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Infrastructure development triggers demand for housing in Bengaluru, Chennai

There is an expected increase in traction in the mid-segment to upper-mid segment market, as the demand for larger spaces is on the rise

Offline vegetable shops in various parts of Bengaluru were also running out of stock.

Offline vegetable shops in various parts of Bengaluru were also running out of stock.


Infrastructure development has triggered demand for housing in the South India micro markets. In 2020, historically low-interest rates, stamp duty waiver, GST reduction, attractive prices, flexible payment schemes, and improved buyer perception had been significant drivers behind the residential sales witnessed in Bengaluru and Chennai.

With work-from-home expected to continue for some time, there is an anticipated increase in demand from the IT/ITeS sector for mid-segment housing. Further, with increasing industrial activity in these cities, demand for affordable housing is also expected to rise in the coming years. There is an expected increase in traction in the mid-segment to upper-mid segment market, as the demand for larger spaces is on the rise.

Several prime residential hubs are emerging in cities like Bengaluru and Chennai. In 2020, East Bengaluru was a top performer and accounted for 45 percent of the supply and 40 percent of the sales recorded with micro-markets like Whitefield, KR Puram, and Varthur catering to the pent-up demand in this market.

North Bengaluru and South Bengaluru also gained traction in 2020 with 30 percent and 25 percent share in the sales, respectively. Key micro markets like Yelahanka, Hennur, and Hebbal in North, and Kanakapura Road, and Sarjapur Road in South have witnessed good demand in these markets.

On the other hand, South Chennai has emerged as a mid-segment to a premium market. It was the top performer and accounted for 58 percent of the supply and 62 percent of the sales recorded in 2020. Residential catchments along OMR (Old Mahabalipuram Road), ECR (East Coast Road ), and PTR (Pallavaram Thoraipakkam Road), such as Sholinganallur, Perungudi, Siruseri, and Pallavaram, have catered to the pent-up residential demand.

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West Chennai, an established market in Old Chennai City, accounted for 31 percent of the sales recorded in 2020. We observe that localities in proximity to the CBD, such as Mogappair, Koyambedu, Porur, Perrumbakkam, and the upcoming Manapakkam market, have primarily catered to this demand.

While comparing ticket sizes, we observe that the mid-segment market, having a ticket size of Rs 25 to 75 lakh, dominated the residential sales in Bengaluru and Chennai. The bulk of launches are concentrated in this segment, with 78 percent share and 68 percent share in supply in Bengaluru and Chennai, respectively. This segment has also witnessed maximum sales traction with 62 percent share and 65 percent share in sales recorded in Bengaluru and Chennai.

Chennai being a prominent mid-segment market, observed good traction in the premium residential market, owing to developers' attractive discounts and enticing payment schemes. The premium market having a ticket size upwards of Rs 75 lakh accounted for 27 percent of the supply and 25 percent of the sales recorded in 2020. The majority of the sales were recorded in the South Chennai market, which was a top performer.

In Bengaluru, under-construction metro lines, proximity to transit corridors such as metro and airport, proximity to office hubs, established social infrastructure, upcoming commercial hubs, land availability, and good demand from the workforce have been significant reasons driving the demand. Other infrastructure projects such as Satellite Town Ring Road (STRR), Peripheral Ring Road (PRR), Bengaluru – Mysore Industrial Corridor, Bengaluru – Chennai Industrial Corridor, and the new terminal (TS) at Kempegowda International Airport are expected to propel real estate growth in Bengaluru.

In Chennai, under-construction metro lines, proximity to transit corridors such as metro and airport, proximity to office hubs, established social infrastructure, upcoming commercial hubs, land availability dynamics, and good demand from the catchment have been significant reasons driving the demand. Other infrastructure projects such as the forthcoming and the proposed metro corridors in Phase-2 (Corridor-3), Chennai-Bengaluru Industrial Corridor (CBIC), and proposed second commercial airport at Parandur are expected to propel real estate growth in Chennai.

To conclude, the pandemic has changed the residential sector, with some new emerging micro-markets witnessing demand. Time will tell whether these trends are here to stay.
Umakanth Y is Director, Advisory Services (South India) for Colliers on Emerging residential hubs in South India market.
first published: Jun 17, 2021 12:21 pm

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