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Trends in Residential Market in Bangalore, India

Wasim Sheikh*, Mihir Dash**, Kshitiz Sharma***

spaces. The real estate sector comprises the activities

Abstract
of buying, developing, and selling land, commercial
This study provides an insight into residential buyers’ space, and residential buildings (Mulky, 2014). The real
preferences in the current housing market of Bangalore.
estate sector & construction sector is the second largest
By analysing these buyer preferences, developers
in Bangalore will know what the current trends in the provider of employment in India next to agriculture and
market are and they can increase their sales and will create maximum jobs by 2022 (Sandhilya, 2015). It is
revenues by offering the same. fragmented, with many small players operating regionally,
Some of the areas covered in the study are the buyers’ with only a few large, organized players operating on a
preference of locations to reside in Bangalore, the type pan-India basis.
of housing they want to purchase, the size of house/
apartment they are looking for, the size of the property, The demand for housing in Indian cities began growing
their budget, their possession date and the builder. significantly from 2001 onwards. The factors contributing
The study also examines relations between some of to this growth in demand were increasing urbanization,
the variables above, including whether buyers’ budget higher incomes especially of the middle class, and easier
is related to purchase type, whether purchase type is availability of housing finance. This drove rapid demand
related with number of rooms, and whether buyers’ for office, retail and residential space. The biggest growth
budget is related with possession date. was seen in new tech cities such as Bangalore and
Hyderabad, where rental rates have consistently grown at
Keywords: Residential Housing Market, Developers,
double-digit rates over the past few years as businesses
Market Trends
jostle for space in an increasingly crowded rental market.

However, the period from the year 2009-2010 witnessed

oversaturation of the retail market along with a constraint
Introduction to potential for growth. The Indian economy overall
experienced a slow growth rate as both businesses and
The need for adequate housing is one of the most basic consumers cut back on spending and investment. This
human needs. The study addresses this fundamental sluggish growth trend has continued into 2014 with the
human need by providing detailed insights into Bangalore real estate market starting to feel the effects of weak
city’s housing market. demand across much of the market as businesses remained
cautious and held back from expanding their premises.
The Indian property market differs significantly from
However, after the landslide victory of the BJP in 2014,
many other markets in the world. The Indian market
it was widely expected that both economic performance
is extremely large, diverse, complex, fragmented, and
and aggregate demand would start to pick up from 2015
experiencing rapid growth (Lyn, 2010).
as investors begin to return to an Indian market, which
The residential housing market in India is one of the continues to have solid growth potential. The India Brand
segments within a large sector which is termed as the Equity Foundation (2013) projected that the total revenue
real estate sector. The other segments within real estate in the real estate sector is expected to reach US$ 180
include the commercial, organized retail, and hospitality

* Research Scholar, Alliance University, Bengaluru, Karnataka, India. Email: [email protected]

**
Associate Professor, Alliance University, Bengaluru, Karnataka, India. Email: [email protected]
***
Associate Professor, Acharya Bangalore Business School, Bengaluru, Karnataka, India. Email: [email protected]
2 PRiMa: Practices and Research in Marketing Volume 8 Issue 1 2017

billion by 2020, as compared to US$ 66.8 billion in 2010- with sales velocities stuck at less than 2% and the GDP at
2011, with demand growing on average (CAGR) by 19% sub-5% rates. For the property markets to move forward
between 2012 and 2016. the new central government will have to address the key
macro areas that affect growth, as well as controlling
Private equity investments from foreign funds in Indian inflation and ensuring that the RBI reduces interest rates.
real estate rose 33% to $2,220 million (approximately Rs.
14,974 crore) in 2015 from $1,676 million (approximately According to the LJ Hooker Mid-Year Report (2014),
Rs. 11,306 crore) in 2014, according to a report by there is currently huge oversupply in the premium
property advisory firm Cushman & Wakefield. segment (houses valued at Rs. 1-3 crore), with the
oversupply in the last quarter of 2013, hitting 218%.
“The three large cities; Mumbai, Bengaluru and Delhi- This exerted a great deal of pressure on builders in the
NCR continue to attract the highest investments in India second half of 2014 to liquidate their inventories (about
and account for about 75% of these investments,” said Rs. 65,411crore). Builders are still finding it difficult to
Sanjay Dutt, Managing Director, Cushman & Wakefield sell their older inventory as the real market prices have
India. failed to keep up with their list prices. The trend emerging
On the residential side, the market potential includes over is that in virtually all projects resale stock is coming onto
900,000 units that are scheduled for completion in the the market at significantly less than the builders’ list price,
coming four years1. and in many cases still not finding buyers. With increasing
labour and materials costs, high borrowing costs, and slow
The Bangalore Real Estate Market sales, many builders are entering a very uncomfortable
cash crunch and have little room to move with their prices
to stimulate sales. Given the tight lending criteria from the
Bangalore, the capital and largest city of Karnataka,
financial sector there are limited options available. This
known as the ‘Silicon Valley of India,’ has become one
requires builders to keep prices at market levels and have
of Asia’s fastest growing cities since the emergence of
offers that engage buyers. Given the build-up of unsold
the information technology (IT) and IT-enabled services
inventory and the pressure to drive cash flow, there will
(ITeS) industry. It contributes about 33% of Indian IT
obviously be some aggressive competition.
exports, and houses over 800,000 IT/ITeS professionals,
accounting for about 55% of the total demand of the This study examines the above mentioned problems
organized real estate market. Thus, the city’s residential that the Bangalore residential market is now facing by
demand is mainly led by growth and performance of studying the buyers’ preferences.
the IT/ITeS sector. Bangalore was popularly known as
a ‘Pensioners’ Paradise’ and Garden City for its delicate Literature Review
blossoms and greenery that imparts a unique beauty to it.

The Bangalore real estate market is considered to be Most of the papers in residential property market focus on
one of the most stable markets in India. The average housing demand pattern on certain parameters as price,
price growth in Bengaluru’s residential areas, in the last income and other demographic factors.
three years, has been around 23%, which is higher than Indian real estate has seen an unprecedented boom in the
the average price growth in all other major destinations last few years. This was ignited and fuelled by two main
- Delhi NCR (18%), Mumbai (22%) and Pune (17%). forces. First, the expanding industrial sector has created
Areas such as Hebbal saw a 67% growth, with average a surge in demand for offices building and dwellings.
property prices rising from Rs. 4,250 per sq.ft. in 2012 to According to Richards (1939), the factors necessary for
Rs. 7,100 per sq.ft. in 2015. 2 a boom in real estate (residential) i. a housing shortage
Whilst Bangalore has performed better than markets ii. A capacity to buy or build homes as measured by
such as Gurgaon, it has still suffered from similar issues the level of income in relation to building costs iii. A
of oversupply and decreasing margins also. According plenitude of capital available for home-mortgage lending
to the LJ Hooker Mid-Year Report (2014), the slowing iv. Reasonable real estate taxes v. a rising business trend
real estate market has mirrored the slowing economy with low employment vi. Confidence on the part of
 Trends in Residential Market in Bangalore, India 3

business leaders and the general public in the economic To understand consumers’ motivations, deterrents and
and political future of the nation; and vii. Financial inhibitors of choice of housing projects and residential
stability in the fields of housing and home-mortgage property buyers’ preferences.
lending, including a relatively low mortgage debt, a
minimum of institutionally held real estate, and a low rate Research Design, Data Collection and Sample
of foreclosure.
Size
Singh and Komal (2009) concluded their research paper
with the remark that real estate is a very wide concept The study is a descriptive research study addressing the
and it is highly affected by the macro-economic factors problem of slow sales and oversupply of the residential
like GDP, FDI, per capita income, interest rates and properties in the Bangalore market.
employment in the nation. The most important factor in
The data for the study was collected using a structured
the case of real estate is location which affects the value
questionnaire, to understand the buyers’ preferences for
and returns from the real estate. India needs a stronger
housing in Bangalore, their budget, and the recent trends
capital market base for property financing.
in the industry and their preferences of top developers
Arimah (1997) linked demand function with income, based on brand and quality. The sampling list included
price, household size and occupational status of the head of the recent visitors to the developers as the visitors are the
household. Besides income and wealth, other sociological hot prospects and right population to fit the study.
or demographic characteristics of the household may
The sample size for the study was one hundred
influence the housing demand. Bandopadhyay and Saha
respondents, selected by convenient sampling by mall
(2011) have shown the influence of location, employment
intercept method in different locations of Bangalore.
position on demand for dwelling units.

The other relevant literatures are reports published by the Analysis Tool
Reserve Bank of India and the National Housing Bank.
The Report on Trend and Progress of Housing in India The relationships between purchase type and budget,
(2012) describes the dynamics of the housing market in purchase type with bhk1, budget with possession, are
India. The National Housing Bank (NHB) is responsible analysed using chi-square analysis. Lastly, Friedman test
for regulating and refinancing social housing programs. is performed to find out the top developers’ (in Bangalore)
NHB’s primary focus is the availability of affordable rankings based on brand and quality.
housing for all.
Observations & Analysis
Data & Methodology
The objectives Location

The different locations preferred for residential housing

To assess potential and market attractiveness as per
are classified into zones as presented in the following
location and housing market segment of housing projects
table.
in Bangalore, and

1
bed-hall-kitchen
4 PRiMa: Practices and Research in Marketing Volume 8 Issue 1 2017

Table 1:  Locational Factors in Bangalore

Location Positives Negatives

Central Bangalore: MG Road, Proximity to malls, key educational in- Limited availability of land
Frazer Town, Kasturba Road , stitutions and hospitals Land prices are very high
Vitthal Mallya Road, Lavelle High potential demand for luxury apart-
Road, Richmond Road, Lang- ments
ford Town Good transport connectivity – Namma
Metro
North Bangalore: Proximity to airport Lack of adequate water
Hebbal, Jakkur, Devanahalli, Not much competition in economy seg- Lack of social infrastructure
Doddabalapur, Yelehanka ment Slow speed of infrastructure devel-
Land prices are cheap opment
Slow sales of real estate
East Bangalore: Plenty of economic and employment op- Far from the main city – commut-
Sarjapura, Hoskote, Whitefield, portunities ing time and cost of commuting are
Old Madras Road, Marathalli, Metro rail to open up more opportunities high.
Mahadevapura, Hoodi Proximity to IT hubs in Whitefield and
ITPL
South Bangalore: Easy connectivity to Electronic City Economic and employment oppor-
Kanakapura, Bannerghatta Availability of power, water and sanita- tunities are moderate compared to
Road, JP Nagar, BTM Layout, tion and other basic amenities East Bangalore
Electronic City Good social infrastructure
West Bangalore: Fully developed Land is expensive.
Vijayanagar, Mysore Road,
Malleswaram, Yeshwanthpur

The preferred locations for buying residential property In terms of the type of housing the buyers intended to
were found to be as follows: 32% of the buyers preferred purchase, 52% of buyers preferred to purchase apartments,
Central Bangalore, 31% preferred South Bangalore, 29% 35% villas, 8% penthouses, and 5% row houses. Buyers
preferred North Bangalore, 6% West Bangalore, and who opted for apartments want to majorly be within the
2% East Bangalore. Thus, Central and South Bangalore city limits, while those who opted for villas want to have
were the most preferred locations to reside. This is more of a peaceful environment. Apartments are more
mainly because these zones are fully developed and have economical as compared to villas, but many buyers do
good social infrastructure built around it. The transport not like apartments in a residential complex mainly due to
connectivity is also very good. South Bangalore is lack of space and privacy, preferring villas instead. A villa
preferred mainly because of the connectivity to Electronic in the city outskirts costs approximately the same as an
City; IT professionals prefer this zone due to the proximity apartment in the city. The only negative thing about villa
to their offices. North Bangalore is also preferred as housing is that it will not have the amenities a residential
land prices in this area are relatively low, and due to the complex will have. Penthouses are preferred by buyers
accelerated development around Bangalore International who have a higher budget and who want style and luxury
Airport. Buyers who want to stay away from the noise in their property. Row houses are the least preferred
and pollution of the city, enjoying a peaceful environment because they lack privacy in a gated community, and they
and natural greenery, prefer this zone. Buyers generally also require a higher budget.
do not prefer to stay in East Bangalore mainly because
of prolonged commuting times to the city and higher In terms of number of bedrooms, 3% of the buyers
commuting expenses. preferred single bedroom housing, 26% preferred two-
bedroom housing, 55% three-bedroom, 14% four-
bedroom, and 2% five-bedroom housing. Typically buyers
 Trends in Residential Market in Bangalore, India 5

tend to live in extended or joint families, and that is why prefer villas choose to stay in the outskirts of the city, in a
they prefer three-bedroom housing irrespective of the area peaceful environment; because land prices are generally
of the property. For nuclear families, the third bedroom cheaper, they tend to build and stay in larger villas.
can be used as a guest room, or it can be converted into
a study room or puja room. The third most preferred is Of the 5% of buyers who preferred row houses,
four-bedroom housing, and these are mainly preferred by 80.0% preferred 1700-2400 sq.ft. houses, and 20.0%
buyers who prefer penthouses or villas, i.e. buyers who preferred 3100-3800 sq.ft. Row houses are mainly gated
want more space and are willing to pay more for it. communities having common boundary walls or fences.
These types of projects are built close to the city and target
Of the 52% of buyers who preferred apartments, the those having a higher budget in purchasing properties.
preferred apartment sizes were as follows: 13.5% Row houses tend to be expensive; therefore, very few
preferred 1000-1200 sq.ft. apartments, 32.7% preferred people opt for them.
1200-1400 sq.ft., 17.3% preferred 1400-1600 sq.ft.,
17.3% preferred 1600-1800 sq.ft., 11.5% preferred 1800- In terms of the budget for purchasing housing, 44% of
2000 sq.ft., and 7.7% preferred 2000+ sq.ft. Thus, most the buyers had a budget of Rs. 25-75 lakhs, 30% had a
of the buyers preferred two-bedroom apartments (1000- budget of Rs. 75-125 lakhs, 15% had a budget of Rs. 125-
1400 sq.ft.), followed by three-bedroom apartments 175 lakhs, and 11% had a budget of Rs. 175+ lakhs. This
(1400-1800 sq.ft.), perhaps due to affordability. means that developers should focus more on economy
housing in their upcoming projects.
Of the 8% of buyers who preferred penthouses, their
preferred sizes were as follows: 37.5% preferred 2200- There was significant association between preferred
2600 sq.ft. penthouses, and 62.5% preferred 3400-3800 type of housing and budget (χ2 = 41.116, p = 0.000).
sq.ft. (including terrace area). The former range is more The majority of buyers preferring apartments had a
common in the Bangalore market and is relatively cheaper, budget in the range Rs. 25-75 lakhs (61.5%), followed
while the latter is less common and is very expensive. by Rs. 75-125 lakhs (34.6%); and the majority of buyers
preferring row houses had a budget in the range Rs. 25-
Of the 35% of buyers who preferred villas, 14.3% 75 lakhs (60.0%); while the majority of buyers preferring
preferred 1700-2400 sq.ft. villas, 20.0% preferred 2400- penthouses had a budget in the range Rs. 1.25-1.75 crores
3100 sq.ft., 28.6% preferred 3100-3800 sq.ft., 11.4% (50.0%), and the majority of buyers preferring villas had a
preferred 3800-4500 sq.ft., 5.7% preferred 4500-5200 budget in the range Rs..1.75+ crores (28.6%), followed by
sq.ft., and 20% preferred 5200+ sq.ft. The most preferred Rs. 1.25-1.75 crores (25.7%). Clearly, buyers preferring
size was 3100-3800 sq.ft., which is the typical size of penthouses and villas would have a higher budget due
a normal villa in Bangalore. Also, a segment of buyers to the larger size of housing. Further, villas are mostly
preferred villas in the range 2400-3100 sq.ft, which is preferred by buyers wanting more privacy and a peaceful
the lower budget range. On the other hand, a significant environment; therefore they tend to look for properties in
proportion preferred villas of 5200 sq.ft. and above, the outskirts of the city such as the North or the South side
which represents the higher budget segment. Buyers who (Table 2).
Table 2:  Crosstab between Budget and Preference

Budget range Total

25 - 75 lakhs 0.75 - 1.25 crores 1.25 - 1.75 crores 1.75+ crores
Apartment Count 32 18 2 0 52
% within 61.5% 34.6% 3.8% .0% 100.0%
Pent-house Count 2 1 4 1 8
% within 25.0% 12.5% 50.0% 12.5% 100.0%
Villa Count 7 9 9 10 35
% within 20.0% 25.7% 25.7% 28.6% 100.0%
Row House Count 3 2 0 0 5
% within 60.0% 40.0% .0% .0% 100.0%
Total Count 44 30 15 11 100
% within 44.0% 30.0% 15.0% 11.0% 100.0%
6 PRiMa: Practices and Research in Marketing Volume 8 Issue 1 2017

Chi-Square Tests majority of buyers preferring row houses preferred two

Value df p-value bedroom houses (80.0%); while the majority of buyers
Pearson Chi-Square 41.116a 9 .000
preferring penthouses preferred three-bedroom (50.0%)
or four-bedroom penthouses (50.0%), and the majority
Likelihood Ratio 45.044 9 .000
of buyers preferring villas preferred three-bedroom
Linear-by-Linear Association 18.780 1 .000
villas (65.7%), followed by four-bedroom villas (25.7%).
N of Valid Cases 100
Typically, buyers tend to live in extended or joint families,
a. 9 cells (56.3%) have expected count less than 5. The min- and that is why they go for a three-bedroom house,
imum expected count is .55.
irrespective of the area of the property. For a nuclear
There was significant association between preferred family, the third bedroom can be used as a guest room, or
type of housing and number of bedrooms preferred (χ2 it can also be converted into a study room or puja room.
= 44.443, p = 0.000). The majority of buyers preferring The row house projects are located in the city, therefore
apartments preferred three bedroom apartments (51.9%), it is quite expensive and people prefer two-bedroom row
followed by two-bedroom apartments (40.4%); and the houses so that the super-built area becomes less and hence
the price also becomes less (Table 3).
Table 3:  Crosstab between Preferred BHK and Preference Type

Number of bedrooms Total

1 BHK 2 BHK 3 BHK 4 BHK 5 BHK

Apartment Count 3 21 27 1 0 52
% within 5.8% 40.4% 51.9% 1.9% .0% 100.0%
Pent-house Count 0 0 4 4 0 8
% within .0% .0% 50.0% 50.0% .0% 100.0%
Villa Count 0 1 23 9 2 35
% within .0% 2.9% 65.7% 25.7% 5.7% 100.0%
Row Count 0 4 1 0 0 5
House % within .0% 80.0% 20.0% .0% .0% 100.0%
Total Count 3 26 55 14 2 100
% within 3.0% 26.0% 55.0% 14.0% 2.0% 100.0%

Chi-Square Tests
Value df p-value
Pearson Chi-Square 44.443a 12 .000
Likelihood Ratio 50.643 12 .000
Linear-by-Linear Association 13.487 1 .000
N of Valid Cases 100
a. 15 cells (75.0%) have expected count less than 5. The minimum expected count is .10.

There was significant association between budget and 75 lakhs (50.0%), followed by Rs. 75-125 lakhs (30.8%)
possession time (χ2 = 21.018, p = 0.012). The majority of and Rs. 1.25-1.75 crores (15.4%); while the majority of
buyers who wanted immediate possession had a budget in buyers who wanted possession within three years had a
the range Rs. 25-75 lakhs (64.7%); the majority of buyers budget in the range Rs. 1.75+ crores (35.0%) [conversely,
who wanted possession within one year had a budget in the majority of buyers with a budget in the range Rs.
the range Rs. 25-75 lakhs (40.5%), followed by Rs. 75- 1.75+ crores were willing to wait up to three years for
125 lakhs (37.8%); the majotrity of buyers who wanted possession (63.6%)]. Thus, buyers with a higher budget
possession with two years had a budget in the range Rs. 25- were willing to wait longer for possession (Table 4).
 Trends in Residential Market in Bangalore, India 7

Table 4:  Crosstab Between Preferred Budget and Possession

Expected time to possession Total

Immediate 12 Months 24 Months 36 Months
Budget Count 11 15 13 5 44
25 -75 lakhs
% within 25.0% 34.1% 29.5% 11.4% 100.0%
Count 2 14 8 6 30
0.75 - 1.25 crores
% within 6.7% 46.7% 26.7% 20.0% 100.0%
Count 2 7 4 2 15
1.25 - 1.75 crores
% within 13.3% 46.7% 26.7% 13.3% 100.0%
Count 2 1 1 7 11
1.75+ crores
% within 18.2% 9.1% 9.1% 63.6% 100.0%
Total Count 17 37 26 20 100
% within 17.0% 37.0% 26.0% 20.0% 100.0%

Chi-Square Tests
Value df p-value
a
Pearson Chi-Square 21.098 9 .012
Likelihood Ratio 19.281 9 .023
Linear-by-Linear Association 5.356 1 .021
N of Valid Cases 100
a. 7 cells (43.8%) have expected count less than 5. The minimum expected count is 1.87.

There was significant difference in ranking of the developers should focus on the North and South zones for
developers (χ2 = 114.343, p = 0.000). Mantri Developers new development. North zone residential projects should
has ranked first, with a mean rank of 2.62, followed by target buyers who want to stay away from the noise and
Brigade Group with a mean rank of 2.66; Prestige Group pollution of the city, while South zone residential projects
with a mean rank of 3.29; Sobha with a mean rank of 3.29; should target the IT professionals, due to its connectivity
Puravankara with a mean rank of 4.45; and lastly Nitesh with Electronic City. East Bangalore will be lucrative to
Estates with a mean rank of 4.73. Nitesh is relatively new developers when the Namma Metro becomes functional.
to the market and is not widely-known because it focuses
on the luxury segment. Puravankara is not very preferred As apartments are in greatest demand in Bangalore,
because of poor quality of construction compared to the developers should focus on this segment. The apartments
market leaders Mantri, Brigade, Presitge and Sobha. with greatest demand are two/three-bedroom apartments,
Therefore, in real estate market buyers don’t have their in the range of 1200-1800 sq.ft., with a budget of Rs. 25-
prime criterion as budget when they are purchasing a new 75 lakhs. Two-bedroom apartments could be offered in
home; instead they want to meet quality standards as the the size range of 1200-1400 sq.ft., while three-bedroom
prime criterion while purchasing a new home. apartments could be offered in the sizes of 1400-
1800 sq.ft.; however, the current market prices do not
match with the budget expressed by the buyers, so that
Discussion
developers should focus more on economy housing in
their upcoming projects. Another possibility would be for
The following are some recommendations for residential
developers to provide smaller three-bedroom apartments
property developers in Bangalore based on the findings
with similar super built-up area of a typical two-bedroom
of the study.
apartment.
Though Central Bangalore is the most preferred zone,
it is very difficult to acquire land in this zone, so that
8 PRiMa: Practices and Research in Marketing Volume 8 Issue 1 2017

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