Resale housing inventory piling up: Many flats, few buyers
Economy and real estate always tune in on the same frequency and have a blended impact on the nation. Keeping this doctrine true, the decline of Bangalore’s housing market can be attributed to the present economic condition, which has been falling off the skids. Economic decline has casted a black shadow on the real estate market of the city, leading to an increase is cost of living and compelling IT professionals to sell off their upscale homes.
Salary increments for IT/ITes professionals in the city has been on the rocks recently, which has stood out as one of the significant reasons for people to service their expensive home loans. To add to it, due to falling rental yields, resale of inventory in the luxury segment has climbed up to 30-35% in the last few quarters.
Statistics confirm
According to property consultants, housing units of 40 lakh plus segment are leading to a saleable transaction in Bangalore. Market reports lap up that around 43000 apartments in the city are yet to be booked by buyers.
Since 2001, the IT hub of the nation, Bangalore has been loaded with an additional 350000 apartments, out of which only 8% is up for sale. During this extent, around 45000 penthouses and villas were constructed in the city out of which 8% find their place in the resale market. Though the number of residential projects in the city has skyrocketed, the absorption rate has not kept up the pace.
Rising resale housing Inventory
The real estate market of the city have been on top of heap in the last few years, which was the perfect time for techies to step in with their investment. However, with the sudden tightening of the salaries, home buyers feel the heat of the inflation in the form of hefty EMIs. This has taken a major toll on the purchasing power of the buyers; as such reselling the house seems to be the only valid option.
People are now taking steps to get rid off all the excess property in exchange of a good deal. Moreover, selling off such properties will likely yield a return running between a crore or so, hence selling seems the most feasible option.
How economic slowdown contributed towards piling inventory
A slackening economy and mounting inflation have further made the matter go downhill. Property consultants further confirm that new home sales in the city in the 2Q(Q2)2013 have taken a dip by 23%, in comparison to last year. With the onset of recession, demand began to peter off as the employees of the companies get a severe blow.
The salary increment of the IT professionals in 2013 have stood in the range 6-8%, in comparison to 15% that prevailed between 2007-10. The persistent gloom in the IT sector is likely to generate less than 50000 jobs this year, which is 17% down in regard to last year.
Price of proximity
Proximity to city center is one of the essential criterion that drives the residential real estate market, however, price of resale units varies depending on the location. A 1000 sq ft apartment in jayanagar would range somewhat between Rs 1 crore-2 crore, while a residential unit with same dimension would cost 50% less in a new layout. Apartments, which are adjacent to work hubs such as Bannerghatta Road, Whitefield and Airport road, fall in the higher price bracket.
The peripheral vicinities in the south and east of the city, having close proximity to IT hubs, drive the housing resale market of Bangalore. Sarjapur road, one the booming areas available for resale, is equidistant from the Electronic city and Whitefield and has more than 11% of the properties available for resale. The resale percentage is 10.9% and 6.9% for Whitefield and Bannerghata while for JP Nagar and Marathalli it is 4.9% and 4.6%.
