The announcement of Real Estate Regulatory Act (RERA), demonetization and unsold stock have crippled property launches in Bengaluru. Despite the slight improvement, the number of new launches in the first half of 2017 (H1) lagged behind when compared to the first half of 2016 with a 42% dip and a 19% lag in sales, says a Knight Frank study.

Shantanu Mazumder, Director, Bengaluru, said, “Until recently recognized as one of the most resilient residential markets in the country, today, the Bengaluru market is reeling under pressure. However, things have started looking up slightly in 2017 and although the figures are still restrained, marginal improvements were observed in the number of new launches and sales at 5% and 4% respectively in first half of 2017 on a year-on-year basis.

However, the study maintained that the inclusion of Bengaluru in the Smart City list is expected to have a far reaching impact on the residential market in the coming years and this will ride well on the back of the Metro phase-1, which is completely functional. This would, in turn, add to the overall attractiveness and brand image of the city as a residential market.

Mazumder said, “A significant chunk of new launches in the first half of 2017 lies in the Rs 25-50 lakh range, a welcome development given the government’s focus on the affordable housing sector. Also, the demonetization effect seems to be fading and bills like Goods and Services Tax and RERA that are expected to empower the end user in the long term will see the residential market picking up in the next two quarters.”

Among the city’s micro markets, South Bengaluru continues to lead in both new launches and sales, courtesy its healthy congregation of large IT hubs. It is also preferred by both locals and expatriates, followed by North Bengaluru.

The research done by Knight and Frank on YoY basis shows that on the office market front, 5.8 mn sqft of transactions depict a slight dip, signaling moderate activity compared to previous years. This decline could mainly be attributed to the dearth of ready office spaces that forestalled potential occupiers looking to expand. Another factor is the tepid growth the IT/ITeS sector - the key demand driver of the office market in Bengaluru.

Having matured over the years, the sector stands on a bigger base today thereby limiting the scope for remarkable expansion that was witnessed earlier. On the new completions front, the city witnessed the infusion of 3.7 mn sqft of office space in first half of 2017, which is slightly better than the quantum of new completions in second half of 2016. “However, this figure is considerably less in proportion to the demand observed in the recent periods. While the IT/ITeS share is gradually reducing due to the advent of newer service sectors, takeup of space by co-working companies is a trend to watch out for,” said Mazumder.