Demand for mid-segment apartments in Bengaluru, with prices between Rs 60 lakh and Rs 1 crore, dipped by more than 8 percent in the April-June quarter compared with the previous three-month period. This was against the backdrop of a consistent rise in property prices and a lower supply of such affordable homes, several market sources told Moneycontrol.
The fall in the resultant demand for increasingly scarce real estate pushed up the prices of once-affordable homes to being out of reach for many. And the ones that now fall into the affordable bucket may not be desirable to many would-be buyers.
Online property listing consultants like NoBroker and MagicBricks pointed out that there has been a considerable drop in enquiries and searches for properties between Rs 60 lakh and Rs 1 crore.
Experts added that more potential buyers, unable to afford an apartment in the city, are turning into renters, reflected in the steadily increasing rental demand in the city.
According to data from NoBroker, there was a decline of 8.5 percent in demand to buy property in the Rs 80 lakh to Rs 1 crore segment from January-March to April-June 2024. For homes in the Rs 60-80 lakh bracket, demand dropped 12 percent.
However, demand for high-end premium inventories—upwards of Rs 3 crore—saw a 4 percent spike in the second quarter of calendar 2024, and most of the new supply in the city also came from this segment.
"In Q2, we saw a major growth in Rs 3-crore and above ticket sizes due to major supply that we saw coming into the segment. For the Rs 80 lakh to Rs 1 crore segment, we saw the majority of homebuyers upgrading to upwards of Rs 1 crore homes," said Saurabh Garg, co-founder of NoBroker.
According to data from property consultancy ANAROCK, Bengaluru added a totla of about 16,020 units in April-June 2024, declining quarterly by 3 percent. However, 83 percent of the new supply was added in the premium and luxury segments combined.
The enhanced supply of upper-end housing has been driven by developers wanting to cash in on the pent-up demand, which a host of factors has driven. For one, the desire to upgrade, as pointed out by NoBroker's Garg, is a continuing fallout of the post-pandemic effect. Also, with easier access to funds, buyers in the higher end of the market are willing to stretch their budgets a little further to land that home.
That unmet demand may be coming to an end.
MagicBricks data showed that in the second quarter of 2024, the growth of new inventory listings rose from 2.7 percent to 4.8 percent. Over 50 percent of the supply was in the premium segment. However, overall demand in the sector fell 8 percent between April and June. "The declining demand and increased supply resulted in a slower price increase of 3 percent QoQ (quarter-on-quarter) compared to 4.5 percent last quarter," said Abhishek Bhadra, head of Research atMagicBricks.
At the lower end of the scale, due to low available inventory and slow income growth, the majority of homebuyers in the Rs 60-80 lakh segment have downgraded to below Rs 60-lakh homes, said industry experts.
A widening gap between salary increments and rents in major cities is triggering a cost-of-living crisis for most Indians. According to data from Aon Group, a UK headquartered human resources consulting firm, average salary hikes in India dipped to 9.7 percent in 2023 from 10.6 percent in 2022, Moneycontrol reported in May.
Experts add that this may have impacted homebuyers in the Rs 60lakh to Rs 1 crore segment, with most opting for cheaper homes or postponing their homebuying plans.
In Bengaluru, local brokers say the number of queries has dropped by 30-50 percent across segments. "We do see a temporary slowdown in the sector, which can be due to the recent general elections or upcoming budget. However, we will have to observe the sector for a month more before coming to a conclusion," said Kiran Kumar, vice-president of Bengaluru-based Hanu Reddy Realty.
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