Bangalore property market versus Mumbai and other cities

The real estate market all over the country is getting majorly pounded because of evident signs of economic slowdown, the delays in project approvals, the rising interest rates and the piled unsold inventory. Most of the major cities like Mumbai and NCR have witnessed a rapid residential unit absorption in the month of January and March by about 50%, whereas Bangalore has escaped and has witnessed a drop in its residential unit absorption by about just 18%.

There are several reports which suggest that the property in Bangalore is performing better than any other Indian real estate markets. Also the price spikes in Bangalore are more reasonable along with a better execution of projects. In the first quarter of 2009, Bangalore has seen a rise of about 18% in its home prices when compared to other real estate markets of Chennai, Mumbai and NCR. All of these cities have witnessed a drastic increase of about 22-48%.

The reasons for Bangalore real estate to stay unscathed:

Bangalore price correction:

This is one of the main important reasons why Bangalore real estate has remained unhurt. The price correction in Bangalore was massive during the country’s boom period and Bangalore did not witness any price escalation unlike other cities like Mumbai, NCR and others. The main reason being the price correction for three consecutive years from 2008 -2011. However major cities like Mumbai were in demand and at a peak in the year 2009-2010. The years 2009-2011 saw a correction in prices in Bangalore at the project level as the sales were not good enough.

Land cost not being a part of construction:

The Bangalore real estate market is a joint venture and this in turn makes the developer less responsible as he doesn’t have to invest much in the property also the land cost is quite cheaper. However the property becomes the joint partner by lessening the burden on the builder. Whereas in Mumbai, the high property prices are followed by higher prices of land which apparently lessens the responsibility of the developers to reduce prices. Also the property developers have equity investors in a project from the beginning and they assure a particular return to the investors making the home price cutting even more complicated. However, the higher cost of land is making it difficult for the developers in major cities and they have to invest a large amount to possess a land due to the increased land prices.

Bangalore having affordable projects after a break of 2 years:

The demand for properties in Bangalore has arisen due to a break for two years and this sudden surge occurred only in the last quarter of the year 2011-2012. This happened due to the launch of the mid-income segment initiated by renowned builders like Sobha Developers and Prestige Estates Projects. Apparently, the developers got a good response at the time of pre-launch as the projects were launched in affordable housing unit segment. Companies like Sobha gained benefits of about 277 million sq ft with a value of about Rs.1, 130. Similarly Prestige gained sales of about 1.8 million sqft with a value of Rs. 1,380 crore. Owning to this the absorption was quite high. Comparatively, the Mumbai real estate market witnessed a downfall after the surge in demand. This happened due to reasons like; unaffordability and lack of new launches.

Differential property markets:

It is very evident that the Mumbai and the Bangalore property markets are quite different as the property prices vary depending in the economic profile and the demographic patterns of the cities. Factually, Bangalore witnessed a population explosion due to the IT boom followed by a demand in the residential flats. Similarly, Mumbai witnessed a slow rate of cut prices as it has always been the financial capital of India. Developers and the owners will not cut prices as they do not have much room to do so or they just want to drive prices higher and create a demand in the projects.

Bangalore real estate based on actual end-user demand:

As a fact the Bangalore property market is based on the end-users and due to constant business in Bangalore and the de-growing of business in Mumbai, most of the investors are attracted towards the Bangalore-based companies. These are the reasons about the increase in the capital values for the residential properties in the city.