Bangalore Real Estate: WHERE TO INVEST IN 2014

The inherent advantages of Bangalore drive investors to its fold with multiple options, says Mr. V Nagarajan

The real estate sector that is interlinked with the economic growth had been plagued by several adverse factors in 2013 like lower economic growth rate,rupee depreciation,declining sales and piling up inventory.Among the metros,Bangalore has witnessed mixed sentiments in real estate sector.

The silicon valley of India has been notching up the top slot in the past decade as the city with the largest volume of office space absorption in the country as it is home to over 664 MNCs, 2116  IT companies, 248 BPOs and 183 biotechnologies companies. Other sectors such automobiles, garments, finance and real estate also have shown phenomenal growth in the past 5 years.

 

Mr. V Nagarajan

This is one reason why the garden city has been driving the investors due to promising gains in terms of rents and capital appreciation.

For investors in commercial property, apart from outer ring road, North Bangalore is an emerging destination where development and leasing activity is reaching a new high. The rental yield is in the range of 10.5%  to 11% post tax on outer ring road.

For investors in residential property, capital appreciation will offset the lower rental yield on investment. Projects are being launched in almost all the locations but the thrust should be given to secondary locations. For instance, Koramangala, Jayanagar, Indira nagar, CV Raman nagar, etc.are the residential hubs &  mid range units are being launched on old Madras road, Bannerghatta road and R T Nagar.

North Bangalore is a favourable destination given the growth of IT in the region leading to a surge in demand for residential property, say realtors.

 

Capital appreciation should be the main driving factor for investors looking at residential property which is in the region of 12% to 15% per annum. At the same time there are instances where integrated development projects developed by leading developers have notched up a weighted average in the region of 10% to 15%.

There are city centric properties which continue to get a stronger demand due to limited supply, said Mr. Manoj Barai, Head of Operations, Pacifica Companies. Those who are looking for high end units with specific preference across CBD locations, there are opportunities available but the option is limited.

"For long-term investors, plotted development projects provide the requisite cushion to plunge into investment",said Mr. N. S. Srinivasa Reddy, Assistant Vice-President, Research & REIS, Jones Lang LaSalle Consultants Pvt Ltd. The fact that investment in land has been consecutively yielding 15% to 20% annualised return is yet another major driving factor for investors, he added. A majority of the projects are under various stages of implementation in North Bangalore, Whitefield, some parts of Mysore Road and Kanakapura road. However, this is not an organised market and so far dominated by local developers. Of late, a few leading developers have also entered the market.

Yet another option is industrial land in areas such as Tumkur Road, Outer Ring Road, Sarjapur Road and Doddaballapur. The government has taken steps to encourage manufacturing industry by allotting land. With the result demand for industrial land continues even today. The demand predominantly from sectors such as logistics & warehousing continues to grow and the yield is competitive due to affordable rentals and limited options for users. There are areas where the capital appreciation was as much as 20% to 25% per annum.

The timing is just appropriate now for people looking at a longterm investment option to enter residential sector as fiscal sops, phased payment options &  bargain deals flourish amidst liquidity crunch, postponement of new launches & dipping sales, say property consultants.

A few developers are able to drive commitment from investors for prelaunch sales to tide over the working capital requirements. On an average, apartment prices appreciate by 18% to 25% during the project implementation period spanning 2.5 to 3 years across select cities.

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