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Tuesday, Jul 16, 2002

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Real estate biz picking up in Bangalore

Anjali Prayag


BANGALORE'S real estate sector is seeing a revival; but this time round, both builders and investors need to be cautious, warns Mr S.N. Nagendra, Deputy General Manager, Karnataka and Goa, Housing Development Finance Corporation Ltd.

According to him, both commercial and residential rates are picking up. "This could be because of higher cash flows among people or lower interest rates, or both,'' says Mr Nagendra.

The real estate scene in Bangalore, which had witnessed fast-paced growth in the 1990s, suffered a setback during the past two years. Though prices have stabilised, builders are not pushing their luck too much. Another factor that has kept a check on the frenzied growth rate is that the industry itself has matured and in the wake of the IT sector not doing well, investors are being cautious.

Agreeing that things are looking up in the sector, Mr Farook Mahmood, Director, Silverline Realty (P) Ltd, a Bangalore-based real estate agent and property appraiser, says: " Bangalore north and south are looking bullish and this time it will be a steady, clean growth.'' He explains that with the returns on bank investments falling to 8 per cent, middle class investors are finding investing in real estate more attractive. For instance, a commercial property would fetch them a return of anywhere between 12 and 13 per cent and residential property between 6 and 7 per cent.

In the residential sector, Bangaloreans have always preferred to buy land and build a home. This area of activity had seen a lull for 10-12 years because the Bangalore Development Authority had stopped distributing sites.

But the present commissioner of BDA, Mr Jayakar Jerome, has renewed this practice and this year the authority would allot nearly 15,000 sites. "But how fast will infrastructure develop in these areas is anybody's guess,'' says Mr Nagendra.

Another area that is witnessing a lot of activity, says Mr Nagendra, is that high net worth Indians from all over the world are buying property in the city. Mr Mahmood says this is an outcome of the September 11 episode. Insecure Indians find Bangalore the best city to invest in.

In the commercial sector, banks are buying space in the city. Call centres and data warehousing companies are also buying up property, says he.

Apart from this, a lot of local companies have also expanded and felt the need for more space.

According to Mr Mahmood, good residential projects are quoting rates between Rs 1,100 and 1,900 per sq ft which is highly affordable for the middle class and commercial rates are between Rs 1,200 and 2,500 sq ft depending on the location, quality of construction, safety factor, intelligence built in, etc.

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