Bangalore Real Estate Trends

THE IT SECTOR CHANGED THE CHARACTER OF THIS CITY FOREVER.AND IN THE PROCESS IT FUELLED THE GROWTH AND DEVELOPMENT OF ITS PROPERTY SECTOR

Bangalore is a unique city. Perhaps it is the only one of its kind in the world. How many cities can you think of that have had a different sobriquet every five years over a couple of decades. Through the 1970s,the city was a pensioners paradise and garden city. It was characterised by its sprawling bungalows, fountains serving as circles,and summer showers that washed the city clean nearly every hot summers day. Through the 1980s it was the pub city and then the IT city.

It is also the only city in the world where a couple of ring roads, arterial roads, an international airport and metro rail system were all planned and executed together.

While many bemoan its insufficient civic infrastructure,it is no easy task catering to a growth rate of almost 40 percent through the last decade in population. Bangalore is today the third most populous city in the country and among the 30 most populous cities in the world.

The city is today defined by its IT industry.The salubrious climate,cosmopolitan culture,large land parcels for development and adequate social infrastructure was an irresistible mix for the IT industry looking for a base in India.It is easy to find talent here or get people to relocate,and this was another major catalyst in the growth and development of the IT sector in Bangalore through the 1990s.

It is now estimated that the IT sector here employs 5 lakh professionals who earn a total salary of around Rs 12,000 crore per annum.This,essentially,is the driving force behind the citys real estate sector.

The first of the citys significant forays into industrialisation was the Peenya Industrial Area.This and the industrial belts around the city housed many of the old economy manufacturing units that offered employment and fuelled some demand for housing in the vicinity.The large business class who ran the retail and wholesale trades in the city,and the salaried segment contributed to the demand for housing in the residential areas around the central business district.Through the 1970s,localities such as Jayanagar and Indiranagar held sway with their large sites and stately bungalows.The population and economy did not fuel a boom in property,as also the demand-supply position with many localities still being untapped.

What changed it all was the IT sector boom and the large influx of people drawn by the career opportunities here.In more ways than one,the IT sector changed the citys skyline.Along with the glass and chrome facades came a demand for housing like never before.The traditional old-timers prediction that people in this city,used to living in bungalows,would never accept apartments proved to be wrong.

A significant chapter in the citys real estate story is the impact of the IT sector that changed the architectural landscape here.The box-like concrete offices made way for glass and chrome structures with landscaping and aesthetics designed to improve productivity.And along with them came apartments to cater to the rising demand for homes in the core city areas.Old mansions were quickly picked up by developers to build apartments that sold on the drawing board in the late 1980s.
In more ways than one,the citys economy,and especially its realty industry,are linked to the fortunes of the IT sector.

The boom was fuelled by the IT sector and then a price correction was triggered when the dotcom model collapsed.Yet,the recovery was quick through the early part of this millennium when the economy and stock markets seemed to reach for the skies.A booming IT sector fuelled a sharp increase in demand for commercial land and resulting residential options.The combination of low interest rates and tax breaks on home loans and competitive job market favouring IT professionals changed the cityscape again.There was a retail revolution with global brands and world-class shopping experience finding demand.

Large theatres found the commercial pull too strong to resist,and the demand for shopping and office space led to a curtain call for many.
Malls,multiplexes,retail hubs,apartments,residential enclaves and office complexes vied for space.The result was sky-rocketing real estate prices.Property in Bangalore was the best investment avenue any high net worth individual could find.While there was talk of a possible price correction in the early 2000s,the fundamentals were firmly behind the property sector.The correction understandably never came.

A barometer that pointed to the scale of demand and economic growth in the city is the sheer pace of urbanisation around the city.Even before the Outer Ring Road could come a full circle,large stretches were already chocka-block with traffic thanks to the residential development on either side.All it took in this city was one good road to fuel commercial development alongside,and residential development in the vicinity,thanks to the connectivity it entailed.This was seen in the case of the Outer Ring Road,Varthur Road and Whitefield Road.

A correction,however,did happen.And this time when many predicted it wouldnt.The 2008 global meltdown took its toll on the IT industry heavily though many predicted that the domestic demand would insulate the IT sector here from the global crisis.And quite naturally,the property industry went through a correction.Deprived of the IT-driven demand,the sector faced a slowdown and is now climbing out of it as the economy shows signs of reviving.But even the recession could not throw a wet blanket on the citys realty sector.The slowdown in demand in the sector saw a new window opening.Many in the city were insulated from the slowdown and salary cuts.

The government staff for example.Many segments such as mid-level restaurants and bargain shopping found demand increasing as many found them convenient in the days when belts had to be tightened.The mid-level restaurants,for example,were a viable alternative to expensive weekend splurges.The shift in spending patterns opened up opportunities for many entrepreneurs who capitalised on the changing dynamics of the retail market.

This economy fuelled the demand for budget housing.Many developers converted their existing mid-segment options to budget housing projects.And the citys outskirts witnessed the mushrooming of many more. The affordable housing concept was a huge potential waiting to be tapped.In the days of the boom,with a large number of investors in the field,it did not make sense for developers to plan affordable options. But now,it is a large market developers have begun to cater to.

Another aspect of the city that helped this cause was the development of arterial roads and state highways.With broader roads came better connectivity,bringing many distant suburbs closer to the city.This,given the fact that land prices are lower in the outskirts,made it possible to plan affordable housing projects there.The connectivity and lower land costs combined to make the locations viable for both developers and homebuyers.

In the months ahead,as the demand fuels more affordable homes projects,this could be another tag for the city.Bangalore could also be a city of affordable homes that offers careers and entrepreneurial opportunities.

_{Source: TimesofIndia Dt: 20-8-10}