While the pandemic negatively impacted most business sectors, contrary to common perception, the housing sector in Bengaluru did not suffer, the Economic Survey 2021-22 reveals
The survey states housing prices increased during the first and second Covid-19 waves, contrary to expectations that they would fall. It says there was a 2.7 percent and 5.3 percent increase in housing prices during the first financial quarter of 2020 and 2021 respectively, over pre-pandemic levels of the first financial quarter of 2019.
Data from the Housing Price Index (HPI) of National Housing Bank (NHB) agrees with this positive trend for Bengaluru, where the composite index for June 2019 was pegged at 113, June 2020 at 116, and June 2021 at 119.
This upward mobility in prices is also reflected in an increase in housing transactions, which spiked by more than 40 percent in the second Covid-19 wave (April-June 2021) over pre-pandemic levels of 2019’s first financial quarter.
The report suggests pent-up demand and improvement in affordability in response to measures taken by the government such as lowering interest rates, reduction in circle rates, and cut in stamp duty, made houses affordable to buyers despite Covid-19’s devastating impact on the Indian economy.
Nasir Sharif, joint secretary, Bangalore Realtors Association India (BRAI), said school and work from home became a pivotal reason for people to buy larger living spaces. “The lockdown was actually a busy time for us,” he said. “There was a 5-10 percent increase in business but the availability of good housing options was low in areas near the Metro or tech parks. ”
Sharif said the ‘Rs 1 crore plus’ market did well, but not so budget-friendly housing options. However, Anthony Raj, owner of a realty firm, did not agree, saying the housing market did not “flourish”. “Desperate sellers sold properties for far less than intended,” he said. “Builders’ inventories were getting stale, so they bought their own properties to avoid a price drop. ”
But others warn of a future where affordable housing would get scarcer and home would no longer be categorized as a necessity. “Developers in Bengaluru are beginning to capitalize on the most elite segment of the housing market, for which there are buyers,” said Sudeshna Mitra, lead-academics and research, Indian Institute for Human Settlements. “This is borne out by increasing average price of transactions. But realtors are not learning how to cater to middle-low income demand. There is an internal crisis that needs to be fixed as the sector is far too focused on the high end of the price segment. Soon, the formalized sector may not have the capacity to deliver a basic home. ”
Speaking about rental transactions, Swastik Harish, an independent researcher, said that over Rs 1. 2 lakh crore (about 1 percent of India’s GDP) worth of transactions take place in the urban rental market which is by and largely informal. Properties are still controlled by traditional land-owning classes who hold their land and assets until their asking price is matched. “Transactions, as recorded in the Economic Survey are from the formal market. Rental housing is largely a poor person’s market. Bengaluru is still an emerging real estate market because there is still urban land to develop, unlike Mumbai or Delhi which are saturated and their demand absorbed by peripheral towns. ” he said.
Mitra said this is a global problem in financialised housing markets, as industry finance predominantly seeks projects with high returns. The main theme underlying the uptick in housing transactions appears to be that many houses were bought or sold on new lands situated on the periphery of BBMP limits, but there is also a dearth of good housing for the middle classes, Mitra said.