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Bangalore - Mid-Size Apartments Rule the Roost

Friday, October 05, 2012

Ears on the Ground Survey indicate to us that that mid-ticket size products are best for the market and this is which has seen the most volume absorption. We could define mid ticket size units as those in the ticket size of Rs5-10m. This segment provides a good combination of investment-worthiness, rental yield and end-user demand. In terms of area, this means unit sizes of 1,800-2,500sft apartments and, in terms of rate, a range of Rs4,000-5,000 psft.

The buyer segment (10-year work experience in IT/ITES sector) has on an average household gross income of Rs1.2-Rs1.8m. This makes price in terms of the household income in the range of 4-5x, which is an affordable pricing bracket in our view.

Over the past couple of years, we have seen a slew of launches in the premium-housing segment with ticket size of Rs30m+, primarily focused in the new-emergent areas of North Bangalore. Observers believe that the market for luxury launches is weak and they have not seen good absorption.

The buyer base comprises primarily of IT professionals looking to invest surplus cash. At the other end of the spectrum is the Delhi-NCR market, which is entirely broker investor driven, dependent on bulk sales. The Mumbai market is between the two extremes. In the Bangalore market, developers do not bulk-sell to a committed broker-investor base. Rather, they depend upon branding and word-of-mouth from existing buyers to attract new buyers.

Bangalore has developers that are focusing on affordable housing (Purvankara Provident, Value Budget Housing Company) and they have started to offer viable products. However, their scalability and execution challenges are yet to be tested over the longer run.

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