C. N. Govindaraju[/caption]
Bagmane Developers Pvt.Ltd. is of the view that most of the prominent micro markets in the region have 90 percent occupancy rate. Comparing the Chennai and Bengaluru markets, Chennai, development has largely been haphazard while Bengaluru city grew in a more systematic manner. In the commercial segment, due to higher demand and lesser availability of large parcels of land in Bengaluru and Chennai, there is no ready supply for next 6 months to 1 year. The next supply will only come after 2 years. .
Over the years, home buying trends in South India have undergone a tectonic shift. Increasing disposable income, improved career opportunities, better understanding of the real-estate and nuclear family set up have contributed significantly in altering home buying trends.Putting things in context, JC Sharma, Vice Chairman & Managing Director, SOBHA Limited said, “Today, customers prefer to buy a ready-to-move-in home or projects nearing completion to avoid blocking their money for an unspecified time frame. Such properties can also become a source for rental income or can be resold at higher value, allowing investors to generate income.”
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JC Sharma, Vice Chairman & Managing Director, SOBHA Limited[/caption]
Ashish Puravankara, Managing Director, Puravankara Limited elaborated, “Operating in a price sensitive market like Bengaluru is challenging where margins are slim and consumer now is looking for value additions. While our focus currently is residential development, in next five years, it will be 80 per cent residential and 20 per cent commercial. In terms of affordable housing, The Provident Housing a wholly-owned subsidiary of Puravankara Projects Limited will offer premium affordable housing projects across Bangalore and Chennai.”
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Ashish Puravankara, Managing Director, Puravankara Ltd[/caption]
Commenting on the post RERA scenario in South India realty Bijay Kumar Agarwal, Managing Director, Salarpuria Sattva Group, said, “For developers in South India, RERA has not had much adverse impact as most of them are quite disciplined in their processes and understand the importance of consumer trust. However, all the markets are undergoing correction phase and are expected to improve in next 3-4 months.”
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Bijay Kumar Agarwal, MD, Salarpuria Sattva Group[/caption]
Brigade Group has its real estate presence in Bengaluru, Mysore, Hyderabad, Chennai and Mangalore markets. According to Viswa Prathap Desu, Senior VP Sales and Marketing, “Bengaluru is a well-developed real-estate market and Hyderabad is emerging as the next hot spot in the Soth India region.Three important emerging micro markets in Bengaluru are North Bengaluru, East Bengaluru and Kanakpura road. We are developing affordable housing projects in North and South East Bengaluru which will be completed by financial year 2018-19.
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Viswa Prathap Desu, Senior VP Sales and Marketing, Brigade Group[/caption]
As the president of CREDAI Bengaluru, some of the initiatives introduced post RERA are educating the member developers on compliances, and empowering them for self-regulation. The agenda that we have set out for the next two years is to create awareness among developers and consumers alike on RERA as well as GST. Ashish Puravankara
Bengaluru
Bengaluru known as the Silicon Valley and the Garden City of India is a demographically diverse and one of the fastest growing major metropolitan cities of India. With 92 million sq. ft. of IT-specific real estate inventory in the market, Bangalore takes top spot as one of the leading IT destinations. Accounting for the presence of more than 35% of all IT companies in India, including a mix of multinational firm back offices, captive back offices and Indian tech giants, the city is undoubtedly the largest contributor to the IT market in terms of space take-up.“Sarjapur area in Bengaluru has emerged out as one of the strongest micro market in the region. North Bengaluru micro market is picking up really well from residential real estate perspective,” said Reeza Sebastian, Senior Vice President, Residential Business, Embassy Group.
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Reeza Sebastian, Senior Vice President, Residential Business, Embassy Group[/caption]
Major IT corridors in Bangalore include the entire Outer Ring Road (ORR) corridor and Whitefield. ORR is the most expensive corridor, with rentals going up to $1.24 per sq. ft per month, owing to its good road infrastructure, well-established residential catchments in the vicinity and well as innovative infrastructure such as a signal-free corridor.
“Pricing is directly related to the cost of land, cost of construction and developer’s margins. “Developers should plan spaces optimally. For instance we are launching about 1,000-1,500 apartments in Bengaluru that offers compact housing with value for money. Apart from location, project concept and sizing is important.” C. N. Govindaraju
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Source: HDFC Realty[/caption]
There is a lot of focus on infrastructure development in this micro-market, making it a go-to location for IT firms. A lack of supply with sustained demand has enabled landlord-favouring market conditions, and this corridor is bound to see rents growing further. This is visible in the increasing trend of companies pre-committing to upcoming office space supply in this market.
Extensions to Koramangala, Jayanagar, and Malleshwaram and the emergence of the Bellary Road corridor, Whitefield and Outer Ring Road are now convenient locations feeding into the city’s IT districts. This has made the city especially vibrant on the luxury housing front, with several high-end residential projects being developed in different directions.
The capital values in locations such as Central, Airport Road, Whitefield and Yelahanka recorded a 3%-6% decline in H1 2017 while off-central locations such as Jayanagar, Sadashivanagar, Bannerghatta and Koramangala witnessed a 1%-4% increase. Pratik Mantri, Director Mantri Developers elaborating on the trend said, “The pleasant weather all year round in Bengaluru is the city’s advantage in attracting workforce from across India and abroad. In the last two to two and half years, new supply of projects has not kept pace with the demand, in office spaces; the demand is much higher than the supply.”
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Pratik Mantri, Director Mantri Developers[/caption]
Micro Trends
Kanakapura Road in the southern part of India’s IT city of Bengaluru is known to be mid-segment buyers’ preferred destination, and is now witnessing the launch of high-end projects as well. Many more such projects are being planned as the metro construction is expected to finish by end of 2018. The transit route will be a major boost to the area and resolve existing connectivity issues to a large extent.
Varthur is another location attracting mid-segment buyers in large numbers. Along with Sarjapur Road, Varthur offers proximity to the key office areas in Whitefield, Electronic City and Koramangala. Being a part of the Outer Ring Road, these two areas have benefited significantly from the growth of IT corridors along this important route. Coupled with the affordable prices in most residential projects, both these locations will remain a hit with end-users and investors. Yelahanka–Doddaballapura Road is emerging as an important destination in North Bengaluru, with prominent builders foraying into this location. The belt has witnessed a price appreciation to the tune of 5%-8% during the last 12-months. This can be attributed to the presence of social infrastructure, connectivity to the International Airport,the IT/ITES catchments around Hebbal.
Bannerghatta Road continues to evince end users on account of the existing social infrastructure and upcoming Phase 2 metro. Properties along Tumkur Road in the close vicinity of Yeshwantpurrailway station coupled with the upcoming Metro station has provided the necessary impetus for growth in this region. Properties near Jalahalli Cross on Tumkur road cater to the industrial catchments of Peenya and have remained stable.
“While several landmark reforms have been implemented by the Government in the last of couple of years, we believe that the sector requires a separate industry status that will help to boost domestic bank lending and help deliver projects on time. Additionally, ‘Single window clearance’ for faster approvals has been along-awaited demand of developers.”JC Sharma, VC & MD, SOBHA Limited
Chennai
Chennai residential real-estate is 80% an end user market and is witnessing demand from the NRI investors who have their roots from Chennai.Areas like Ayanavaram, Virugambakkam, Nungambakkam and Ashok Nagar are important micromarkets in Chennai.Sales and launches saw a modest recovery in Chennai and a significant chunk of new launches took place in the below ?50 lakh range, indicating an emphasis on the affordable housing sector.
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Chandrakant Kankaria, Director, Olympia Group[/caption]
Chandrakant Kankaria, Director, Olympia Group explained, “In the last four to five years, Chennai has witnessed a healthy diversification of economic growth. It’s an improving market with new residential pockets of North Chennai, Porur and Navallur. IT/ITeS, BFSI and the diverse economic base continues to attract new businesses and industries, assuring a strong demand for both residential and commercial projects.”
Explaining the changing buyers preferences in Bengaluru & Chennai, Ashish Puravankara stated, “The home buyers are much more aware and want reasonably priced homes with value addition. They also expect good customer service from the developers. For instance, we give customer value adds by adopting latest construction technology for timely delivery of projects, good quality workmanship and pleasant customer service.”
The southern prime districts have followed a natural extension to Old Mahabalipuram Road (OMR) and East Coast Road (ECR). Some years back, South Chennai comprised of areas like T Nagar, Mylapore, Adyar, Alwarpet, MRC Nagar and San Thome. These areas were always prime, and with the city growing further south, these localities are considered as central Chennai now - today, South Chennai more or less means OMR and ECR.
The OMR pre-toll location sees the maximum traction from the IT industry, with rentals as high as $1.24 per sq. ft. per month. The IT corridor consists of Grade A buildings with easy access to the city centre. Proximity to good social infrastructure also helps it to remain a location of choice for major MNC firms. With limited vacancy and no new upcoming office buildings in the near future, the rentals in this corridor are expected to rise.
| “Challenges in building affordable housing projects are, acquiring land at reasonable rates, controlling the FSI cost and most critical, acquiring timely sanctions and clearances from local authorities.” P.C. Sukanand |
P.C Sukanand, Eminence group[/caption]
The Small and Medium Enterprise industry workforce and government officials are largely driving the demand for residential units in North Chennai; Automobile and electronic manufacturing work force is driving the demand for residential units around Oragadam and Sriperumpudur (West Chennai)and Great Southern Trunk Road (GST Road); IT is predominantly driving the demand along the Old Mahabalipuram Road (OMR) and Great Southern Trunk Road (GST Road) to a certain extent.
Micro Trends
The Old Mahabalipuram Road (OMR) belt has shown good absorption levels butThuraipakkam, Karapakkam and Perungudi areas lack good infrastructure. Perumbakkam, off Sholinganallur, houses products in the mid and higher-mid segment while, Velachery-Tambaram road due to its connectivity is seeing firming up of demand.The micromarkets of Pallikarnai, Medavakkam and Vengaivasal continue to attract home buyers. Semmancherry offers integrated-township projects and Siruseri consists of IT and industrial parks.
East Coast Road (ECR) showcases the development of a super-luxury high-rise and villaprojects amd the mid-segment projects abound in Kelambakkam,Pallavaram, Chromepet and Tambaram and regions around. The Grand Southern Trunk Road (GST), with the presence of SEZs, integrated developments andexcellent connectivity to various parts of the city, is evolving into a prime realty market and the region surrounding Thiruporur is witnessing the development of affordable housing. P.C Sukanand of Eminence group stated, “There is a paradigm shift of buyers demand to the 40-60 lakh budget range which also means that we are in the phase of consumer driven market.”
The rapid industrialization and advent of global manufacturing companies along Sriperumbudur, hasled to an array of budget homes projects with integrated township projects.The Chennai-Bypass road along the western corridor of Mogappair and Aynambakkam has witnessed residential development during the last few years. Porur is an emerging as a prime realty market.
“In Bengaluru the office space demand has led to the emergence of some of the strongest micro markets in the country, In Hyderabad West Hyderabad’s residential market is picking up well. In my opinion residential real-estate will see the emergence of compact houses with a check on ticket prices.”Reeza Sebastian
The realty market in North Chennai consisting of Padi, Villivakkam and Ayanavaram and Perumburis typically driven by the trader community, public sector employees and port-related activities relevant in the region.This has led to development of smaller mid-segment properties to cater to the local catchment areas.
There remains an inherent demand for plots and independent bungalows in the micromarkets ofPoes Garden, Boat Club, Alwarpet, R.A Puram, Besant Nagar and Adyar. These locations face theissue of scarce land and premium pricing.Anna Nagar is witnessing the redevelopment of projects and Nungambakkam has witnessed the launch of new projects in the super-luxury segment.
“Even before RERA, majority of developers in Bengaluru were operating in a transparent and ethical manner. RERA is an excellent initiative and if implemented in its entirety, it will make everybody involved - builder, buyer, banker and broker responsible towards delivering their respective responsibilities which would help in the completion of projects with the promised specs and on time.” Pratik Mantri
Hyderabad
Robust infrastructure, availability of skilled manpower and competitive real estate prices differentiates Hyderabad from other metros of India. However,its real estate market had witnessed a slowdown due to the uncertain political scenario during formation of Telangana.
Hyderabad topped office leasing market in Q2 2017 and witnessed a 93% rise in the net absorption of office space, at approximately 1.75 million square feet. In fact, there is currently a shortage of Grade A office spaces in Hyderabad - as a result, there is a fresh demand for land parcels where new commercial office facilities can be created. The Telangana government has also taken decisive initiatives to promote Hyderabad as India’s new start-up capital.
Many developers who were traditionally in the luxury or high-end segment are foraying into affordable housing. The challenge is to execute the projects as early as possible to gain profits and the availability of reasonably priced land in urban areas. Bijay Kumar Agarwal
With Hyderabad reinventing itself as a key market, the city’s residential real estate market grew by 12% over the previous quarter. The affordable housing segment constituted a majority of the overall launches in Q2 2017, which were mainly concentrated in the peripheral areas of the city.Residential unit sales remained unchanged in H1 2017, while prices in select micro-markets (such as Appa Junction, Uppal, Kukatpally, and Manikonda) grew between 5-10% y-o-y. Due to a steady growth in sales, inventory overhang has also reduced to 24 months as of H1 2017 (from 32 months as of H2 2016).
Bengaluru has emerged as one of the best real-estate markets in South India. The fast developing Hyderabad will give tough competition to Bengaluru in next few years. Viswa Prathap Desu
Micro Trends
Gachibowli, has seen demand for the residential segment, because of young IT crowd that wants to stay close to IT establishments, like DLF Cyber City – Hyderabad’s first IT SEZ – as well as HITEC city, and well-developed physical and social infrastructure. Gachibowli also has good access to the airport via Outer Ring Road.Kondapur- has seen some terrific real estate expansion owing to the rising start-ups and working class people living in this suburb.Madhapur: is a locality in Hyderabad that is right in the middle of the city’s IT hub. It consists of the IT SEZ-rich Hitech City, as well as the residential areas surrounding it.
The region surrounding Nanakramguda is witnessing development in mid-segment residential units. Manikonda well connected to Outer Ring Road and Old Mumbai Highway is witnessing development of integrated townships. Tellapur Kokapet and Gandipet are witnessing development of mid-segment, gated communities and villa projects. Ashok Naidu, Director, Kumari Builders and Developers, commented, “At present, residential market of South India cities is dominated by end users than investors. Townships are a big hit with buyers and therefore developers are turning to outskirts of metros due to availability of land parcels at cheaper prices.”
“Right now the markets are undergoing self-correction. There is a huge gap between the demand and supply of affordable housing due to lack of infrastructure and high construction costs.”Chandrakant Kankaria
The region surrounding JNTU and the Malaysian Township are witnessing development of projects in the mid-segment and premium segment. A.S. Rao Nagar, in close proximity to Sainikpuri, Uppal primarily driven by the unorganised sector and Tarnaka housing government establishments, public-sector units and the Osmania University are witnessing development of affordable housing and budget villas.
Jubilee Hills and Banjara Hills are the most sought after locations with an inherent demand for independent bungalows. Other posh areas like Gandhinagar and Begumpet has the presence of premium apartment projects and independent residential bungalows.
Given the views of the realty developers across South India, it seems the consumer confidence in South India has outperformed the other regions of the country. In markets like Bengaluru the residential market is a by-product of the corporate setup and with more and more companies heading South wards and eyeing the ever-growing pie of IT market in the region, the residential market will also grow more resilient and strong in coming times.
Demand-Supply equation of the market has definitely been impacted because of regulatory changes. Only half of the products were launched in all segments of what were supposed to enter the market. The next 6-8 month time is expected to be the era of market consolidation and re-orientation of products in the cities of South India will happen.
