Price Correction for Bangalore Residential Property

                                                                                         

Indian Real Estate: Due To Supply / Demand Mis-match

With more supply than demand, prime residential property in Bangalore is scheduled for the much-awaited price correction. The city’s demand-supply mismatch fuelled a sharp increase in prices of premium residential property in the last one year, which is expected to fall marginally, with imminent supply in the market.

According to a survey by Cushman & Wakefield, a real estate consultancy firm, the existing demand for premium apartments in prime locations, such as, Richmond Town, Benson Town, Koramangala, Jayanagar, off M G Road, Cunningham Road, among others will reduce as an increasing number of independent bungalows make way for small premium apartment complexes, which will help stabilise the market, in the very near future.

A surge in real estate prices, attracted huge investments leading to increasing numbers of plotted developments and villa projects in peripheral areas, such as, Sarjapur Road, Hosur Road, Bannerghatta Road near Jigani, Bellary Road, Doddaballapur Road and Hoskote. This additional stock, according to the survey will help feed current demand, and over the next 8 to 12-months help to stabilise the continuous rise in price values.

As per the survey, barring a few micro-markets like the Sarjapur Road / Outer Ring Road; Brunton Road / Lavelle Road and the RT Nagar - Yelahanka stretch, which saw prices appreciate by over 10% during the December 2006 - May 2007 period, and most pockets clocked a moderate rise of under 5% in property prices in a majority of localities.

Anurag Mathur, Deputy Managing Director, Cushman & Wakefield, India says the last six months have seen exceedingly high price points and spiralling interest rates, thus contributing reduced interest from speculative investors, resulting in a clear shift to a largely end-user-led demand. More price sensitive locations and developments in certain parts of the city will witness a rationalisation of capital values, as the market reaches price thresholds, with new supply being infused in the market at high prices.

With South-East Bangalore seeing ample supply in the coming 12-18 months, this will contribute to a marginal correction in these localities, according to the survey.

It needs to be mentioned in this context that the supply situation for villas in the Whitefield - Sarjapur belt stands at 2,500 villas, for the current year, while approximately 1,40,000 units are expected to be delivered over the next two years.

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