Bengaluru’s thriving economy is a major demand driver for residential real estate in the city. It is the leading city, in terms of absorption of office space and this, in turn, is fuelling demand in the housing segment.
An analysis by Track2Realty, vis-à-vis the volume of office space consumption per household (not only in India but also internationally in London, Singapore, New York, Tokyo, etc.) found that there is equilibrium, when the office space consumption is around 60-65 sq ft per household. In India, the ratio per household, even in a city like Mumbai, is 25 sq ft. In Kolkata it only 14-15 sq ft office space per household. In Delhi-NCR, it is 20-25 sq ft per household. London, despite its large population, has 50-55 sq ft office space consumption per household, while in Singapore it is 60-65 sq ft and 160 sq ft in New York.
Bengaluru is the only face-saver in India, where the absorption is 50 sq ft office space per household. This means that the volume of office space and houses being supplied, have been in equilibrium, thereby, making the city attractive to end-users. Moreover, investors won’t be attracted, unless they are very long-term players.
A report by JLL India, also points to the fact that Bengaluru is the first Indian city to appear on the ‘City Momentum Index’ (CMI) Top 20 list, this year. Reinforcing the city’s status of as one of India’s premier technology centres, Bengaluru figures at No 12 in the Top 20 technology-rich cities globally. Large tech companies are also vying to establish or expand their presence in the city, thereby, providing a fillip to economic as well as real estate activity.
Ashish Puravankara, managing director of Puravankara Projects, believes that companies are also realising the cost advantages of doing business in Bengaluru. The average rental cost of office space in Bengaluru is around Rs 45 per sq ft and this works well for the companies. The average cost of housing in Bengaluru is Rs 5,500 per sq ft, which makes it affordable for the workforce.
“If the prices are supposedly unaffordable, due to high demand, people would have started looking at other cities, such as Chennai. Companies are setting up offices in the city, owing to its cosmopolitan culture, great weather and access to educated workforce. This has created substantial employment opportunities, which is fuelling the demand for housing. Many people have moved from Delhi or Mumbai, for work,” explains Purvankara.
Joe Verghese, managing director of Colliers International, feels that while developers have been lucky, they have also played a very valuable role. “Investors trust developers in Bengaluru more than those in other parts of the country, owing to their professionalism and commitment towards promises that they make. I don’t see too many disputes between developers and investors or among developers in Bengaluru’s realty market,” points out Verghese.
Besides the cost and the ease of doing business, Bengaluru also attracts corporates due to its favourable weather and safety. For example, four large multi-national companies in Gurgaon, occupying three to four million sq ft, are reportedly planning to shift to Bengaluru after tremors were felt in Delhi-NCR. All these underlying factors, collectively make Bengaluru an ideal business destination in India.
(The writer is CEO, Track2Realty)