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Despite the COVID-19 pandemic and rising construction costs, the premium residential real estate market in Bengaluru is experiencing strong growth, according to a report by Savills India. The average capital and rental values of premium housing properties have grown at an average of 4 percent YoY. The demand for premium housing is being driven by the city's mid- and senior-level executives who have relatively high corporate salaries.
The report notes that Grade-A developers have successfully passed on the increased input prices of construction materials, albeit partially, to end-users. Central Bengaluru has the highest average capital values at around Rs 19,000 and Rs 15,500 for completed and under-construction projects, respectively. South Bengaluru had the highest YoY increase in premium housing prices at around 8 percent in 2022. However, select properties of reputable developers such as Brigade, Prestige, Sobha, and Sattva in the central areas of the city saw price appreciation of 10-15 percent.
Completed premium projects with comparable amenities had a 10-15 percent higher sale value compared to housing units in under-construction projects. The differential pricing shoots up by 25-30 percent for completed projects in East and Central Bengaluru projects. Independent villas in upscale residential blocks in areas such as Koramangala have attracted a lot of attention from C-level executives of multinational corporations, including start-up and unicorn founders.
The report notes that homeowners who had vacant properties in 2020 and much of 2021 are eager to capitalize on the current demand-supply mismatch. As a result, average rentals increased across micro-markets in 2022 compared to 2021. The rental range for premium 3BHKs in the city stood at Rs 67,000 – Rs 1.15 lakh per month as of 2022 year-end. Luxury properties in select pockets such as Koramangala and MG Road have a much higher rental value compared to the average rentals in the city. Central Bengaluru, in particular, has 3BHK units being rented out at monthly rentals of Rs 1.5 lakh and above.
The report projects that with metro connectivity getting extended up to Whitefield in early 2023, capital and rental values in premium properties of the area are expected to increase by 10-15 percent in 2023. Developers are likely to focus more on locations such as Sarjapur, Whitefield, and Brookefield which are close to the Information Technology corridors of the city. North Bengaluru, with its proximity to the international airport and Manyata Tech Park, will continue to witness healthy residential activity in the coming years, the report said.
The report added that within Bengaluru city limits, posh localities, especially Koramangala and Indiranagar, will uphold the preferred locality status amongst ultra-high net worth individuals, given the overall connectivity of these areas and limited supply of contiguous plots and luxury independent houses.
In conclusion, despite the pandemic and rising construction costs, the premium residential real estate market in Bengaluru is performing well, and developers are likely to focus more on locations near IT corridors, international airports, and tech parks. The demand for premium housing in posh localities is being driven by the city's mid- and senior-level executives, and homeowners are eager to capitalize on the current demand-supply mismatch. The extension of metro connectivity to Whitefield in early 2023 is expected to increase capital and rental values in premium properties of the area by 10-15 percent in 2023.
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