We will continue to look for joint development opportunities.

Rajendra Joshi

- CEO Residential, Brigade Enterprise

What are the peculiar challenges of Bengaluru real estate and how has Covid disrupted the sector in terms of demand and supply, construction activities/ finance, etc. 

The challenges faced by the real estate sector in Bengaluru are similar to most real estate markets in the country.  However,  one peculiar challenge for Bengaluru is that it is largely an end-user market.  This means that the percentage of investors in Bengaluru is much lower as compared to other major urban centers. We, therefore, see a relatively higher demand for quality product and on-time delivery in Bengaluru which places much higher pressure on real estate developers in the city viz a viz other markets such as Mumbai or Delhi. Also, since the demand from IT & ITES forms a large percentage of the Bengaluru market, over the last 12 to 18 months the demand for real estate has actually gone up as the IT sector has done really well during this period based on requirements from the global markets as the pace of digitization increases. Since IT & ITES form a large part of the customer base for key markets such as North and East Bengaluru, the city's residential real estate market, particularly for larger developers, continues to be good. In terms of construction, activities, finance, etc. COVID has disrupted it in a big way. In the first wave, construction activity was stopped, and migrant labor returned home. In the second wave although construction activity was allowed the availability of labor was down to 60% which has impacted construction activity.

States like Maharashtra and Karnataka had reduced stamp duty to boost the demand.  Bengaluru, on the other hand, had rationalised its rates long back. What measures do you think are needed to be undertaken by the government to boost sales?

There are a couple of measures that can help the industry and the end customer. Firstly, the re-introduction of input tax credit for residential real-estate by the central government will help reduce prices for the customer. Since input tax credit was removed in 2019 the net impact was an increase in the price of Rs 400 to 500 per sq/ft. Secondly, although Karnataka has rationalized rates, if the guideline values are reduced it will help in bringing down the overall cost.

With most of the population working from home now, what is your take on the prospects of commercial office space absorption, and what will be the near time challenges?

Although work from home is the norm currently, what we will see going forward are two trends i.e. the square-foot-per-person will increase and the demand for commercial space from Grade A developers in top commercial hubs will continue.

Bangalore Development Authority (BDA) plans to tie up with developers for opening up its land parcels for real estate development. How do you see this development?

We are in touch with the BDA on this.  However, the announcement was made by BDA only recently and they are yet to firm up their plans as to which parcels, the process etc. we will be happy to work with BDA in terms of developing land parcels once the process is set in place.

How do you see the current fiscal ending in terms of demand, new launches, sales as well as price appreciation.

In the current fiscal, once the impact of the second wave eases, the demand for residential real estate will rebound to pre covid levels. In addition, further consolidation of the market is expected with leading developers gaining market share. Residential products from leading developers, particularly larger sized units, units in larger integrated communities will see renewed demand. I do see demand coming back and therefore I also see that developers, particularly the larger developers planning new launches. The overall sales as compared to the last fiscal will largely depend on how long the current impact of the pandemic will last.

As far as price appreciation is concerned there is a significant increase in input material costs, for example, steel is at an all-time high price. Similarly, the price of raw material such as cement, PVC materials, aluminum and copper have hit new highs. As the price of petroleum increases, downstream products such as plastics etc. will see price hikes. As a consequence, developers will be forced to increase prices which will take effect from quarter two of the current fiscal.

What's your pipeline for this fiscal in terms of investments and project launches? Are you looking at acquisition or JDA/ JV model for growth?

We are looking to expand our footprint in Bengaluru, Chennai, and Hyderabad with new projects and tie-ups. Our preferred mode of development is JDAs. We will continue to look for such opportunities and we are actively talking to landowners to acquire land parcels for development, largely on the JDA model.

Hits: 106