, Marthahalli, Airport Road and surrounding areas where purchase rate of dwelling units is close to Rs. 2,000 a sq. ft. now.
The outright purchase rates in ITPL and surrounding areas has gone up from Rs. 400 a sq. ft to Rs. 1,600 a sq. ft. in nine months, points out Sanjay Gandhi, Vice-President, Jain Housing and Construction Ltd., and Secretary, Karnataka Ownership Apartments Promoters' Association (KOAPA). Those who invested in the city about two years ago are getting rich dividend, he says.
Vital factors
What caused the boom? It is clear that both physical and psychological factors have played their part. Those who have been watching the scenario give three main reasons. The first is the sudden and steep rise in the incomes of the middle class thanks to employment they got in IT and ITES (BPOs or call centres). Their dream houses started becoming a reality. Many owning dwelling units found it lucrative to invest in real estate. Besides, many of the IT and BPO employees are migrants who need houses immediately.
The second factor is speculative purchases being made by people who think the prices would shoot up greatly to their advantage. Thirdly, it is a lot easier now to get home loans. Even less moneyed can invest now. Young working couples, most of them having double incomes, are going for two and three bedroom flats, planning for the future.
Analysts say thousands of real estate businessmen who had tasted big money in the previous boom in the 90s were waiting for an opportunity to cash in on. As industries started to reopen after the recession, people's hearts filled with hope and money started changing hands. Markets strengthened and people started investing in property. Businessmen and builders fuelled it further.
Volume
K. Subramani, Chairman of the Karnataka Centre of the Builders Association of India, says about 1.25 lakh residential buildings, including 50,000 apartments, are under construction in and around the city. About 30 lakh sq. ft. of commercial structures, meant to house IT and BPO offices, are under construction and will be ready for occupation in two years.
Getting the exact number of buildings under construction was not possible as builders were not willing to share the information, Mr. Subramani says. His Association has about 350 members but there are more than 1,200 players (builders) in the unorganised sector.
Mr. Subramani says during the last 18 months, construction activity has trebled in volume. But the statistics provided by the Department of Stamps and Registration suggest that the number of transactions in property registered in Bangalore Urban district has nearly doubled in the last three years. The revenue earned by the Government from these transactions has nearly trebled in this period.
In 2001-02, the department registered 1.48 lakh documents and earned Rs. 505.61 crores (Rs. 426.47 crores as stamp duty and Rs. 79 crores as registration fee). In 2004-05, it registered 3.12 lakh documents earning Rs. 1329.48 crores (Rs. 1,182.82 crores as stamp duty and Rs. 146.65 crores as registration fee).
The sources in KOAPA point out that the number of properties that officially change hands are usually 10 times the stamp duty collected. Thus, it may be assumed that property worth Rs. 11,828 crores changed hands in 2004-05. The figure for 2001-02 was about Rs. 4,264 crores.
In the entire State, property worth Rs. 16,600 crores were registered in 2004-05 as against property worth Rs. 7,631 crores registered in 2001-02. The figures show that value of the property changing hands has doubled in the State in three years, whereas it has trebled in the areas around Bangalore. The figures do not include the investments made in properties yet to be registered and those changing hands without being registered.
Buyers choosy
Land developers point out that there is increasing demand for apartment complexes which are designed to be self-contained, complete with club house, swimming pool, jogging/walking paths, party hall for functions and grocery store. There are also mini townships which provide for a school as well, but these are still down south in the city. Since IT and ITES establishments are concentrated in these areas, their high-paid employees prefer to stay in the same area instead of wading through the city's traffic jams.
"They are willing to pay any price for a piece of land or a house here," says B.M. Jayaram, a real estate agent in Koramangala.
What surprises Mr. Gandhi is the fact that the boom is seen in the northern areas also where not many rich people live.
Major attraction
Market watchers say property developers are showing interest in the north as the manufacturing industry is all set to locate itself closer to the international airport coming up at Devanahalli.
Two apparel parks and an electronics hardware park coming up on the way to the new airport are portents of what is to come, developers feel. All those people employed in those industries will need living space, closer to their places of work.
Mr. Gandhi and Srinivasan Desikachari, Executive Secretary of KOAPA, say sooner the prices stabilise the better for all. Mr. Gandhi says there is an indicator to what might happen in the future. In Whitefield, where nearly 10 lakh sq. ft. of commercial buildings are ready for occupation, 15 to 30 per cent of the space is still vacant. Another 25 lakh sq. ft. to 30 lakh sq. ft. of commercial buildings are under construction there.
"There seems to be some slowdown," Mr. Gandhi says. "Saturation has been reached in Whitefield," adds Mr. Subramani.
Market observers say slow down is first reflected in commercial properties. Residential properties follow.
Mr. Subramani says the boom will continue for about two to three years. "The outer limit is five years," he says ..
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Rates up 300 per cent
THE REAL estate boom in Bangalore has led to the following:
300 per cent rise in property prices in posh areas in nine months.
300 per cent rise in volume of construction activity in 18 months.
Prices of flats now hover around Rs. 2,000 a sq. ft.
Builders who invested two years ago are getting rich dividend.
50,000 to 1.25 lakh dwelling units under construction.
30 lakh sq. ft. of commercial spaces under construction in IT corridor.
350 major builders and over 1200 "other players" constructing apartments.
Saturation being reached in Whitefield area.
Boom may last for three years.
In 2004-05, 3.12 lakh documents were registered, yielding a revenue of Rs. 1,329 crores in Bangalore Urban district.
The revenue collection in the three previous years: Rs. 856 crores (2003-04), Rs. 711 crores (2002-03) and Rs. 505 crores (2001-02).
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