Bangalore has emerged as the most preferred real-estate markets in India, over the last 10 years. There are numerous reasons for this, such as the booming IT industry and growing infrastructure. However, the most crucial aspect of homebuying is cost, and buying a home in Bangalore is relatively economical when one compares it to the exorbitant realty markets of Mumbai and Delhi-NCR where one has to break the bank in order to pay mind-boggling sums of money – at least 1 crore or more – to buy a decent sized home in these cities.
Having said that, Bangalore’s housing market, like all other urban markets, faces similar socio-economic challenges including income disparity. Hence, a better understanding of the segmentation of the market with respect to the budget will enable builders and investors to be able to tap into this housing market.
We quizzed random prospective home-buyers in Bangalore to understand how much their budget for an apartment and their preferred location. In the process, we recorded over 6000 responses. Our findings are documented in the following graphs and they tell an interesting story which goes much deeper than what initially meets the eye.
Budget of a Homebuyer in Bangalore
63% of the respondents were looking for apartments in the 50 lakh to 1 crore range. About 23% have a budget that is less than 50 lakh. Altogether, a staggering 86 out of 100 respondents have a budget of less than 1 crore. This is in sharp contrast with what the market offers as projects built by reputed builders are priced at 70 lakh or above.
This has contributed to a disparity between demand and supply. Perhaps, this explains why most housing markets in India have a large share of unsold inventories piling up every year. A recent survey conducted in (H2) 2017 by real estate consultants JLL paints a similar picture, “as many as 70,000 residential units remain unsold across Bangalore in 2017.”
Budget Range of Bangaloreans – 2 & 3 BHKs
In terms of a budget for 2 BHK & 3 BHK apartments, our research revealed that 73 out of 100 buyers are looking to invest 55 lakh or lesser in order to buy a 2 BHK apartment. Whereas, in order to acquire a 3 BHK flat, 76 out of 100 buyers are looking to invest a maximum of 80 lakh. In fact, the apartments developed by big builders are priced at least 35%-50% more than the expected price of homebuyers. This disparity is a strong indicator of the largely ignored socio-economic reality of the people living in metropolises in India.
It should be noted that a larger quantum of residential housing demand is in the lower ticket range (55 lakh or lesser – 2 BHK) & (80 lakh or lesser – 3 BHK). Developers would profit by catering to this huge market by optimally designing their development strategies.
Locational Preference of Homebuyers in Bangalore
With respect to location, trends of previous years continue to remain the same in 2018. South Bangalore, home to the IT sector, accounts for almost half the share (46.6%) of preferences for localities in Bangalore. Meanwhile, North and East Bangalore appear to be the next preferred destinations at 21.7% and 21.5% respectively. West Bangalore with suburbs like Rajajinagar, Vijaynagar accounted for the last significant part of the pie at 10%. Central Bangalore is a commercial hub and home to some of the most posh and expensive residential areas like MG Road, Lavelle Road, Vittal Mallya Road and Richmond Road. Being the most developed zone in Bangalore, residential projects in these localities are scarce and even those are pricey, and hence accounted for a meagre 0.3% of sales.
Ray of Hope for the Real Estate Market
The trichotomy of demonetisation, RERA Act & GST has transformed the real-estate market. The positive effects of these government initiatives took some time to reflect on the market, as buyers played the waiting game in 2017.
2018 has been the year of consolidation, as builders have increasingly started recognizing the needs of the market by launching affordable homes (upto 40 lakhs) and mid-range segments (less than 80 lakh) to meet various demands. The Knight Frank report on housing trends in 2018 (H1) notes this trend, “60% of new launches in Bangalore in H1 2018 were in the 25-50 lakh bracket.”
Developers are now competing aggressively to highlight RERA compliance, availability of occupational certificate (OC), PMAY eligibility and ready-to-move-in projects in the 40-75 lakh segment, thus highlighting the effects of RERA & PMAY CLSS initiatives on the developers and the real-estate market.
What Lies Ahead for the Real Estate Market in Bangalore?
Bangalore, with a current population of 12.5 million, is booming. It is home to a large number of working class people, and is the 5th largest contributor to India’s GDP. Government initiatives such as RERA Act, and PMAY-CLSS with a vision of ensuring ‘Housing for All’ by 2022, are facilitating the entry of first time homebuyers to the market. There is a significant section of the population that’s looking for budget and affordable homes in the city. Developers should look to tap into this section while paying close attention to homebuyers’ limited budgets and designing projects under PMAY-CLSS schemes which have a wider appeal.
To conclude, what was once an unorganized market marred by uncertainty, inconsistency and lack of transparency is now more regulated, transparent, responsive and consumer-oriented. However, the transformation of the sector can only be complete once the builders and investors understand the requirement of the customers (in terms of size and pricing of homes) and accordingly match supply to the demand. This in turn would reduce the number of unsold inventories, thus aiding developers, and self-correct an erroneous market. The signs of change are undeniable.