Bangalore is possibly the safest location for investments in the world. The good news is prices do not skyrocket or get hyped like in some other prominent locations in India. They do not go downwards too like they have in many other prominent locations in India.
Bangalore has the distinction of being a market where most of the property purchases are by endusers and not speculators. Speculators treat it as a pure investment for financial gains. A leading real estate company conducted a study on the pattern of first purchases (purchase straight from builder or developer) by end-users. The study found a surprising and comforting factor. It said 81.2 percent of first purchases in Bangalore were by end-users and not speculators or investors who look for just financial returns. This figure in locations such as Mumbai could be as low as 40 percent.
The advantage of end-users buying more is prices do not appreciate or depreciate at abnormal percentages. This is good news for a homebuyer since the prices would be stable and would move upwards or downwards within a small band. Even during a recession, the salability is almost guaranteed. Also, the market here is not driven by economic sentiment in some other part of the world but by the actual demand and supply situation in the particular location where the project is located.
This clearly puts the home buyer in a position of safety as he is paying the right price and not a speculative price due to economic boom in some other part of the world. Since the price is reasonable and decided by the supply and demand pattern, there is minimum risk of a price decline. Bangalore’s prices have been the most stable ones even during a recession. It can be clearly said that Bangalore’s prices stood stable even during those times keeping the homebuyer safe and also started appreciating soon after the economic situation improved the world-over. This stability happens only in locations where most of the homes are bought by end-users. Now, with real estate prices going up, there is steady demand and the safety factor is much better. It is safer to buy property in Bangalore now.
There are three asset classes – site, apartment and villa – in the residential property segment. Let’s consider the site segment. They are bought by those who want to build their own designer homes. Typically, the timeframe before a home is built on a plot is 3-7 years. Many a time, the buyer uses it as an investment for the future generations. This investment cannot be considered speculative buying as the buyer has firm plans. The site is not bought for its potential appreciation in value but to be retained within the family for future generations. This is the simplest form of a home purchase. The delivery happens within 12 months of the purchase. The registration process is completed within these 12 months.
A buyer should buy from an established developer with a brand name, and also go by past delivery and proper legal documentation. Most of the developments in this segment are in the BMRDA and BIAPPA areas. For more details on the BMRDA area we need to understand the concept of the planning authorities. There are six major planning authorities around Bangalore that have almost autonomous powers to sanction townships, layouts, buildings and villas. These authorities are under the BMRDA. All the policies and procedures are framed and monitored by the BMRDA. The six planning authorities are the Anekal Planning Authority under which the areas of Sarjapur, Hosur Road and other nearby areas come; the Hoskote Planning Authority under which the areas of Old Madras Road, Chintamani Road and other nearby areas come; Kanakapura Planning Authority under which areas around Kanakapura Road come; Nelamangala Planning Authority under which areas around Nelamangala and other nearby areas come; Magadi Planning Authority under which areas around Magadi Road come; and the BIAPPA Planning Authority under which areas around the new international airport come.
Some buyers have a misconception that any government body’s approval is acceptable for townships, layouts and sites, and put in their hard-earned money. Many a time, buyers rely on a panchayat plan sanction and assume that it is a clear plan sanction and documentation. The BMRDA and the respective planning authorities, as mentioned, are the only legal authorities with powers to sanction plans in the areas under the BMRDA jurisdiction. According to recent government policies, any approval for a new villa in a layout approved by the BMRDA or a planning authority needs the BMRDA or the planning authority’s approval. This point is missed by some buyers. The plan has to be approved by these planning authorities mandatorily. The panchayat has no powers to sanction a building or villa plan in a BMRDA or planning authority approved layout.
Also, according to a government rule, the sale or purchase of a site in green belt areas is illegal. Investments in green belt areas are not safe and could come under different legal complications later on.
Another point buyers have to take care of is pricing of a site in a township in a BMRDA or BIAPPA area. The typical pricing, if all the legalities are correct, is between Rs 1,000 and Rs 1,800 per sqft depending on the area and location of the project. Anything above Rs 1,800 is a futuristic price. Any price below Rs 1,000 should be scrutinised thoroughly. The prices, even in BIAPPA areas, are between Rs 1,250 and Rs 2,000 per sqft depending on the location of the project. Any price above this is a futuristic price.
The rest of the areas around Bangalore come under the Department of Town Planning (DTP). The DTP is the authority that sanctions plans for all other areas around Bangalore, apart from BBMP and BDA areas. The procedures are almost the same. The typical price range of sites in the DTP approved areas is between Rs 750 and Rs 900 per sqft. These areas are beyond the BMRDA limits and typically 30 to 40 km from the centre of Bangalore.
Today, the specifications and trends have moved towards international standards. Many of the townships come with concrete roads instead of the typical tartopped roads. The major reason being concrete roads last at least two decades before repair works have to be taken up. Owners’ associations save a huge amount in future on road maintenance works. With concrete roads, you will not find grass and other unnecessary vegetation growth coming up like on tartopped roads. If there is no regular vehicular movement, tar-topped roads have grass growing on them. Also, today, most premium townships and layouts come with underground electrical cabling and other facilities.
So, the next time you invest in a site, make sure these issues are taken care of so that your investment is safe, and will be an asset for the next few generations to come.
By Dr Roy C J, Chairman and Managing Director, Confident Group
Source: Times Property in The Times of India, Bangalore
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