What's In Store for Bangalore's Real Estate Market

Looking to buy property in the Bangalore’s realty market? Before you take the plunge, here are some facts to keep in mind.

Bangalore real estate market has always made for an interesting watch. The constant changes in property rates and market conditions make Bangalore a city to watch out for in terms of property investment.

For first-time buyers, in particular, getting acquainted with the internal workings of the place they are investing in becomes all the more essential. Well, here is the current picture of Bangalore’s realty market.

The Present Scenario

There has been a quiet lull in the realty market of Bangalore for the past couple of months. The property prices have remained pretty consistent and there has been an increasing demand for ready-to-move in projects. This burgeoning demand can be attributed to the fact that most buyers are wary of the constant possession delays faced by most residential projects. A ready-to-move in project is not only a safer option but allows the buyer to see what they are actually buying.

The city also saw a rise in the number of new residential projects in the first quarter of this year. The number dropped down during the second quarter, which indicates that the builders are looking to clear off the existing inventory before starting on a new project.

Still, compared to the rest of the metropolitan cities, Bangalore’s real estate market fared relatively well. The quarter Apr-Jun 2015 witnessed an improvement in the number of transactions in the city, as compared to previous quarters.

The present state of the realty market is indicative of some major changes and you should carefully analyse the market before making any investment decision.

Change is Coming

Experts have foreseen a substantial rise in property rates starting September. While an exact percentage isn’t provided, most specialists agree that a 10-15% rise in property rates can be expected.

Such a change can have major bearings on the how the market functions and will also negatively impact the purchase of properties.

The main reason behind this sudden rise in property rates can be ascribed to the rise in the cost of construction material. Most of the material used for constructing properties has witnessed a sharp upwards trend. This will lead to builders accounting for that increased cost by charging more from the buyers.

Essentially, builders used to keep a profit margin of 20% before, but with the rise in the cost of construction material, the margin was reduced to 10%. Understandably, such a major cut in the profit margin can only last for so long. Hence, to maintain the level of profits that they were earning, the builders are planning to bring down the cost to the buyers.

You can expect the price escalation to commence from the month of September since that is generally considered the peak time for real estate markets.

Understanding the Reasoning

The main reason for the escalating costs of construction material can be traced back to certain government policies and more importantly the scarcity of said material. Here’s a breakdown of the margin of increase for each construction material:

• The cost of sand has gone up by 300 per cent
• Cost of cement has risen by around 70 per cent
• Other inputs like labour, white cement, tiles and electrical fittings have also witnessed a rise in cost of almost 30 per cent

While the cost of construction material is surely a major factor, some realty agents are of the opinion that the demand for residential properties is also responsible for the upcoming price escalation.

Taking into account the major price hike on the cards, now would be the best time to buy a property. Check out commonfloor.com to search for the perfect property that meets all your requirements.

Gsv Naresh is a real estate blogger who blogs about India's realty market and also gives advice on buying residential projects and flats in India.For More Information about Real estate Visit CommonFloor.