Bengaluru water crisis: Experts anticipate dip in apartment rentals, investors hold back

Eastern IT corridor and parts of central Bengaluru have been reeling under water shortage due to unplanned real estate development and a lack of planning.

Bengaluru's water crisis looks like it could lead to a dry spell in its real estate market as well. Many people who were considering buying a property in the tech city have decided to defer their prospective investments following taps running dry in several parts, especially close to the IT corridors.

Rajath, one of these people and who goes by one name, has been looking to invest in real estate for rental housing for over a year now. "However, after the pandemic, the prices shot through the roof in places like Bengaluru. And now, most parts of the city are grappling with water scarcity," he said.

This means that Rajath, who had wanted to have concluded a deal before the general election, will now take his time before finalising his decision.

Another person, who had been keen on investing in the eastern IT corridor of Whitefield, has also decided to wait a month or two to risk-proof the investment.

The eastern IT corridor and parts of central Bengaluru have been reeling under water shortage due to unplanned real estate development and a lack of planning, Moneycontrol reported.

"Today most lakes in eastern Bengaluru have been encroached upon and we see highrises in buffer zones. If I choose to invest without clarity of water availability in future, I do not want the tenants to be bothered and also be burdened by their distress calls," Rajath said.

Over the last two years, rents in the area, a preferred location for those working in the tech industry, had soareds 30-40 percent, with employees returning to offices after the pandemic-forced work-from-home situation when many left for their hometowns; and a major inventory mismatch between demand and supply. With rental yield crossing four percent in the area, a 2BHK apartment today commands upwards of Rs 45,000-50,000 a month, from Rs 30,000 last year.

Investors, tenants avoiding large gated communities

Local brokers say that most investors who had been looking at Whitefield and areas close to other IT hubs in the city have shifted their attention to parts like north Bengaluru and Indiranagar.

Kiran Kumar, vice president of the city-based property consultancy Hanu Reddy Realty, said, "Investors and prospective tenants today are becoming choosy and are factoring the water shortage in their decision-making. Mostly, the queries we get today are worried about the water availability in the areas where inventories are available for rent or sale."

Today, piped water, or the water from the Kaveri River, is available only in parts of the city. The areas pencilled into the city limits in 2007 remain without piped water supply, and people here rely primarily on borewells, which are drying, albeit slowly, and water tankers. In 2007, 110 villages were added to Bengaluru, spread across Mahadevapura, Yelahanka, South, and RR Nagar zones.

Places like Indiranagar and parts of northern and southern Bengaluru still have uninterrupted water supply, which means that they naturally remain the focus for most investors, Kumar added.

Balaji Badrinath, managing partner at the local office of real estate consulting firm Coldwell Banker, added that there has been a significant shift in the perspective of those buying to invest and that of end users when it comes to larger gated communities.

"Today, larger gated communities and townships are bearing most of the brunt as they require large amounts of water. We see a dip in the queries for much larger projects, from both investors and homebuyers, who are now looking at smaller projects as it is easy to source water for them," Badrinath said.

Across Bengaluru, realtors say, the cost of water acquisition has increased by 20 percent. For example, Shalini Reddy, flat owner in eastern Bengaluru's Doddanekundi, has been paying Rs 6,000 per month for maintenance charges, up from Rs 4,000 last month.

The recurring water shortage theme in Bengaluru has pushed investors and homebuyers into going for better long-term planning, Badrinath said.

Rentals may be affected if prolonged

After a surge for the last two years, realtors say the water crisis may correct real estate prices in Bengaluru with a significant dip in rentals.

Realtors anticipate a decline of 10-15 percent in areas most affected, like east and central Bengaluru, if the crisis lasts a month or two.

"During Covid, the city saw a major drop in rentals, by at least 20 percent, due to people moving back to their native places. Not only did that get corrected, but also almost doubled in the last two years," Badrinath said. "With the water crisis, we may see many move back to their hometowns, thus again correcting the real estate prices."

After large parts of Bengaluru including the toniest areas were waterlogged in August 2022, Moneycontrol reported a fall in property prices, especially in posh neighbourhoods like Billionaire Street. "Similarly, we may see a dent in areas especially close to IT corridors with the ongoing water crisis. However, it depends on the situation when the city reaches peak summer over the next two months," Kumar said.