Tag: Bangalore Properties

Commercial real estate: The perfect choice for investment

Bangalore – Investment in real estate is considered to be the best form of investment for any asset. The returns are highest and it is an asset which cannot be stolen. With this view, Indian market has always been driven to buy property more than invest in deposits, gold or any other form. The Indian mind set of investment in real estate has been inclined more towards residential due to the fact that there is an option of second home for buyers. Although most reports, experts and statistics are against this fact. Developers and experts from the sector express that commercial property as an investment motive is way better than residential.

For any investor, there are two most important things; initial cost of acquisition and return on investment. A good residential property may be lesser in pricebut is unable to yield higher returns. For instance, an average cost of a good 2 BHK unit in a good project in NCR will be around 30 – 35 lakhs and would fetch a rental of 25 – 30 thousand. Whereas, a 600 sq. ft. commercial property at a good location will cost around 40 – 50 lakhs and will provide a return of around 75 thousand monthly. This goes to show that the returns are higher in commercial properties over residential properties, even if cost is taken proportionally to the return.

M. K. Gupta, Chairman, KPDK Buildtech says “In commercial real estate it is more common for investors to pool their capital together and syndicate deals, you will also find that smaller private equity firms and finance companies are more inclined to do joint venture projects and provide the needed capital to complete the deal if the deal makes sense. So as a commercial real estate investor you have the potential to raise capital for a deal from the same traditional sources as residential real estate i.e. Traditional Financing and Hard Money, but in addition to that you can have access to capital through smaller private equity firms, hedge funds, private REITs, investment groups, etc.”.

Today, the trend of development has also started to drift a bit. As more and more buyers are interested in buying commercial property for investment, development in NCR is gaining momentum for commercial projects. Almost every region in NCR today has several commercial projects located in key places and offers various commercial spaces, some with assured returns as well. The concept of assured returns began with commercial real estate which ensures a buyer to buy and start earning. Therefore, a buyer earns before possession and also multiplies through capital appreciation with time. KushagrAnsal, Director, Ansal Housing says “There are three very prominent things with commercial real estate. One, the commercial real estate is valued differently. The income that a piece of commercial real estate produces is directly related to its usable square footage.

This isn’t always the case with residential. Secondly, commercial property helps diversify risk. For example, if you own an apartment building and you lose one of your 10 tenants, you only lose one-tenth of the income for that property, instead of the entire rent as you would if you lost a tenant in a single-family house. Finally, the cash flow is often greater with commercial real estate. The yield is often higher per square foot and on an initial investment basis than it is in residential. If you lease or rent a multi-unit commercialproperty, you have more tenants to generate income than you do with a single-family dwelling.

Source: The Economic Times

Here’s an update on Bangalore’s real estate market

The proposed Mumbai-Bangalore Industrial Corridor is expected to connect Bangalore City in the north-western side of the city along Tumkur Road. Since the last 7-8 years (since 2005/2006), Tumkur Road and its surroundings are witnessing significant augmentation and improvement in terms of infrastructure in general and connectivity in particular.

Some of the key infrastructure projects rendered operational in the area in the recent past include the Elevated Expressway, Bangalore-Mysore Infrastructure Corridor (BMIC) and Bangalore International Exhibition Center (BIEC).

Other on-going and proposed infrastructure initiatives are Metro Rail Phase 1 & 2 and Peripheral Ring Road. These infrastructure projects, along with the proposed Mumbai-Bangalore Industrial Corridor, are expected to significantly improve the physical characteristics of the area.

The result will be the development of large integrated projects, as there are large industrial land parcels waiting to be unlocked for quality real estate development with the growth of economic drivers in the area.

Until the recent past, the population of this micro-market had a low socio-economic profile – it was dominated by blue-collar workers as the area was a hub for small scale industries manufacturing ancillary parts for PSUs, automobile industries, garment industries, etc.

Over a period of time, the area saw the arrival of large Indian and multinational industrial entities such as Kennametal, Widia, ITC , Volvo, BOC , Reliance Packing Industries, etc.

Since last 4-5 years, the area is being viewed as one of the fast developing micro-markets in the city, as is evidenced by the launch of some large real estate projects complemented by key infrastructure initiatives.

This has vastly improved the characteristics of the area, which now has good availability of large land parcels due to the unlocking by sick industrial units at competitive prices, and a visibly changing socio-economic profile of the resident population.

Some of the large developments envisaged then (now completed) are Brigade Gateway Project on 40 acres land parcel, BIEC, Taj Vivanta – Tumkur Road, etc., to mention a few.

Till date, about 17 residential apartment projects launched and an there is expected to supply about 5,099 units in the micro-market on a cumulative basis.

Some of the graded developers like Brigade, Prestige and Sobha have also ventured into this market and are targeting the upper-middle income, middle and upper-lower income segments.

Social infrastructure facilities like hospitals and schools are already in place and are acting as catalysis for residential development in the area.

Most of these social infrastructure developments are adequately catering to the existing residing population. With the proposed Mumbai-Bangalore Industrial Corridor, this micro-market is expected to benefit from an increase in much-needed economic driver, which will significantly increase demand for all core real estate asset classes like residential, commercial / office, retail, hotel, industrial infrastructure, etc.

Some of the commercial / office and retail developments envisioned during 2005/2006 within this micro-market and its surroundings are operational now. These include the Brigade Gateway Project – an integrated development comprising residential apartments, commercial / office, retail and hospitality which is currently known as ‘Brigade World Trade Center’.

Commercial Grade A developments in the area account for about 260,000 sq. ft., which includes Brigade Rubix at HMT Township (about 180,000 sq. ft. of office space) and 80,000 sq. ft. of office space by IBC Developers within the residential development of Platinum City.

Tumkur Road is also fast emerging as an attractive destination for stand-alone developments and graded shopping complexes. This is evident from newly launched Brand Factory at 8th Mile, McDonalds, etc. along with ‘vanilla ‘ stores having brands like United Color of Benetton, Wrangler, Levis, Lee and Woodlands.

The proposed Mumbai-Bangalore Industrial Corridor is likely to leverage the residential, commercial and industrial infrastructure along with existing, ongoing and proposed infrastructure initiatives in terms of transforming this micro-market into a major growth node for the city.

We see the emergence of an important economic hub catering to the city in general and the micro-market in particular. The area within a 4-5 km radius along both sides of Tumkur Road is likely to develop into an influence zone for the proposed Mumbai-Bangalore Industrial Corridor in terms of residential belts like Magadi Road, Hesaraghatta, Jalahalli, etc. up to Yeshwanthpur.

Metro Rail Extensions To Spawn New Residential Locations

The Bangalore Metro Rail Project is envisaged as a major game-changer for Bangalore City in terms of inter-connecting different parts of the city and reducing traffic congestion on city roads, and significantly cutting down the commuting time.

Phase 1 of the Metro Rail Project largely covers the city centre, running a total length of 42.3 km through two corridors – the East-West Corridor (about 18.10 km linking Baiyappanahalli and Puttenahalli along Kanakapura Road) and the North-South Corridor (about 24.20 km liking Mysore Road with Tumkur Road till Hesaraghatta Cross). Phase 1 is likely to be commissioned by 2014.

Details of the proposed Phase 2 of the Metro Rail Project, consisting of four extension lines and two new lines with a total length of 72.095 km and 61 stations are given below:

The four proposed extension lines under Phase 2 are expected to provide much-needed ‘last mile’ connectivity to commuters and also optimize the utilization of Phase 1. The two new lines traverse through some of the densest and traffic-congested areas of the city, and will offer faster connectivity to the Information Technology Industry. The Phase 2 is planned to be completed within 5 years from the date of approval by the Government of India.

With Phase 2 covering a large part of the city, especially fast-growing locations like Whitefield, Mysore Road, Tumkur Road and Bannerghatta Road, these areas are likely witness further development in terms of all core real estate asset classes for the following reasons:

* Metro Rail Projects are being developed across the world’s high-density corridors because they provide vastly improved connectivity. This phenomenon is likely to be seen all along the alignment in Bangalore as well, resulting in substantial development

* There is a proposal to permit a maximum FAR of 4.00 (against the current average FAR of 2.50) all along the Metro Rail alignment within 500 meters on both sides of the Influence Zone. This additional built potential of the properties along the influence zone will be able to make use of this additional FAR, as land values along these corridors are very high

* Improved connectivity and reduced travel time may encourage the city population to prefer suburban locations for residential purposes (to avoid residing in high-traffic areas), which would further catalyse the development of social infrastructure like schools, healthcare, retail developments, leisure and entertainment facilities, etc. in the suburban locations due to the further development of residential catchments.

Considering the combined coverage of both Phase 1 and Phase 2 of Metro Rail Projects, all localities up to the BMIC Corridor alignment within Bangalore City are likely to witness significant growth over next 5-7 years.

Source: moneycontrol.com

Average size of Bangalore apartment highest in India

Bangalore tops in many things like weather, good, high-end schools and quality of life notwithstanding the traffic cribs. But there’s one not-so-well-known parameter of which the city can be justifiably proud: large apartments.

On an average, a typical apartment across major metros in the country is roughly 1,100 sqft to 1,200 sqft. In Bangalore, that size is 1,750 sqft making it 45% higher than the national average. The average size of apartments in Bangalore is the highest in India, 60% larger than those in Mumbai and 20% larger than those in the National Capital Region (NCR).

Data shared by global consultancy firm LJ Hooker states that the only other Indian city to match Bangalore in apartment sizes is its old IT rival Hyderabad, which also has apartments measuring approximately 1,750 sqft on an average.

Elaborating on the reasons why Bangalore has large dwellings, Alexander Moore, CEO, LJ Hooker India, says the primary reason is land cost. “The higher the cost of land, the greater efficiency you have to make of it, and that’s by building smaller apartments,” says Moore. Land prices in Mumbai and Delhi, says Moore, are 10 times higher than those in Bangalore.

The demographics of buyers in Silicon Plateau, who are primarily end-users located in tech hubs on the periphery, is another important factor. “This takes pressure off city areas and allows greater size. In Bangalore, you can travel 10kms to get access to land which is not the case in other cities, more so in Mumbai,” adds Moore. Mumbai and NCR have large investor populations who prefer smaller units close to city locations.

In Mumbai, the availability of developable land is so scarce that developers need to go vertical and keep the size of apartments units small to maximize land yield. As per data shared by LJ Hooker, the average apartment size in Mumbai is around 1,100 sqft. While average apartment size in NCR is 1,500 sqft, in Chennai it’s 1,300 sqft. “Affordability is the key to Bangalore’s real estate success,” says Jackbastian K Nazareth, group CEO, Puravankara Projects Ltd. PropEquity, a real estate data analytics and research firm in New Delhi, rated Bangalore as one of the most affordable real estate markets in the country.

Bangalore-based real estate major Sobha Developers sells 3-BHK units ranging from 1,850 sqft to 2,000 sqft, which account for 90% of its total apartment sales. At Puravankara Projects, sales of 3-BHK units contribute approximately 70% of its sales.

Prashanth Sambargi, partner, Mars Realty, points out that the city always had a culture of large bungalows with gardens, which is why people look for large apartments. That buyer mindset is visible in the real estate market as many Bangalore-based developers offer terrace/balcony spaces ranging between 600 sqft and 2,000 sqft per apartment.

Developer speak

Most of the demand for 3-BHK apartmens comes from the migratory population which wants to have one room for kids, one room for parents/in-laws and another for guests.

Source: GharaBari