B'lore leads in hectic year for real estate

THE 2005 STORY

Liberalisation of the FDI policy and guidelines for private equity investment in real estate has seen a flood of investments in the city. This, in addition to the strong demand from IT and ITeS sectors could result in the city absorbing 9 million square feet in 2005, the highest in the country.

With the hectic pace of deals continuing presently, as of mid-December, the office space absorption has touched 8.1 million square feet, surpassing last year's (2004) aggregate of 7.25 million square feet.

According to industry sources, normally deals are finalised by the 'Thanksgiving Day' (fourth Thursday of November), but the deal making continued till Christmas Day.

According to Cushman and Wakefield's year-end estimate, the shortage of supply that prevailed throughout 2004 gradually eased by the fourth quarter of 2005 and the market is presently seeing a demand-supply equilibrium.

The geographical distribution of fresh lease commitments made in 2005 shows a preference for new buildings along the Outer Ring Road, reflecting the concern for accessibility and road infrastructure. Shortages expected to remain over the next 2-3 quarters.

That being so, locations in Whitefield are likely to dominate the supply scenario in 2006, it added.

"Last quarter witnessed landmark campus transactions like Cisco Systems committing to 1.4 million square feet of space on the Outer Ring Road, Delphi committing to 1.5 lakh square feet in Whitefield, Huawei taking up 47,000 square feet in Diamond District and 25,000 square feet in Electronic City," said Ram Chandnani, head-south India operations, CB Richard Ellis South Asia.

A noticeable feature in 2005 was that of companies expanding their presence to tier II cities like Mysore, Hassan and Mangalore. This has led to intense competition among developers to deliver more efficient and a better class of buildings and the builders are building land banks in these cities. Puravankara and Brigade Developers have taken up positions in Mysore.

The year 2005 has been very good for real estate. It was a year when Asian real estate biggies like Keppel of Singapore and ETA Star of Dubai entered Bangalore's real estate market and more players are expected to join the fray in 2006.

With the Devanahalli International Airport taking off, Bangalore North is likely to be the key growth area in real estate in 2006 with the main thrust being on Bellary Road, Yelahanka and Devanahalli of course.

The year saw the government stopping registration of properties, other than those developed by authorities like the Bangalore Development Authority (BDA) and BMRDA, to check unauthorised layouts and development.

During the year the Traffic Task Force of Bangalore announced its ambitious project of a Core Ring Road, bordering the Central Business District (CBD), which can open a new chapter in the development of city's infrastructure.

The ambitious Rs 100 crore project is aimed at solving many of the traffic problems of the city where traffic is growing by geometric proportions. During the year, IT icons came together on a single platform to take on the government on the infrastructure issues. Another highlight was the announcement of BDA's draft master plan which reduced the green belt demarcated in 1995 from 742 square km to 455 square km.

The draft master plan has protected the Tippagondanahalli catchment and Bannerghatta National Park, while the eastern side of Bangalore has been opened up for restricted development. There are mixed opinions on the draft master plan among various quarters.

The single negative development of the year for realty was the the imposition of service tax by the Centre on buying and selling apartments. This pushed up the prices. "This means buyers of apartments have to cough up more," said M A Vakil, chairman and managing director, Vakil Housing Development Corporation.

A major development which elicited much interest was the demolition of illegal buildings in Koramangala. The government had to act on a public interest litigation (PIL) filed by some angry residents of Koramangala. This proved to be a landmark event in the history of Bangalore.

The year has ended with the government announcing a single window clearance policy. "But, at the onset the policy looks like a single window with many (four) doors. A waiting period of 120 days for conversion can be frustrating for builders and purchasers of land," said Vakil.