In the aftermath of the COVID-19 pandemic and despite the soaring cost of construction material, Bengaluru's premium residential market is posting strong growth. Average capital and rental values continued to grow in 2022 at an average of 4 per cent year-on-year, according to a report by the real estate agency Savills India.
This is because of relatively high corporate salaries and the city's mid- and senior-level executives driving demand for premium housing.
"Grade-A developers have been able to pass on the increase in input prices of construction materials successfully, albeit partially to end-users," the report titled Bengaluru Residential Market Watch added.
Premium housing segment
Of all the micro-markets in the city, central Bengaluru has recorded the highest average capital values at around Rs 19,000 and Rs 15,500 for completed and under-construction projects respectively, the report said.
"South Bengaluru registered the highest YoY increase in premium housing prices at around 8 percent in 2022. However, select properties of reputed developers such as Brigade, Prestige, Sobha and Sattva in the central areas of the city, have witnessed a price appreciation of 10-15 percent," the report added.
According to Savills India, completed premium projects with comparable amenities have 10-15 percent higher sale value compared to housing units in under-construction projects.
"East and central Bengaluru projects have this differential pricing shoot up by 25-30 percent for completed projects," the report said.
Interestingly, independent villas in upscale residential blocks in areas such as Koramangala have attracted a lot of attention from C-level executives of multinational corporations, including start-up and unicorn founders.
Central Bengaluru comprises areas such as Lavelle Road, Palace Cross Road, Cunningham Road, Frazer Town, Benson Town, Richards Town, Ulsoor Road, Richmond Road, Sankey Road.
South Bengaluru includes areas such as Koramangala, Bannerghatta Road, JP Nagar, Banashankari, Jayanagar, Basavangudi, HSR Layout, Sarjapur Road, Kanakapura Road.
East Bengaluru includes Whitefield, Old Airport Road, Indira Nagar, Domlur, Bellandur.
North Bengaluru comprises Hebbal, Jakkur, Devanahalli and Yelahanka.
Premium segment rental growth
The report said that homeowners who were plagued by vacant properties in 2020 and much of 2021 are eager to capitalise on the current demand-supply mismatch. As a result, average rentals increased across micro-markets in 2022 compared to 2021.
"The rental range for premium 3BHKs in the city stood at Rs 67,000 – Rs 1.15 lakh per month as of 2022 year-end. However, luxury properties in select pockets like Koramangala, MG Road etc. record a much higher rental value as compared to the average rentals in the city. Central Bengaluru, particularly, has 3BHK units being rented out at monthly rentals of Rs 1.5 lakh and above," the report added.
Outlook for 2023
The report projected that with metro connectivity getting extended up to Whitefield in early 2023, capital and rental values in premium properties of the area are expected to increase by 10-15 percent in 2023.
Developers are likely to focus more on locations such as Sarjapur, Whitefield and Brookefield which are close to the Information Technology corridors of the city.
Additionally, north Bengaluru, similarly, with its proximity to the international airport and Manyata Tech Park will continue to witness healthy residential activity in the coming years, the report said.
"Within Bengaluru city limits, posh localities especially Koramangala and Indiranagar, will uphold the preferred locality status amongst ultra-high net worth individuals, given the overall connectivity of these areas and limited supply of contiguous plots and luxury independent houses," the report added.
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