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Gated apartments in Bengaluru city centre have taken an affordability hit, forcing tenants towards the suburbs

With a shortage of land in and around the city centre, experts say rentals for gated apartments close to the suburbs will likely soar.

Tina Freese, who has spent most of her life with her parents, has relocated to Bengaluru for a job. After living in a standalone apartment for some time, she is looking forward to moving to a gated property.

But finding an affordable gated apartment in Bengaluru is nearly impossible today.

"The 2BHK gated apartments priced at Rs 20,000 last year cost more than Rs 35,000 today, with deposits touching Rs 2-3 lakh," Freese, a 23-year-old journalist, said.

Tanvi, who wanted only her first name to be used, has raised her budget for a 3BHK in the city from Rs 45,000 to Rs 55,000. She is still on the hunt for a gated apartment within her budget.

"The 2BHK gated apartment I used to live in Marathahalli in 2021 is now priced at Rs 45,000, up from Rs 28,000. Most 3BHKs are priced above Rs 60,000, and they mostly are mid-segment apartments," she added.

The Covid pandemic played a major role in shifting homebuyers' and tenants’ preference towards gated communities.

The hitch is that most gated apartments in Bengaluru’s Central Business District (CBD) are unaffordable today.

Experts say almost all new launches in the city centre are happening in the luxury segment, with affordable projects being pushed to the outskirts.

Demographics in gated apartments

Most bachelors and young professionals Moneycontrol spoke to said they preferred a gated apartment in the city centre over standalone apartments.

Freese wants to move to a gated community for security and more importantly, for a certain sense of freedom from the apartment owner.

"Standalone apartments often have several restrictions placed by the owners, and most importantly, the gated security attracts me more," she added.

Local brokers say the gated apartments in the city centre are mostly being occupied by migrants, with families moving towards the cheaper suburbs to live in their own houses or larger communities.

Kiran Reddy of Hanu Reddy Realty says that out of all real estate sales, only 20 percent are happening in the gated apartments close to the CBD. The rest are rentals.

Still, the unexpectedly large rents in the city centre have startled a majority of the tenants.

Rahul, an information technology professional, says most of his salary goes towards paying the rent. "The 10-month rental security deposit almost made me broke for a good three months," he says.

Soaring rentals

Sunil Singh of Realty Corp says that in places close to the CBD like Koramangala, HSR Layout and around Indiranagar, the monthly rental for a mid-segment 2 BHK apartment was around Rs 50,000 - Rs 60,000.

And the rent for a high-end 2BHK apartment could easily start from Rs 80,000. A premium furnished 1BHK can cost more than Rs 1 lakh a month.

"The prices we see in these apartments have jumped by 40 percent, some by 50 percent, compared to the last few years," Singh added.

Realtors say that in the city centre, most launches are happening across the premium segment wherever land parcels are available. No affordable apartment launches in the CBD area are likely soon, Singh added.

According to real estate consulting firm Colliers, rentals in the high-end residential segment rose by 3-4 percent year-on-year (YoY) in 2022.

Umakanth Y, Director of Advisory Services at Colliers, added that with the increase in demand for commercial office and retail space in the city centre, multiple standalone gated apartments had been converted to commercial use, leading to limited availability of residential inventory in the micro-market.

Due to limited land availability for development, the price of land has shot up sharply in the city centre, compared to the pre-pandemic period

Rentals and capital values in the city centre have touched an all-time high in the city, and residential rents are above affordable levels because of limited project launches, he added.

Experts say the need for affordable housing was increasing in and around the city centre, forcing people to move to the suburbs because the land is cheaper.

Turning point

Umakanth pointed out that Bengaluru suburbs were expanding rapidly, led by infrastructure developments such as the Metro Rail, Peripheral Ring Road and Satellite Ring Road that provide seamless connectivity to the city and also to commercial hubs.

Brokers say the suburbs will see the most affordable to mid-segment gated apartment launches because of relatively stable land prices and land availability.

A mid-segment 2BHK apartment in the suburbs like Sarjapura, Whitefield and Hennur can start from Rs 40 lakh to Rs 55 lakhs with an average monthly rent of about Rs 25,000-Rs 30,000 monthly.

"In the suburbs, you will find several Grade A developers launching affordable gated projects well within Rs 40 lakh today," Singh said.

With a major shift in development towards townships and plotted developments in Bengaluru, experts say that even the prices of gated apartments located close to suburbs will likely soar.

Suburban prices

For example, Singh said, the launch prices in growing suburbs like Sarjapura Road have doubled in less than 2 years from Rs 5,000 per sq. ft. to about Rs 10,000 per sq. ft.

Umakanth added that because of the limited availability of rental options in city centres, gated apartments, particularly in the established tech corridors such as Whitefield, Sarjapur Road, Outer Ring Road, Bannerghatta Road, and Old Airport Road, today experience higher rental growth at 25-30 percent.

"The peripheral areas and suburbs such as the northern and eastern parts of the city are witnessing heightened demand for plotted developments and luxury villas offering sustainable and large open spaces," he said.

Even so, experts believe the robust floating population in Bengaluru will keep demand for gated communities high, mostly in the smaller pockets located close to suburbs.

Souptik Datta Reports real estate, infra and city in Bengaluru. Btw, curiosity never kills the cat.
first published: Mar 17, 2023 01:03 pm