After several months of apartment rush in Bengaluru, rentals and property prices continue to soar. A mismatch in supply and demand has put the real estate sector in a frenzy.
However, despite the rupee-dollar exchange advantage, non-resident Indian (NRI) investments in the city have slowed down since January.
Since the beginning of last year, the rupee had continued to depreciate against the dollar, opening up Indian real estate avenues to offshore investors. However, soaring property rates, a shortage of inventory and the infamous Bengaluru floods have put prospective investors off.
Animesh Sharma, a US-based NRI, was looking forward to buying a 30x40 plot in Devanahalli. However, after he found out the prices had gone past Rs 60 lakh from about Rs 45 lakh earlier, he put his plans on hold.
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A majority of NRIs who were planning to make use of the falling rupee are deterred by soaring property prices, up by at least 20 percent in one year. For example, in prime locations like Indiranagar, Sunil Singh from Realty Corp explains, "In posh neighbourhoods like Defence Colony, the property prices have shot up to Rs 34,000 per square foot (sq ft) from Rs 27000-29000 per sq ft a year ago."
Singh said that in other parts of Indiranagar like around the Indiranagar Club, the prices have touched Rs 28,000 per sq ft from Rs 24,000 per sq ft last year.
Similarly, in Whitefield, land prices have almost doubled from Rs 4,000 per sq ft to Rs 9,000-10,000 per sq ft.
Kiran Kumar from Hannu Reddy Realty added that with the completion of the Kengeri-Whitefield metro route, prices could surge another 10-15 percent.
The northern parts of Bengaluru follow a similar trend. From Hebbal in the north till Nandi Hills, prices for residential properties start from Rs 4 crore and go up to Rs 20 crore, including villaments.
However, ultra-luxury apartments above Rs 4 crore continue to be a top choice for most NRIs and high net-worth individuals. "NRI investments saw a major slowdown in ticket sizes below Rs 3 crore," Singh added.
While property prices played a major role in NRI choices, the lack of supply of new inventories in central Bengaluru and central business district (CBD) areas like MG Road, Richmond Road and Sadhashiv Nagar added to their dilemma.
Angad Bedi, managing director of BCD Group, a developer, added that in 2021 and 2022, the city saw unprecedented sales. "Till last quarter none of the builders in Bengaluru had unsold inventories left, and we have lapped up almost all supply. Additionally, home loan rates have shot up, and will offset the advantages offered by the falling rupee," he added. While it is not very common, some NRIs do take home loans from Indian banks, which come with several added conditions.
"Even if inventories are available, they are priced unimaginably high. A 2BHK near MG Road today commands Rs 2 crore and above, up from Rs 1.25 crores last year," Singh added.
In fact, Bengaluru Development Authority (BDA) layouts, once a favoured choice for NRIs, have seen a major spike. The resale price of the layouts is about Rs 8000-9,000 per sq ft today, brokers say. Previously, these plots in Vishwesharaiah Layout and Arkavathy Layout were sold between Rs 4,000 and Rs 5,000 per sq ft.
Plotted developments in Bengaluru also haven’t gotten any respite. "A plotted layout that sold at Rs 5,000 per sq ft today commands Rs 10,000 per sq ft in northern Bengaluru," Singh said.
Amit Goenka from Nisus Finance added that most NRIs would prefer not to invest in under-construction projects due to several risks involved. "Most inventories being launched in Bengaluru today are at an early stage, less than 12 months. This has also deterred several prospective investors," he said.
According to Goenka, global layoffs have a major role to play when it comes to a slowdown in NRI investors in Bengaluru. "NRI investments here heavily relied on the IT segment, a good chunk of 40 percent at least. Bengaluru has felt its effect with a majority of techies losing jobs offshore," he said.
Floods, domestic demand outweighs NRI investors
Dipesh Nagaria had planned to buy 29,000 sq ft of land in southern Bengaluru's Varthur for Rs 5.5 crore. However, he deferred the decisions after he found several stormwater drains around the land.
"One of my friends had a luxury condo in Yemalur in northern Bengaluru. However, after the flood, the capital price depreciated. And my family, including our children, stay abroad, with no one to look after these issues in India," another NRI investor said, who also held back his plans of buying an apartment in the city.
Last year in the first week of September, unprecedented rainfall submerged several luxury condos and villaments in parts of Bengaluru.
Residents’ associations say they incurred a loss of at least Rs 1.5 crore in damage, and some had to stay elsewhere for about a week. CEOs say two days of flooding led to damages totalling Rs 1-2 crore.
"Today the floods have started to show their impact on investments by NRI who stay far away from the city. This has led to confusion and mistrust in most of the clients I spoke to," Kumar said.
Over the last two months, rents in Bengaluru have shot through the roof with prospective tenants bidding for apartments in the city. A crunch in fresh supply has led to rents jumping more than 40 percent in some cases.
"We see the domestic demand for rentals and properties from states like Maharashtra, NCR and even West Bengal overweighing the NRI investors," Singh said. He added that domestic demand now constitutes 70 percent of the market in Bengaluru, while NRI demand has come down to about 20 percent from 30-40 percent earlier.
Additionally, Kumar said properties in Bengaluru have hit their peak appreciation levels. "The properties have appreciated 15 percent over the last year and today, investors will need to wait at least three years to see another 20 percent appreciation," he noted.
This has also played a major role in slowing down NRI investments in the city, he added.
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