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What demonetization has in store for real estate in Bangalore

A view of Bangalore

Bangalore has been one of the few big cities in the country which has been performing solidly when it comes to real estate. But the city has not been left untouched by a slumping realty market. The demonetization driven undertaken up by Prime Minister Narendra Modi to fight black money, corruption and terrorism is expected to have far reaching consequences for the real estate sector. Let’s see what it has in store for the capital city of Karnataka.

Bangalore is the Information Technology capital of the country. Because of this, the city has witnessed its fair share of ups and downs. The mid 1990s saw the rise of this real estate giant on the back of the IT boom. But the financial crisis of 2008 which crippled the global economy brought it to its knees. Builders were forced to rethink their projects and reshape them to make them more affordable due to the negative sentiment that was prevalent in the market. The real estate market only recovered for this blow due to the lowering of interest rates by banks.

So what effect would the demonetization have on a market which maybe not be as fragile as some of the markets up north like Delhi NCR and Mumbai? Well over all one expects that buyers will have an upper hand while negotiating with developers. The last few years have already been labelled as a buyer’s market. So developers will most definitely be going through a cash crunch of sorts now and maybe willing to negotiate with a buyer who seems to be serious about the property on the block.

Bangalore’s luxury real estate segment and land transactions will see a big impact. Most of the black in circulation in the real estate sector usually can be found in these two segments along the resale segment. The northern parts of the city which are known for their luxury villas and affordable land parcels will see a considerable price drop. So there might be a good window of opportunity for the next two quarters or so to make the most of the distress sales that could take place in these two segments. You can lookout for resale properties as well as which might be cheaper than usual for the next few months. But the caveat here is that not all sellers will be willing to sell their properties under the current circumstances. A buyer can only benefit if a distress sale happens.

Buyers who are looking for new properties should not expect the prices to drop drastically. But for those who are seriously looking for a home, the builders will pitch some deals which could be quite hard to resist and could prove beneficial to the buyer.

The next six months will be a good time to purchase a property in Bangalore. A negative sentiment has swept across the realty industry at the moment. So buyers can make the most of this time and start looking into homes in areas which they may have traditionally ignored because of the high pricing. Even if you can’t go for a new property, a resale property in areas such as Indira Nagar, Koramangala, Jaya Nagar and other parts of central, eastern and southern Bangalore will not set you back by much if you act quickly.

Those dependent on home loans will also have a reason to rejoice as the liquidity flow into the banks might ultimately lower home loan EMIs. Even if property prices don’t fall, lower EMIs will boost the real estate sector by making homes a more affordable proposition. With the Reserve Bank of India bringing down the repo rate to a historic low of 6.25% and the prevalent market sentiments, the next six months will be a good time to purchase a property in Bangalore.

Kavitha Ravi for IndiaProperty.com

Image:By Prateek Karandikar (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 4.0-3.0-2.5-2.0-1.0 (http://creativecommons.org/licenses/by-sa/4.0-3.0-2.5-2.0-1.0)], via Wikimedia Commons

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