Property in Bangalore Still Feeling Demonetization’s Sting

The effect of demonetization upon property in Bangalore is still being felt nearly two and a half months after note ban was implemented. Despite the fact that largely end users drive real estate property in Bangalore, demonetization has lead to a slump in property in the city.  Demonetization has led to a drop in sales volume in both the secondary and primary markets, experts believe that it may take as long as three to four quarters for real estate activity in Bangalore to rise back up to pre demonetization levels. About to be announced new projects in Bangalore have also been put on the backburner.

Disappointing Final Quarter

While in real estate the final calendar year quarter is usually when most of the buying and selling of property in Bangalore occurs, this year’s final quarter has been a gross disappointment. The reason for the lukewarm final quarter is the demonetization of high denomination notes in early November last year. In the last months of the calendar year property transactions usually rise by five to six percent, however this year the number of properties bought and sold remained subdued.  

The Cause and Effect

The primary reason for the less than celebratory real estate sales during the festive season in Bangalore is due to the actions by the center to demonetize five hundred and one thousand rupee notes on November 8^th of last year. The Akrama Sakrama scheme and the drive again illegal constructions in Bangalore have also played their role and are a cause of fewer real estate deals in the city this quarter. As a result of the above-mentioned factors, Luxury property in Bangalore were shelved and many investors withdrew from investing in projects in the city.  

About the Primary Market

In Bangalore, mid segment houses are priced up to sixty lakhs and such flats for sale in Bangalore usually account for nearly fifty percent of the number of units sold in the primary market. This year however demand for such homes did not rise as expected as many buyers preferred a wait and watch approach before choosing to venture into real estate in the city.

Real estate insiders also believe that there is a trust deficit between builders in Bangalore and buyers due to the note ban, which has led to fewer transactions this year. Even the lower home loan interest rates announced on January 1^st did little to infuse the real estate market in Bangalore with a positive sentiment.   

Fewer Takers For Seconds

Due to the note ban, fewer buyers are willing to buy in the secondary market, as most consumers prefer to adopt a wait and watch approach. The buyers psyche leads him to believe that there will be a price correction while at the same time that sellers are unwilling to sell properties at low price, which may hurt them financially. The confusion over the Akrama Sakrama scheme has also led to fewer buyers buying real estate in Bangalore at the end of last quarter and in January of this year.

The Ground Reality of Bangalore Realty

The Availability of New projects in Bangalore has fallen drastically since October of last year as builders and developers in Bangalore have shifted their focus toward completing ready to move in projects. The supply of new projects in Bangalore fell by nearly four percent in the final calendar year quarter of last year. Furthermore a trust deficit between the government and builders in Bangalore has led to fewer new developments in Bangalore. Many builders in Bangalore today are considering raising funds for development via joint ventures rather than through high interest rate bank loans.

Conclusion

The market is expected take up to year to bounce back but will become more infused with vigor due to the implementation of RERA as well as the GST both of which will add greater transparency to buying and selling real estate in Bangalore.

Excellent Localities at Which to Own a Luxury Property in Bangalore

Luxury Property in Bangalore is gradually becoming more skewed towards developing more luxury units than was the case a few years ago. While a few years ago there was a stronger focus among Top builders in Bangalore to create budget homes for mid to senior level IT workers, today nearly thirty percent of upcoming projects in Bangalore are counted among the luxury segment. The market for luxury homes in Bangalore is driven by demand from expatriates, NRI’s, IT millionaires, senior executives working in IT, and NRI’s. Many high net worth individuals prefer living in Bangalore as opposed to any other city.

The Upmarket Locales of Bangalore

While Bangalore was well known as a retirement town and has many well-developed neighborhoods which served this purpose, today not only is the number of luxury projects in Bangalore increasing but so are the localities which are considered to fall in the luxury segment. Regions of the city such as Cunningham Road, Palace Road, Richmond Road, Fraser Town, Indira Nagar, and Sankey Road have always been considered luxury hotspots in the city where residents usually lived in large bungalows. Today however many homes in such localities tend to be large apartments occupied by NRI’s. Furthermore, there is also a larger presence of premium gated communities in regions of Bangalore such as Bannerghatta Road, Whitefield, Koramangala, JP Nagar, and Sarjapur Road.  Notably, the government has a keen focus to create better infrastructure in regions such as Hebbal, Kanakpura Road, Hosur Road, Jinagar, and Yeshwantpur.

Prices for Luxury Apartments in Bangalore

Luxury apartments in Bangalore can cost up to 6 crores in many regions of the city and often start from a price as low as 75 lakhs. Most flats in Bangalore at such price points are spacious 3 bedroom flats. Notably, unlike in virtually any other real estate market, in Bangalore one can buy a 4 BHK villa for 80 lakhs in the locality of Electronic City. If you want to buy a house in Bangalore in an upmarket locality it may cost you nearly 40,000 rupees per square foot in regions such as Richmond Road. Similar 3 BHK apartments in Bangalore located in Sankey Road are priced for sale at a rate of 30,000 rupees per square foot. Buyers with a more modest appetite have the option to own apartments in Bangalore in upcoming regions such as Hebbel where the price per square foot is between 4,000 to 7,000 rupees per square foot. Other regions of the city such as Koramangala, Indiranagar, and Cunningham Road carry valuations of 10,000 to 12,000 rupees per square foot. Hence a buyer who wishes to own luxury apartments in Bangalore may be able to do so for approximately one crore as there are diverse localities with differing price rates to suit many pockets.

Conclusion

Demand from NRI’s, Expats, and similarly high-flying segments is leading to a new dimension in Bangalore’s real estate market. Many such individuals are used to living in larger homes which also have every amenity imaginable. As such there are today a larger number of luxury apartments in Bangalore under development than there were at any other time in the past.

Excellent News This Quarter for Commercial Property in Bangalore

There was a slightly greater increase in demand for commercial New projects in Bangalore this quarter over the same quarter last year. This occurred in spite of the fact there was not an increase in demand for property from large multinationals in Bangalore. Much of the increase in demand for commercial property in Bangalore took place in Whitefield, which is the IT hub of Bangalore. The absorption for real estate increased to 2.7 million square feet from the 2.3 million square recorded in the same quarter last year.  During the first quarter of last year, the gross absorption of commercial space stood also stood at 2.3 million square feet. The properties under development which will be delivered within the next 4 to 6 quarters and net absorption of property together make up gross absorption. The moderate increase in the demand for commercial property may also lead to a moderate increase in the demand for commercial projects in Bangalore, particularly in regions close to Whitefield. 

Whitefield the IT Hub in Bangalore

The region of Whitefield witnessed the greatest increase in the demand for commercial office space this previous quarter. Whitefield had more vacancies for office space when compared to the Outer Ring Road. This is not necessarily good news for Whitefield as the reason for more demand for commercial space in Whitefield had to do more with available space at the Outer Ring Road which has a vacancy of only 2 percent due to its far smoother connectivity with regions which have more real estate in Bangalore.  

Companies Which Acquired the Most Commercial Space

According to experts, commercial property in Bangalore continues to remain constraint however there is a large supply of space in regions such as Whitefield and Electronic City. TCS acquired the largest amount of commercial space during the previous quarter in Whitefield, an area measuring .55 million square feet. The second largest acquirer of space was Broad Ridge Financial which acquired close to .15 million square feet of commercial space. Home improvement company Lowe’s acquired .12 million square feet of commercial space in Embassy Tech Park. An increase in the demand for commercial space is usually a good sign for the creation of new affordable and luxury flats in Bangalore.

What to Expect in the Future

Experts believe that though the news was positive was commercial property in Bangalore it is unlikely to match the growth in the previous two years. In 2014 and 2015 the demand for commercial property in Bangalore stood at 11.3 and 12.2 million square feet largely due to the fact that companies such as Flipkart, Ola, and Amazon made huge commitments to their businesses.

Unlike the glamor of the previous quarter which saw the likes of Apple and Diageo acquire commercial property in Bangalore, this year the only glamorous company to acquire commercial space has been Lowe’s. The Outer Ring Road continues to be the prime locality for commercial real estate in Bangalore due to its close proximity to apartments in Bangalore from where employees can commute smoothly to and from their office. Overall there has been a drop of .2 million square feet in commercial space acquired this year over the same time the previous year.

Chinese Speech Recognition Edge Impacts Future of Apartments in Bangalore

Emerging speech recognition technologies may be pertinent to those who own apartments in Bangalore and work in the cities thriving IT sector. Swiftly advancing technologies capable of tasks which ten years ago were impossible to be automated are emerging from companies which are capitalizing on colossal data that has been gathered for over a decade. A new technology from the Chinese search engine giant Baidu will now make it possible for people to text message with greater speed and accuracy than ever before using only speech. Speech recognition software was available nearly twenty years ago yet failed to attract a large number of users as it was not very reliable at that time. Today technologies are developing so rapidly that Baidu in collaboration with two American universities has used its massive search engine database to create language recognition software that is more accurate and faster than some of the fastest humans who type.

Clearly, technology is rapidly evolving and as more people time online punching in queries on search engines, newer ways to map human thought shall emerge. Features such as Google Instant search would likely never have emerged before they did nearly six years had Google not already had an idea of the kinds of keywords people use to search. Now the Chinese, which had banned Google more than a decade ago, have a huge corpus of data also gleaned from the thought patterns of living humans which allow them to digitalize the spoken word into a written format faster than was possible earlier. To be fair, Baidu has an advantage recognizing words as spoken and written Chinese are virtually identical. Yet the thoughts behind the written and spoken and words are similar across languages and hence the fact that a newer speech recognition language emerges by the efforts of the Chinese search engine giant is unsurprising. CEO’s who live in luxury apartments in Bangalore should take note of a large number of newer formidable technologies emerging from China while IT workers in Bangalore continue to carry out relatively routine and mundane tasks. Bangalore may lose its edge as a center of IT to China if efforts are not made to develop innovative technologies which can rival or surpass those emerging elsewhere across the globe.

Millions of search queries are typed into a single search engine each day, the data gleaned from such search results is gold to IT companies even as it generates revenue for the search engine. Top builders in Bangalore today rely on Google for much of their advertising; a high page rank by Google is prized by many builders and developers in Bangalore. Yet despite the fact that the CEO of Google is of Indian origin most of the benefits which accrue from Indian search queries go into American hands. Baidu is a credible threat to Google’s worldwide dominance. The ability to use language to map human thoughts will likely be crucial to developing newer technologies and may even be at the core of developing strong Artificial Intelligence.

A viable domestic search engine is crucial, even if such an engine is developed and promoted by the public sector. Upcoming projects in Bangalore, advertised on the big three search engines such as Google, Bing, and Yahoo, will be better served by a powerful domestic search engine whose page ranking mechanism better takes into account Indian businesses and the Indian mentality. Advertising from technologies for industries such as real estate which includes luxury and affordable property in Bangalore should be in domestic hands. Western publications such as the New York Times prognosticated dire times ahead for China’s economy when the Chinese government banned Google in China, however, today, China’s local search engine is the model IT company which has mountains of useful data it can use to benefit Chinese business and to develop next generation technologies.