‘Bangalore still has 22% idle commercial capacity’

November 07, 2009

Bangalore, the country’s third leading realty market, has perked up smartly on the residential front but still has 22 per cent idle commercial capacity, according to a Bangalore report by IndiaREIT.

IndiaREIT Fund Advisors expects commercial space market to turn around nationwide in 2011, said Mr Ramesh Jogani, CEO and MD of the Piramal group-promoted real estate venture fund, after releasing the city report on Thursday.

During April-June 2009, Bangalore started recovering and posted 50 per cent increase quarter on quarter in residential sales, selling 1.1 million sq ft.

The city leads the country in office space, with 73.8 million sq ft of stock available. However, it also has a high 22 per cent vacancy along with a large number of projects under development putting pressure, he said.

Budget houses offered in the last one year have shown demand even during the downturn of 2008. Residential grade-A property has doubled in the last four years. The city continues to add over 10,000 new housing units every year. North Bangalore leads the residential market with large supply coming in the next few years, driven by the airport located there.

In comparison, Hyderabad’s residential space recovery has not started and there is an n oversupply due to unlimited FSI provision, he said. Mumbai and Delhi, the top two markets, had picked up.

The IndiaREIT study reveals that while vacancy has been rising across the residential segment, budget housing projects launched during the last one year have reported resilient demand even during the downturn.

For the commercial space, IT and ITeS were the main drivers. “Developers are expected to rationalise new [office space] supply by delaying project completions and rolling back announced projects. We therefore expect the development pipeline to significantly reduce over the next one year period.”

The Bengaluru Real Estate Report 2009 by IndiaREIT and DTZ focusses on residential, commercial, retail and hospitality projects. According to it, “While property prices have fallen over the last one year, market players believe this to be a much needed correction to keep the sector attractive [to] the investor/ occupier. Though a sector-wide recovery seems to be on the way with a clear pick-up in demand levels during the last 3-4 months, questions on its sustainability remain. This recovery, however, would depend on the level of present and proposed infrastructure of the city.”

Jogani said, “Past investments in Bangalore and Chennai have given us great multiples. In Chennai we are focussing on the resilient residential sector, we plan to target mid-segment housing with a price range of Rs 2,800-3,200 a sq ft at launch, catering to large untapped demand.”

IndiaREIT manages $ 450 million. It has more than 47 million sq ft of area under development through eight local developers.

Source : http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=5836&cat_id=8