“2015 looks very positive for Realty Sector”

Wherever there is improvement in infrastructure, there is an increased real estate activity and subsequent demand, says Nagaraj Reddy, CMD of Zonasha, a leading player in Bangalore’s burgeoning realty sector. He shared his valuable insights on Bangalore’s real estate market in an exclusive interview with CommonFloor. In addition, Mr Reddy also spoke about his wishlist for the realty sector in 2015.

Here are the excerpts of the discussion.

Recently, the city recorded a hike in guidance values. How do you see it impacting the Bangalore’s Market?

Guidance value is set by the State Government and is the minimum value below which no residential property can be registered. It is the minimum price for registration and not the price at which the property will be sold. The buyers will have to shell out a larger amount for stamp paper and registration fees which consequently, will increase the property prices.

Of late, Bangalore is the only city that has witnessed a surge in guidance values and in some areas the increase is 100 per cent. Purchasing property in Bangalore post increase in guidance value will lead to a higher stamp duty and registration charges.

Customers who may have booked during the pre-launch offer from the developers will need to pay more now because of the increase in government charges and will need to register their property as per current guidance values. This will impact the Income tax of both the Builders as well as the Customers.

What are your expectations from the Bangalore’s real estate market in the year 2015?

Bangalore has been the fastest growing city of India since the past few decades.

A whopping 43 per cent of residential projects are expected to be completed in 2015. These include apartments, villas and row houses. This is followed by 32 per cent of projects expected to be completed in 2016. Further, 17 per cent are expected to be completed in 2017. This points to the fact that buyers can expect a plethora of residential projects across Bangalore next year in different price and size ranges.

Which areas are expected to see maximum real estate development in 2015? And why?

Wherever there is improvement in infrastructure, there is an increased real estate activity and subsequent demand. In south Bangalore, close proximity to the NICE corridor, improved connectivity to Electronic City, prestigious schools, high-end hospitals and retail chains, have led to a surge in demand.

The re-emergence of IT/ITES sector as the key driver of the economy has propelled a high-disposable income and a demand for quality housing. Additionally, availability of good housing options providing international lifestyle such as Zonasha Paradiso is encouraging the professional working class to purchase / upgrade their property in the Area. The cosmopolitan crowd, the availability of good education system and expectation of it being an important commercial hub makes it an attractive investment destination in ORR – Marthahalli – Whitefield zone.

Additionally, in the Bangalore Development Authority Master Plan 2015, the government has allocated 12,000 acres of land for ‘hi-tech’ use. The said land covers Kengeri in the West and Electronic City, Whitefield, Varthur and Begur in the southern part of the city. In Bangalore East, there are seven notified SEZs and the proposed investment is Rs 4725 crore with an employment potential of 1,08,500.

The southern part of Bangalore has already seen the establishment of major IT parks which has triggered the growth and development of residential spaces. The KSIIDC has also earmarked 400 acres for Devanahalli Business Park (DBP) and around 300 acres will be given for commercial development on the Build-Operate-Transfer (BOT) model. Growth has been pretty even in most outbound directions.

What are the significant trends likely to be seen in 2015 in the Indian realty market?

2015 Real Estate market is bullish and the Central Govt is helping to promote this sector though various amendments and policy changes. In Bangalore more than 7million sq. ft. of office space is confirmed. That means it will create more than 70k job opportunities. Hence the demand for Residential Housing in Bangalore will be stable and upbeat.

To earn rental returns, which five localities would you suggest?

1. O.R.R. between KR PURAM to HSR LAYOUT.
2. Bangalore North near Hebbal.
3. Whitefield
4. Indiranagar Inner Ring Road
5. Bannerghatta Road between Dairy Circle upto Meenakshi Temple.

Is there any un-sold inventory in the city that might impact real estate prices in the coming year?

The build-up in unsold inventory and the availability of a large number of ready to move-in apartments in Bangalore has resulted in constricting price rise in the first half of 2014 in the city’s Real Estate market. Bangalore has an under construction 1,05,000 units which will come to market for next two years. Strictly speaking this cannot be construed as unsold inventory because the Developer may have held on to secure a better price.

What are your views on Real Estate Regulatory Bill.

The proposed relaxation in FDI norms in the Regulatory Bill will help cash-starved developers raise significant amount of foreign funds and also complete the stuck projects.

Easier FDI rules will help faster completion of projects delayed by a squeeze on funds due to elevated debt levels. The sector’s share in the total FDI has slipped from 5 per cent in the previous year to under 3 per cent as of the current fiscal until August. In fact, its share has been consistently falling over the last six years since 2009-10,when it stood at over 20 per cent.

This would also result in better developments in urban centres where space has always been a constraint and it was difficult to develop a 50,000 sq mtr projects.

What are the five things you wish to happen in the real estate sector in 2015?

1. Additional benefits to the Housing Sector in the proposed budget
2. Interest Rates on Financial Lending and Home loans should come down
3. More Affordable Housing projects launch
4. More FDI investments in India
5. Demand for office space in IT sector should increase