Bangalore: Bangalore’s real estate market continues to groan under the burden of unsold property and sluggish demand, even as a revival in property sales in other cities has encouraged developers to launch a slew of projects.
Nearly one in every five homes scheduled for completion by the end of this year remains unsold, according to a report released last week by DTZ International Property Advisers Pvt. Ltd and Indiareit Fund Advisors Pvt. Ltd, a private equity fund. For projects scheduled for possession in 2011, this figure jumps to 56%.
DLF Ltd, Unitech Ltd and Housing Development and Infrastructure Ltd have started launching projects in Mumbai and New Delhi, particularly in the “affordable category” that has residences priced under Rs30 lakh.
The recovery may take longer in Bangalore, the country’s third largest realty market, where big technology firms such as Infosys Technologies Ltd and Wipro Ltd are headquartered.
“Bangalore has continued to witness a correcting trend as the investor community hasn’t quite revived activity yet,” said Aditi Vijaykar, executive director, residential services, at property advisory Cushman and Wakefield.
While the growth in Mumbai and New Delhi is driven by multiple sectors, growth in Bangalore is largely dependent on the technology sector, she pointed out.
Interestingly, lower prices, to the tune of 25-30%, hasn’t pushed up demand in the city, both developers and analysts said. For instance, Whitefield, a suburb in east Bangalore and close to a prominent information technology (IT) hub, saw sluggish sales even after prices corrected by nearly 30%.
“The affordable concept didn’t work as much in Bangalore as it did in Delhi or on Mumbai’s outskirts,” said Prakash Gurbaxani, managing director of QVC Realty Ltd, a property developer. “Prices in Bangalore are lower but home sales and office sector take a direct hit when IT firms stop expanding and the sentiment is negative.”
Unlike Bangalore, where prices are still falling, realtors in Mumbai, New Delhi and Gurgaon have already raised prices between 5% and 10% on the back of rising sales.
Starting July, Lodha Group increased prices by 10% and Unitech by a flat 2% after the latter sold 4 million sq. ft in three months and Lodha’s mid-income flats got good customer response.
“Restricted supply has boosted demand in Mumbai in the past months, price checks and mid-income projects by big developers have worked for Delhi,” said Kumar Gera, chairman of Confederation of Real Estate Developer’s Association of India, an industry lobby. “Bangalore will see a revival only by 2010.”
Bangalore also has a problem of over supply, which doesn’t bother metros such as Mumbai and Delhi. According to the Indiareit-DTZ report, there are around 51,470 residential units across 193 projects coming up in east and south Bangalore, where 66% of under-construction projects are located, which would take the total stock to 122,431 homes by 2011.
Besides a few low-cost projects, larger developers in Bangalore such as Sobha Developers Ltd and Puravankara Projects Ltd have stayed away from fresh launches and are focusing on selling inventory.
After a hiatus of 18 months, Sobha is only now planning to launch a residential project in the next two months, and Puravankara doesn’t have any Bangalore launch in the pipeline after launching its mid-income project in Chennai.
Growth corridors such as areas near the new international airport also haven’t really turned out as expected. Although most developers have picked up land parcels in the area, few projects have been launched.
Tangible effects of the slowdown in construction activity would be visible in 2010-11, the report said.