Banglore Real Estate Prices:

Bangalore- the capital of Karnataka state- is known as the ‘Garden City’ of India- it has the reputation of being a genial, restful city with soft breezes, cool summers and tree-lined boulevards. It is deemed the preferred destination of people from all over India and the world. However, over the past 25 years, several corporations have shifted to Bangalore to take advantage of its temperate and pollution-free climate, economical housing, and Information Technology (IT)-educated workforce. The city has increased by 400 percent in size while real estate prices have jumped six times. The city which was previously known as the ‘Pensioner’s Paradise’ is today called the ‘Second Silicon Valley’ in the world, ‘India’s fifth metropolis’ and ‘Asia’s fastest growing city’. Leading multinationals are setting their base in Bangalore leading to a steady increase in the price of real estate and rentals.

Bangalore is the acknowledged first choice for all IT/ITES companies and the city’s economics have received a boost with the spurt in outsourcing of services. The bursting job market, high salaries, and easily available home loans have abetted the meteorical rise in real estate prices. The sudden demand for homes has led to a clamber for construction especially in the South, East and central areas of Bangalore. The rates in certain locations such as Whitefield, Sarjapur road, Outer Ring Road, Banerghatta road and Hosur road have spiralled at an alarming rate. Whitefield has witnessed a 100 percent increase in land prices in just a year and with the construction boom projected to continue for the next two years atleast, there could be a spurt in construction in suburban Bangalore. The city will see some premium, fast-paced development on the outskirts and this could smooth out the demand and supply gap so that the rates across the city are stabilised.

The financial closure for the Rs1,200-crore International Airport coming up in the Yelahanka-Devanahalli stretch has led to a surge in land rates in the area. The area, which comprise of farms and vineyards in the nineties is now selling at Rs400 a square foot. The prices are expected to further increase once the airport becomes operational. Banglore Real Estate developers are betting on the six-lane highway leading to the airport and the Railways are planning to set up a high-speed link from the Cantonment station. Companies, equity funds and developers are lining up in the Hebbal-Devanahalli stretch and many corporates have indicated that they will put up Special Economic Zones.

Office space in the city, especially in the Central Business Districts, is costly and difficult to get. Customers seem to grab retail space almost as soon as it hits the market. Residential accommodation is getting more and more expensive for the middle-class citizens, even

though housing finance options are easily available and more inventory is being created. Developers are increasingly investing in super luxury apartment and villas costing more than Rs50 lakh, to cater to the growing community of high networth individuals. Residential prices have increased by 50 percent in prime areas since the last one-year. As per a leading Cushman & Wakefield report, an estimated 27,000 dwelling units are slated to enter the market during 2005-2006 in all categories.

The boom in the Banglore Real Estate seems to be end-user driven because of tax concessions available to the first-time home buyer, low interest rates, higher disposable incomes and the disintegration of joint families. The built-up area rate on Airport road for residential projects is between Rs1500 and Rs2250 per square foot; in Banashankari and Fraser Town, it is between Rs1,000 and Rs1,500 per square foot; in Cox Town and Malleshwaram, it is between Rs1,250 and Rs1,750 a square foot; in Jayamahal and Koramangala, it is between Rs1,250 and Rs2,000 a square foot; in Sadashivnagar it is between Rs2,000 and Rs3,000 a square foot; and in Whitefield and Yelahanka, it is betweenRs1,000 and Rs1,250 a square foot. The rate for office space in Airport Road is between Rs1,800 and Rs2,200 a square foot; in Cunningham road, it is between Rs2,000 and Rs3,000 a square foot; for office space in Brigade Road, the rate is between Rs3,000 and Rs3,500 a square foot; in Richmond Road, office space comes at between Rs2,000 and Rs2,750 a square foot; while in Vittal Mallya Road, it is priced at Rs2,500 to Rs4,000 a square foot.

The Banglore Real Estate Prices sector is burdened with multiple taxes such as work contract tax, service tax, high stamp duties and an increase in the cost of raw materials. While the pot-holed inaccessible roads and the pitiable infrastructure could translate into a decline in land rates, the Government of India’s liberalisation measures will be a boon for the realty sector. Some price correction is projected to happen with rising supply. The Karnataka state government has cleared the Hi-Tech City project proposed by the Bangalore Development Authority but the latter is hit by non-availability of land as private land developers have acquired a portion of land allocated for the project five years ago. The project is part of the IT Corridor that is aimed at decongesting the city and creating an exclusive township for the IT sector between Sarjapur Road and Hosur Road.

The boom has gained the interest of foreign companies. Royal Indian Raj International Corporation is investing $2.9 billion in a single real-estate project called ‘Royal garden City’. Morgan Stanley Real Estate has invested about $68 million in Mantri Developers Pvt Ltd, a private real estate developer based in Bangalore. Top developers such as Prestige, Sobha and Hiranandani are scouting for properties in Bangalore while Emaar of Dubai is trying to acquire land to develop its world-class townships. The who’s who of global real estate is scrambling to buy every centimetre of Bangalore land, which has acquired the status of a potential goldmine.

With the demand for retail, commercial, office and residential real estate in Bangalore touching dizzying heights, Bangalore’s property market is projected to boom in 2006 even as 2005 was an excellent year. Ernst and Young have predicted that foreign direct investment in the property market in India will touch $1.5 million in 2006, and Bangalore will garner bulk of the investment.