Amidst COVID-19, Bengaluru’s residential prices have witnessed a QoQ decrease of approx. 3% in the second quarter of 2020, revealed the latest edition of Magicbricks’ PropIndex (Q2, 2020). Bengaluru residential market maintained a steady momentum in the last 5 years with 17.7% and 33.3% surges in ready to move and the under-construction segment prices, respectively. However, the QoQ 2.8% price decline in the ready-to-move segment washed away the gains made during the previous six quarters.
The under-construction segment had a decent 33% growth in the last 5 years, but the recent pandemic brought a decline of 0.8% in Q2 2020. Shortage of labour, supply chain disruption and extension in the RERA deadline by 3 months in Bengaluru is likely to shift the delivery of some under-construction projects by a few months.
According to the Propindex, Bengaluru thrives on healthy mid-segment demand, with both 2 and 3 BHKs each accounting for more than 40% of the demand and supply. Together they account for 88% of the property searches and 92% of the supply. However the market is slowly shifting to the affordable segment, and a small demand-supply mismatch is emerging in the less than INR 5,000 per sqft price bucket. The demand for 1 BHK and 2 BHK configurations is likely to further increase due to the reduction of stamp duty between 3% to 5% for properties costing up to INR 35 lakh.
Commenting on the PropIndex, Sudhir Pai, CEO, Magicbricks, said, “India’s real sector is gradually adopting to the new normalcy. The economy had almost come to a stand-still in March but now hopefully we are on the road to recovery. At a pan-India level, the price decline has been just 1.5% QoQ while repo rates have been lowered by more than 100 points. This augurs well for the industry. Our data also suggests that consumer interest has not tapered off and developers have to grab the attention of the home buyers through attractive deals and offers. There is a pent-up demand for ready-to-move-in properties as our data suggests that 80% of searches are happening in this segment and the rest for under-construction.”
Post COVID-19 pandemic, the government has allowed partial sales of plots In the layouts to ease the liquidity situation of developers and accelerate the layout development process. State government allows the regularization of over 75,000 land parcels, which were initially a part of the BDA development scheme but were under unauthorized possession for more than 12 years, by payment of penalty.
Whitefield, Sarjapur Road, Bellary Road and Electronic City were the top 4 micro-markets in the city, supported by factors such as affordability, better access to IT hubs and sound connectivity to the airport. The extension of metro lines from Baiyappanahalli – Whitefield and RV Road – Bommasandra is likely to boost the demand for the economic hubs of Whitefield and Electronic City in the future
However, it will be interesting to see how these factors play out as the market recovers from the outbreak of COVID-19 and the ensuing national lockdown. Magicbricks data indicates that overall, consumers are back to the marketplace, albeit in lower numbers. Developers are running various schemes and promotions to entice home buyers and drive transactions. The next three to six months will remain key to determine any developing trend in prices and transaction volumes. It has become even more of a buyers’ market with the onus on sellers to make the right interventions to enable the real estate market to bounce back.