Bengaluru April 28: At the outset of the COVID-19, Bengaluru’s residential prices witnessed a YOY increase of 2.9% in the first quarter of 2020, fuelled by development in infrastructure and existence of numerous IT and ITES establishments, revealed the latest edition of Magicbricks’ PropIndex (Q1, 2020).
While the global outbreak of COVID0-19 and the ensuing lockdown did impact India’s real estate, Bengaluru witnessed a 4.7% rise in demand for residential real estate during the Jan-Feb-March period of 2020. As an end user driven market, Bengaluru’s residential segment has continued to beat the overall market trends by witnessing steady demand and price increase.
In both the Under Construction (UC) and Ready-to-Move (RM) property categories, positive demand patterns were observed with 1.8% and 0. 8% increase in prices, respectively. The under-construction segment surprisingly witnessed more increase in prices for almost all brackets, in comparison to ready to move properties, showing trust on builders. The city reported a noticeable increase in demand for the luxury budget segment by 1.9% during the first quarter of 2020. Nevertheless, most demand now lies in the segment of the property less than Rs.5000/sqft.
While Bengaluru has traditionally grown on the back of strong commercial development, the city is expected to grow with government’s attempt to promote industrial ventures in the outskirts, by making amendments in Article 109 of the Land Reform Act, 1961. Additionally, reduction of stamp duty from 5% to 2% for new homes costing less than Rs.20 lakhs is expected to have a positive impact on demand in the city’s outskirts.
Commenting on the PropIndex, Sudhir Pai, CEO, Magicbricks, said, “The Government is taking stringent measures to contain the Covid-19 outbreak, but the long-term impact on property market is uncertain, and yet to be assessed. But it seems that the consumer interest has not tapered off. There is a pent-up demand for ready-to-move in properties as our data suggests that the 80% of searches are happening in this segment and the rest for under-construction.”
Owing to the employment opportunities, affordability and airport connectivity, Whitefield, Sarjapur Road, Bellary Road and Electronic City continue to be the top-4 micro markets in the city. Posh localities such as Indira Nagar and Malleshwaram experienced a dip in consumer preferences that fall in the segment higher than Rs.7,000/sqft.
According to Magicbricks’ PropIndex, the residential sector was primarily being driven by three critical factors:
· Residential market was positively impacted by the robust commercial real estate growth in the city
· The construction of Phase II and Phase III metro stations has increased the development of plots in the peripheral localities of Bengaluru
· Upcoming Peripheral Ring Road connecting Tumkur Road and Hosur Road through Kempegowda International Airport and Old Madras Road to support residential development in the surrounding localities
However, it will be interesting to see how these factors play out as the market recovers from the outbreak of COVID-19 and the ensuing national lockdown.
As things return to normalcy, Magicbricks Research foresees the next two years to be crucial for the residential segment, as most of the stuck projects are likely to get completed with the help of the Rs.250 billion bailout fund. At the same time, completion of major metro lines should ease connectivity between peripheral and commercial areas, opening the next phase of growth. At last, it’s imperative for the sector to withstand these testing times and come out more robust and well prepared, once the COVID-19 situation gets better.
