According to the
Unprecedented rise in home prices
As of the end of the first half of 2024, average residential prices in Bengaluru stood at INR 7,800 per sq. ft., a notable increase from INR 5,900 per sq. ft. at the end of H1 2023. Dr Prashant Thakur, Regional Director & Head of Research at ANAROCK Group, highlighted the city's impressive year-over-year growth: "Average residential prices in the city stood at INR 7,800 per sq. ft. by H1 2024-end against INR 4,960 per sq. ft. at H1 2019-end. Bengaluru also saw the highest Y-o-Y jump of 32% – from INR 5,900 sq. ft. by H1 2023-end to INR 7,800 per sq. ft. by H1 2024-end."
This sharp rise can be attributed to soaring construction costs and increased demand from both investors and buyers. Following a period of stagnation during the pandemic and subsequent structural reforms, the post-COVID-19 market has seen a significant uptick in demand, prompting developers to raise prices, as per the statement from ANAROCK.
Premium and luxury segments drive growth
With such a sharp rise in prices, one would expect that the residents must be settling for affordable, low-range housing units. But, on the contrary, most residents are rushing to buy the premium and luxury units, according to the report.The increase in average prices has been propelled mainly by a surge in new launches in Bengaluru's premium and luxury segments. In H1 2024, approximately 32,500 units were launched, marking a 30% increase compared to H1 2023. The premium segment (INR 80 lakh – 1.5 crore) accounted for 39% of these new launches, while the luxury segment (>INR 1.5 crore) comprised 36%.
"Increased new launches in Bengaluru's premium and luxury segments in H1 2024 also contributed to the rise in average prices. Interestingly, out of the total new supply of approx. 32,500 units in H1 2024 in the city, nearly 75% were in the premium and the luxury segments altogether," says Dr Thakur.
More positive signs
Bengaluru’s real estate market also witnessed a significant reduction in inventory overhang. By the end of H1 2024, the city’s inventory overhang fell to a record low of 8 months, down from 15 months in H2 2019. The available stock stood at approximately 45,420 units, a 30% decline from the 64,680 units available at the end of H1 2019. This reduction is particularly notable given the robust new supply added to the market since 2019, indicating a strong absorption rate and positive market sentiment.
Bengaluru's office space demand has also been on an upward trajectory since 2020, recently reaching an all-time high. The city's thriving business environment continues to attract significant interest, although the dominance of the IT-ITeS sector has marginally decreased year-over-year.
Coworking space providers and manufacturing/industrial occupiers have expanded their presence by 3% and 2%, respectively, suggesting diversification of the tenant base and a maturing business ecosystem.
The trajectory for coming years
Despite its growth, Bengaluru faces several urban challenges, including traffic congestion, water scarcity, air pollution, waste management deficits, and increasing urban sprawl leading to flooding. However, the city is actively addressing these issues through various infrastructure projects, such as the Multimodal Logistics Park (MMLP), Bengaluru Suburban Rail Project (BSRP), Namma Metro Phase 2 and 3, Bengaluru Satellite Ring Road, and multiple expressways and corridors.Looking ahead, the ANAROCK report expects residential launches and sales in Bengaluru to rise by 10-15% by the end of 2024 compared to 2023. Average capital values are projected to witness a moderate appreciation of 10%, with prime locations and established tech corridors potentially experiencing steeper growth. Emerging trends, such as co-living spaces and eco-friendly homes, are likely to play key roles in market expansion.
In the office market, new supply may see a slight decline of 4% in 2024 compared to 2023, but net office absorption is expected to increase by 10%. Average office space rentals are projected to rise marginally by 1% across the city.
Despite how the social media memes portray, Bengaluru seem to be on an unprecedented upward trajectory. At least, the city's real estate market is on a robust growth path, driven by significant price appreciation, reduced inventory overhang, and strong demand across residential and commercial segments.
One can only hope that the city's strategic infrastructure projects and ongoing efforts to address urban challenges bear fruit to enhance the quality of life for its residents.