The fundamentals of the city’s property market look strong in the light of the positive underlying factors. Unlike when prices were pushed by the dotcom rush or were investor-driven, the end-user base has grown over the last few years. After the 2008 slowdown, the property market has emerged more mature and is on a stronger end user fuelled base.
This segment is good news for both developers and lenders as they look for a home to live in and are long-term players who will ensure they don’t default on the loan. A strong end-user base also contributes to a more dependable investor base who come in with a planned, long-term investment horizon, to capitalise on the long-term story of the IT city that is spreading well beyond its one-time ‘city limits’. The growing demand from the end-user segment is a potential market for investors.
Investors who buy property as part of an investment portfolio park funds keeping in mind the gestation period of property as an asset class to deliver high returns. This is healthy for the property market as a firm fundamentals-based investor segment in the market pushes prices in line with demand and supply. This will ensure firm resistance levels, and will prevent a steep correction with short term investors liquidating positions in a hurry. Such panic selling, seen in the stock markets, doesn’t make sense in the property market.
The growing city is opening up potential pockets all around, thanks to connectivity on the one hand and commercial development on the anvil on the other. This puts both end-users and investors in a unique position. It is possible to identify and choose a location to live in at a later date, going by the development plans scheduled for the belt, and at the same time space out property investments and park funds in upcoming projects.
A case in point is the planned Information Technology Investment Region (ITIR) near the international airport. The ITIR is being developed as an integrated IT city. It will be developed over an area of around 40 sq km located between Devanahalli and Doddaballapur. At a distance of around 14 km from the airport, this project will push commercial and residential development in the belt.
“Historically, it has been seen that as a city grows, the development moves towards satellite towns. It is natural that the belt towards the airport will witness development. On the other hand, Hoskote has always been an industrial hub. Now with residential options and better connectivity it is set to develop further. It is a healthier and more convenient location to live and work in. Property in these suburbs are priced attractively at the moment and are value buys for those looking at working an living close by”, says Sanjay Goel, Partner, B C K Intermark. On the value of property as in investment, he says, “In the years ahead, as the city grows and industrial development spreads, property prices will appreciate. Property will always be a good investment option”.
The ITIR is expected to draw investments of over Rs 1 lakh crores and create some four million new jobs. This means a huge demand in the vicinity for housing - from those looking at owning one and companies looking at guest houses.
The development of commercial hubs around the city in other regions - Hoskote and Whitefield - will push for the creation of more residential belts around the city. With the stock markets remaining range-bound and volatile, property - especially residential property - in these emerging localities is a prospective option. In the medium term, as the industrial houses expand and start recruiting more people, the values here - both capital and rentals - will trend upwards. Many of these options will now come at attractive prices given the fact that the fundamentals of these locations are still developing.
The investor has to delve into the long-term story each of these localities present to make a sound investment. Factors such as location, price, potential of the locality as a residential catchment and connectivity are some basics that indicate capital appreciation and rental yield.