How Bengaluru is bucking India's realty downtrend

BENGALURU: Bengaluru, India’s Silicon Valley, may not top the tally when it comes to property sales volume or price factor, but has emerged as the healthiest market owing to its resilience. Key factors that have enabled the market clinch this spot over the last few years includes being one of the affordable markets and absence of euphoric price appreciation in earlier cycles.The IT city remains as one of the most active residential and commercial property market in the country despite marginal dip in sales in the second half of 2019 due to the economic slowdown.Bengaluru was the third largest property market in the country only after Mumbai and Delhi-NCR in 2019 with a 19% share. The city’s share of new residential supply during 2019 was 40% as against 41% in 2018.Additionally, the Southern markets of Bengaluru, Chennai and Hyderabad remained resilient in 2019 and accounted for 40% share of the overall housing sales in the year.”The delivery in Bengaluru property market has been better compared to other larger residential markets. The developers had made products in line with the market demand,” said Siva Krishnan, Head – Residential Services, JLL.With rising sales backed by rising consumer demand, India’s Silicon Valley has seen the overhang of residential inventory declining to 15 months by the end of the last quarter of 2019 from 17 months in the last quarter of 2018. The overall unsold stock has also declined by 14% during the same period — the maximum among top cities, data from Anarock research mentioned.“The real estate regulatory Act was a blessing in disguise. It helped tier-I builders to increase their market share. We are witnessing around 70% sales in the first two-quarters of launch,” said Ashish R Puravankara MD Puravankara.Being end-user driven, the slowdown impact was minimal in the city’s realty market and was quick to re-bounce post reformatory changes like demonetisation, RERA and GST.The residential markets are coming out of a 7-year downturn and select micro-markets will bottom out in 2019 and 2020. ”Bangalore and Hyderabad residential markets are performing, rest are all under pressure. Despite a harsh environment, we have seen good demand for the Rs 50 lakh to Rs 2 crore segment,” said J C Sharma vice-chairman and managing director of Sobha.Bengaluru has seen demand for mid-income housing projects, since early last year. ”The areas of significant growth are apartments in the sub 1.5-crore market which is a ticket size which still has a large unfulfilled demand. There are specific locations particularly in high growth zones which have demand. The buyer is mostly in his mid-30s and is an employed professional,” said Swaroop Anish - Executive Director, Business Development, Prestige Group. 73892267 A robust commercial sector (the largest office market in the country), growing IT/ITeS populace, and strong buyer sentiments were established as the key drivers for the trend.Bangalore continued to drive demand for office space in the country and with supply addition witnessed across all micro-markets.During 2019, Bengaluru retained its premier position as India's healthiest office market . In 2019, Bengaluru's of?ce space leasing touched a new benchmark of 15.3 mn sq ft, a marked spike of 14% over 2018., said Knight Frank.“With global multinationals expanding and consolidating their footprint in Bangalore, the market has shown tremendous development with demand from small, medium and large-scale occupiers. The city has emerged as a preferred investment destination across the globe, backed by a wide talent base and favourable rental rates, thereby offering several investment-grade options in the office sector,” said Shailendra Naidu, Executive Director, Advisory & Transaction Services, India, CBRE South Asia.The commercial real estate market in India has hit the highest levels of leasing ever in last year. This has made many residential segment-focussed builders focus on income-generating commercial assets. Some of them include Puravankara, Sattva Salarpuria, Brigade Group and Nitesh Estates.According to the CBRE data, gross leasing activity grew by more than 25% y-o-y to cross 60 million and touch a historic high of almost 61.6 million sq. ft. by the end of 2019, a historic high, indicative of the fact that leasing activity continued to be strong in the country. Bangalore, Hyderabad and Delhi NCR are expected to dominate supply addition in 2020.The city also attracted large PE investments of $620 mn in 2019 against $420 mn in 2018 for income-generating assets. In terms of value, in entire 2019, commercial segment attracted maximum PE investments, followed by residential and then logistics & warehousing. The percentage share in price value in that order was commercial – 83%, the residential – 9% and logistics and warehousing - 8%, mentioned ANAROCK research."The city will continue to be attractive to investors because of multiple factors. Heightened commercial activity backed by high demand from both IT/ITeS and co-working sectors will attract investors. They would like to capture a pie of this growing commercial market,” said Shobhit Agarwal, MD & CEO – ANAROCK Capital.In 2019, the real estate sector saw total PE inflows of over $5 bn across cities. Of this, Bangalore comprised 12% share while the highest was in MMR, it mentioned. The top 3 deals include – Blackstone & Salarpuria invested over $390 mn in Tanglin Retail Realty, Godrej Fund invested $120 mn in Century Group and US-based Hines invested $46 mn approx. in Shapoorji Pallonji Group.However, as per ANAROCK research, Bangalore received total institutional funding (by HFCs, NBFCs & PE together) of $770 mn in 2018 which decreased only meagrely to $720 mn in 2019.During 2018 and 2019, Bangalore has seen institutional investments by both Indian and foreign investors. Interestingly, 39% of the total investments during this period is by Indian investors, including Piramal, KKR, Altico Capital, Kotak Group, and Godrej Fund, among others.The foreign investments are by funds from US and Singapore. These include Warburg Pincus and Hines from US and Xander from Singapore. However, the fate of the property market Bengaluru largely depend on the economic slowdown and the monetary issues faced by the sector.The Finance Ministry recently announced the setting-up of a special window for last-mile funding of distressed affordable and mid-segment homes. The fund has attracted interest from investors such as the government of India, State Bank of India, LIC, HDFC and all major public sector banks. The government has committed a fund infusion of up to Rs 10,000 crores and further investments will be brought in through institutional and private investors to generate a total corpus of Rs 25,000 crore. However, this comes with a caveat - the projects should not be non-performing assets or pending under NCLT, and must be at least 60% complete.As per industry experts, the recent financial booster may not impact new demand significantly - but will give relief to aggrieved homebuyers who had been waiting anxiously for their homes before the start of the festive season. That said, it will go a considerable way in improving overall buyer sentiments and will also help fix the supply side in the residential segment.

from Economic Times https://ift.tt/31jEagd