Colliers Quarterly Q3 2016
BENGALURU | RESIDENTIAL 02 November 2016
Steady demand amidst cautious buyer sentiment Divya Grover | Senior Manager | Bengaluru Despite momentary civil unrest and the municipal corporation’s drive to regularise construction, we are hopeful that the mid-end segment should continue to drive sales as the festive season approaches with developers offering various freebies and attractive payment plans amidst a soft home loan interest rates environment.
Forecast at a glance Demand Should improve as builders are introducing lucrative deals to lure fence sitters Supply Oversupply situation in the primary market to continue in the upcoming quarter Capital Values Should rationalize across micro markets barring far off northern peripherals which may see slight appreciation Rental Rate Likely to hold steady across micro markets
New project launches plunge During Q3 2016, Bengaluru noted nearly 4,300 new unit launches, totalling to about 21,800 new units YTD. The city witnessed about 63% QOQ decrease in new launches. This dip in the new launches was primarily attributed to the momentary civil unrest over Kaveri water issue between the state of Karnataka and Tamil Nadu. Also, many projects could not initiate construction and remained in the pre-launch stage due to delays in getting necessary approvals from government departments in the wake of Bruhat Bengaluru Mahanagar Palike‘s (BBMP) recent city wide initiative to tackle the encroachment of storm water drains (rajkaluves) and the lake beds. With end user affordablity being the prime criteria, almost 96% new unit launches were restricted to the mid-end segment barring the launch of a high-end apartment complex in the residential neighbourhood of J.P. Nagar. Of the total new units launched, Hope Farm Junction (25%), Whitefield (20%) and Hennur Road (15%) emerged as the top three locations garnering maximum launches. Other peripheral locations such as Banashankari 6th stage, Kanakpura Road and Bannerghatta Road together accounted for rest of the share.
Market Trends Capital Values (INR Per Sq Ft)
QOQ% Change
YOY% Change
Central
21,000-31,000
4%
8%
Cooke Town
7,700-15,000
6%
6%
Jayanagar
8,700-10,700
2%
2%
Sadashivanagar
9,200-15,200
2%
2%
Airport Road
8,800-11,200
3%
11%
Indiranagar
8,200-13,000
1%
6%
Bannerghatta Road
4,700-8,700
-1%
3%
Kormangala
6,800-10,700
-3%
3%
Whitefield
4,400-8,700
-3%
3%
Yelahanka
4,200-10,200
3%
-4%
Micro Markets
Source: Colliers International India Research Note: Above values represent indicative selling price for premium properties in secondary market
The festive season has triggered a slew of soft launches in the market and developers were offering freebies such as gold coins, lucky draw for car, no pre EMI for first two years (as part of 20:80 schemes) and buyback plans to gain traction among prospective buyers. Demand remained concentrated in locations near employment hubs for mid-segment products ranging in the price bracket of INR 60 lakhs – 65 lakhs.
Average Capital Value Trends INR per sq ft 32,000 28,000 24,000 20,000 16,000 12,000 8,000 4,000
Central Jayanagar Airport Road Bannerghatta Road Whitefield
Q3 2018F
Q3 2017F
Q3 2016
Q3 2015
Q3 2014
Q3 2013
Q3 2012
Q3 2011
Q3 2010
0
Cooke Town Sadashivanagar Indiranagar Koramangala Yelahanka
Source: Colliers International India Research Note: Dotted lines in the chart above represent forecasted values
Average Rental Values INR per sq ft per month
Yelahanka
Whitefield
Koramangala
Bannerghatta Road
Indiranagar
Airport Road
Sadashivanagar
Jayanagar
Cooke Town
The city continued to witness completion of new projects in Northern and north-western suburbs of Hennur Main Road and Rajaji Nagar along with southern favourites such as Bannerghatta Road and Electronic City Phase-I. The completion of new projects kept the rents stable across micro markets. Completion of a few office IT park provided an impetus to the rental market in the Sarjapur Main Road belt.
Colliers View
80 70 60 50 40 30 20 10 0
Central
Capital values appreciated in the range of 1 to 6% across micro markets barring a few locations such as Whitefield and Bannerghatta Road, which witnessed slight correction in prices. In the coming quarter, we expect, capital values to remain stable due to continuous addition of new supply in the market.
We expect the next quarter to bring the much needed vitality back in Bengaluru’s residential sector as sales should revive in the upcoming festival season. There is a sizeable pipeline of new projects that are likely to get launched in the coming quarters. Projects launched in proximity to employment hubs at right price points should continue to attract buyers. However, delay in reaching consensus over the implementation of Real Estate (Regulation and Development) Act, 2016 in Karnataka and objections raised by the Governor may inevitably affect buyers sentiments negatively in shortterm.
Source: Colliers International India Research
For more information: Sumit Jain National Director Residential Services Sumit.jain@colliers.com
Aakanksha Anand Senior Manager Residential Services Aakanksha.anand@colliers.com
Copyright © 2016 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
Authors: Surabhi Arora Senior Associate Director Research Surabhi.arora@colliers.com
Divya Grover Senior Manager Research Divya.grover@colliers.com