The Boom and Boom in Bangalore Housing Market

02/02/2024

The residential real estate market in Bangalore, often hailed as India's Silicon Valley, has witnessed a meteoric rise in the past 18-24 months. Sales have hit record highs! As per the latest industry reports, Bangalore saw sales of 47,000 units in the first 9 months of 2023 which is an astounding 42% over the previous year. Prices have surged by over 40% across various micro-markets in a matter of 6 months.

How Is The Bangalore Housing Market Growing?

This unprecedented growth was fueled by various factors such as -

Return to Office Post-COVID

As IT companies began recalling employees to Bangalore, the demand for residential spaces soared.

High Rentals

The influx of professionals boosted rental rates, making home ownership more appealing.

Upgrading Living Spaces

The pandemic-induced desire for larger, more comfortable homes played a significant role.

Low-Interest Rates

Attractive financing options initially fueled the market.

FOMO Among Buyers

Fear of missing out led to a rush, as prices escalated and buyers feared being priced out in the future.

Investment in Plots

The flexibility of remote work encouraged investment in land. Plots in the suburbs also served as a lower ticket size alternative to the overpriced apartments in the city.

Supply Constraints

COVID-induced uncertainties slowed down land acquisitions and new project approvals by developers in 2020 and 2021. When demand spiked, supply lagged, exacerbating the price rise.

Interestingly, this demand wasn't limited to established developers. New entrants, despite limited track records, saw massive demand. The supply-demand mismatch, with a ratio of 3:1 in terms of interest, led to weekly price hikes in some cases.

However, the key question is not if but when this upward trajectory will plateau. The answer lies in the imminent influx of new inventory. Sources indicate that around 50 new launches are expected in the next six months, adding approximately 25,000 units to the market. With top-tier developers contributing over half of this, the market dynamics are poised for a shift.

A Look At The Bangalore Housing Market

Typically, Bangalore's market absorbs 35,000-40,000 units annually. However, the simultaneous arrival of these new projects will likely tip the scales in favour of buyers. While a direct drop in prices seems unlikely, as developers aim to maintain the current rate of 9000-10,000 Psft, innovative strategies are expected. These may include flexible payment plans, freebies like modular kitchens, gold coins, and Developer paid Pre-EMIs.

The next 6-12 months will be pivotal. An even larger wave of new projects is anticipated post-2024, following numerous land deals in 2023 and projects currently in the approval stages. This period will witness a tug-of-war in the market, balancing supply and demand.

A word of caution to prospective homebuyers: exercise due diligence. With the market in flux, it's crucial to vet developers and projects thoroughly. Attractive offers might be enticing, but it's essential to ensure their viability. Seek reliable market insights and conduct comprehensive legal and technical checks before committing to one of life's most significant investments. Stay away from Fly-by-night operators who prey on consumers during such times of boom.

After all, as Warren Buffet said, only when the tide goes out, do you discover who’s been swimming naked.