A recent report by Knight Frank indicates that Bengaluru has seen a decline of 2% in housing sales, dropping from 13,390 units to 13,133 units over the past year. This downturn is particularly influenced by reduced activity in the affordable housing segment, although the demand for office space in the IT hub has remained consistent at 3.5 million square feet.
During the first quarter of 2024, sales plummeted by approximately 65% to 70% in homes priced under Rs 50 lakh, contributing to the overall dip in figures. Furthermore, residential properties priced between Rs 50 lakh and Rs 1 crore experienced a 7% decrease, largely due to challenges regarding affordability for potential buyers. Vivek Rathi, head of research at Knight Frank, remarked during the unveiling of their India Real Estate: Office and Residential Report (covering January to March 2024), 'This might just be a short-term anomaly.'
Despite these sales declines, there is notable growth in the higher-end market, with homes worth over Rs 1 crore witnessing nearly a 50% surge in sales.
When addressing the impact of the ongoing water crisis in Bengaluru on the real estate market, Shishir Baijal, chairman and managing director of Knight Frank, remarked that the issue "has not had too much of an impact on the housing sales trajectory and cannot be attributed to the decline in sales or the market performance." Nonetheless, he emphasized that since Bengaluru is a major hub for commercial leasing, addressing the water shortage is paramount, as it stands as a pivotal market in the country.
Bengaluru Housing Sales Overview
The data reveals that Bengaluru’s residential market totaled 13,133 units sold in Q1 2024, while 13,135 new units were introduced, marking a remarkable annual growth rate of 9% year-on-year for the quarter. Additionally, the average weighted residential price surged by 9% year-on-year to reach Rs 6,145 per square foot, making it the second-highest pricing among top Indian cities.
In terms of unit sales, 993 homes in the under Rs 50 lakh category were sold, showcasing a 68% decline; 6,065 units sold in the Rs 50 lakh to Rs 1 crore range reflected a 7% drop; while 6,075 units in the over Rs 1 crore category showed a 50% increase.
Office Space Market Activity in Q1 2024
Bengaluru's office space transactions amounted to 3.5 million square feet during the first three months of 2024. This performance underscores the city’s role in bolstering the commercial real estate market, with a 22% contribution to the total transactions of 16.2 million square feet across the top eight Indian cities.
Office completions rose dramatically by 275%, climbing from 1.3 million square feet in Q1 2023 to 5 million square feet in Q1 2024. Bengaluru accounted for almost 38.46% of all new office completions among the leading eight urban markets in the nation.
Moreover, in Q1 2024, Global Capability Centers dominated the occupancy landscape, comprising 51% of the leasing activities. The transactions associated with these centers escalated by 38% year-on-year, increasing from 1.3 million square feet in Q1 2023 to 1.8 million square feet in 2024.
Flex office spaces also took a significant share of the city's leasing scene, constituting 26% of the overall activity. Businesses focused on Indian markets led the charge, with Third-Party IT Services coming in as the second and third most prominent sectors at 14% and 9% respectively.