Bangalore residential property review and outlook for 2014

Bangalore has been one of the fastest growing city of India over the past few decades. Information Technology has been the major growth driver responsible for aggressive real estate development of the city. Being the IT Hub of India, Bangalore has a multi-cultural population, good social infrastructure, excellent educational institutes and an improving physical infrastructure. Currently, the most promising residential micro-markets are Outer Ring Road (ORR), Sarjapur Road, Whitefield and North Bangalore.Bangalore is also the third-largest real estate investment hub for High Net worth Individuals (HNIs) and tops the list in terms of investments from Non Resident Indians (NRIs) looking at settling down in India in the future. The city attracts a sizeable population due to its cosmopolitan culture. Home to over 10,000 individual dollar millionaires, Bangalore has a large base of expatriates living and employed in the city. There has been increased demand for high-end residential apartments in the city, particularly in the Central Business District (CBD), Secondary Business District (SBD), Whitefield, North Bangalore and Outer Ring Road sub-markets.High end segment – Rs 1.5 crore and aboveDemand for high-end residential projects is expected to be steady over the next 12 months. Bangalore is one of the most promising markets for villa projects in India. Villa and row house developments are most active in the micro-markets of Whitefield, North Bangalore, Outer Ring Road and Sarjapur Road. However, buyers are very selective about these projects when it comes to the amenities, product quality and size of the units.Mid-segment – Rs 75 lakh to Rs 1.5 croreThis segment is mainly driven by individuals working in the IT/ITeS industry. The main driving factors for mid-segment homes are social infrastructure, proximity to workplace, good physical infrastructure and access to medical and educational facilities.With regards to these factors, the micro-markets like Whitefield, ORR IT corridor, Electronic city and a few areas in North Bangalore will continue to witness considerable demand in 2014.Affordable Segment – Below Rs 50 lakhAffordable housing will see constant demand on the outskirts of Bangalore, in all directions. Availability of large land parcels at lower prices has encouraged affordable housing projects in these areas. Also, the planned Metro rail and the Peripheral Ring Road have increased demand on the outskirts of Bangalore. VBHC Attibele and Patel Neo Town in South Bangalore, Provident Welworth and Sovereign Lakefront in North Bangalore, Provident Sunworth and VBHC Kengeri in West Bangalore are some of the notable affordable housing projects in the city. The demand for budget housing in East Bangalore is lower when compared to the other micro-markets of the city such as Mysore road, Hosur road, Kanakapura Road, etc.Market OverviewThe Bangalore market witnessed improved residential real estate absorption in 4Q13 in comparison to 3Q13. Over 30 residential projects were launched across Bangalore in the last quarter of 2013. Major residential launches included Unishire Belvedere Signature, Orchids Lake View, Ajmera Stone Park, Hiranandani Edenhall, Sobha Town Square and Purva Coronation Square.Capital values appreciated marginally across various sub-markets in 4Q13 due to an increase in sales volumes and higher prices at most projects that were nearing completion.OutlookBangalore's residential markets are exhibiting continued steady growth in 1H14. Capital values are forecast to stabilise and rents for residential properties in the city are predicted to record marginal growth.The first half of 2014 will be defined by a moderate number of launches of residential projects, and stable demand. Rents and capital values will remain stable during 1H14 and increase in 2H14.The following factors will influence capital appreciation and rental potential in Bangalore:•Growth in the IT Industry•An increasing number of High Net-Worth Individuals and Non Resident Indians (NRIs) / expatriates•Proposed infrastructure by the Government (Peripheral Ring Road, Metro Rail, Signal Free ORR, High Speed Rail Link, Mono Rail and Elevated Expressway).•Proposed SEZ and IT parks in North Bangalore (ITIR in Devanhalli, Aerospace SEZ, Devanhalli Business Park, Airport City)(Sanjay Chugh is Head - Residential Services (Bangalore & Chennai) Jones Lang LaSalle India)