Affordability Driving Consumer Demand for Residential Real Estate in Peripheral Areas of Bengaluru: Magicbricks Data

* Home buyers are retaining size preference but reducing budgets

* Security, proximity to school, local markets and offices are key deciding  factors

* Whitefield, Sarjapur Road, Electronic City and Bellary Road most preferred localities

With India intermittently unlocking, new encouraging trends are now visible in the real estate sector after a period stagnancy. The sector is witnessing a tectonic shift and according to Magicbricks data, consumer preference in Benglauru is shifting towards peripheral areas due to affordability.

The shift in consumer demand towards Bengaluru’s peripheral areas has been accentuated by the demand-supply mismatch in the less than Rs.5000/sqft price category. Magicbricks data also suggests that Bengaluru’s consumer demand for BHKs and size hardly remain unchanged pre-COVID vis-à-vis post-COVID indicating that home buyers are retaining size preference but reducing budgets to move to the peripheries of the city in search of larger houses at lower cost.

Magicbricks data suggests that peripheral areas near employment hubs like Whitefield, Sarjapur Road, Electronic City and Bellary Road were the most preferred localities for home buyers during the April-May-June period of 2020. The consumer demand in these localities are driven by factors like affordability, better access to IT hubs and sound connectivity to the airport. The extension of metro lines from Baiyappanahalli – Whitefield and RV Road – Bommasandra is likely to boost the demand for the economic hubs of Whitefield and Electronic City in the future.

Commenting on the changing consumer behaviour, Mr. Sudhir Pai, CEO, Magicbricks, said: “We are experiencing a strong recovery in demand after searches dipped by 50% in April. Buyers are back in the market and our data suggests that Bengaluru’s recovery rate is faster than the national average. There is an emerging trend towards larger homes; but with budgets which are lower than earlier, buyers are searching more towards peripheral areas of the city. Our recent survey suggests that around 33% of home buyers in Bengaluru prefer under construction properties, which is significantly higher than the national average, reflecting their trust in branded developers. We are also witnessing an uptick in demand for plots and from NRIs.”

Bengaluru’s home buyers also displayed increasing propensity towards ready-to-move in properties with as many as 67% respondents suggesting that they want to cut down risk factors by opting for ready-to-move in units. Overall, 74% users are planning to reduce their budget preference and around 50% have cut it by 10-30%. Factors like gated community and proximity to schools and colleges remain the two main priorities for home buyers while selecting a property while amenities such as clubs, gyms and open areas have lost their sheen since COVID-19. Our survey also suggests that in Bengaluru, 55% of the respondents said that they would choose any developer (Tier 1/2) who can give the most economical option/best deal.

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Global Prime Residential Index Witnesses an Annual Increase of 0.9%:Knight Frank Prime Global Cities Index Q2 2020

* Bengaluru ranks 26thoutperforming New Delhi (27th), Mumbai (32nd)

* Bangkok was the weakest-performing global city in the year to June, with luxury home prices falling by 5.8%.

Knight Frank India, a leading international property consultancy, in its ‘Prime Global Cities Index Q2 2020’ report cited Bengaluru as the26th fastest-growing Indian prime residential market in the world, in terms of annual price appreciation.The premium micro-markets of the city recorded a rise of 0.60% in annual capital value change in Q2 2020 to an average price of Rs 19,727 per sq. ft.

New Delhi ranked 27th on the global index, witha 0.30% rise in terms of annual capital value change in the prime residential market to an average price of Rs 33,625 per sq. ft. in Q2 2020. Whereas Mumbai's prime residential market ranked 32nd in Q2 2020, registering a decline of 0.60% with an average price of Rs 64,388 per sq. ft.

Prime residential property is defined as the most desirable and most expensive property in a given location, generally defined as the top 5% of each market by value. The Prime Global Cities Index is a valuation-based index tracking the movement in prime residential prices in local currency across 40+ cities worldwide using data from Knight Frank’s global research network.

According to Knight Frank’s research analysis, 20 cities that witnessed a decline in prime residential prices in Q2 2020 - nine were in Europe, seven in Asia, two in Australasia, one in the Middle East, and one in Africa. The Prime Global Cities Index, an unweighted price index of prime residential prices across 45 cities, increased by 0.9%; recording the lowest rate of annual growth in 11 years. According to the report, 67% of the global cities registered flat or positive yearly price growth; Australasia recorded the strongest performing world region in the year to Q2 2020, and the Asian prime residential prices declined by 0.2% in the three months to June 2020.

Manila,leads the index with prime home prices rising by 14.4% over the 12 months to June 2020, followed by Tokyo (8.60%) and Stockholm(4.40%). Bangkok was the weakest-performing global city in the year to June 2020, with luxury home prices falling by 5.8%.

While Bengaluru and Mumbai moved up by one place in Q2 2020; Delhi gained five places in the same period.

Shishir Baijal, Chairman and Managing Director at Knight Frank India, said, “The pandemic infused economic stress has engulfed the global markets with a fear of uncertainty. Ultra-rich buyers around the world are seen deferring the high premium purchase of a prime residential asset class and preferring investments in liquid assets, primarily gold and cash equivalents. With the expected price correction and uptick in sentiment depending on the news related to vaccine discovery, buyers with adequate liquidity will find value to enter the prime residential asset class in India.”

Key Highlights:

* Bengaluru’s prime residential market performed better than Mumbai and Delhi. Globally, the city ranked 26th with 0.6% annual price change for the period Q2 2019 – Q22020;with 0.00% price change in Q2 2020compared to the previous quarter.

* Delhiranked 27th with 0.3% annual price change for the period Q2 2019 – Q2 2020. The city saw a flat 0.00% price change in Q2 2020 compared to the previous quarter.

* Mumbai ranked 32ndwith -0.4% marginal annual change for the period Q2 2019 – Q2 2020. The city registered a price decline of -0.50 % in Q2 2020 compared to the previous quarter.

* Manila ranked 1st with 14.10%annual change for the period Q2 2019 – Q2 2020. The city saw a flat 0.00% price change in Q2 2020 compared to the previous quarter.

* Bangkok ranks 45th with -5.8% %annual change for the period Q2 2019 – Q2 2020. The city registered a price decline of -1.40% in Q2 2020 compared to the previous quarter.

Brigade Group Announces Q1 FY21 Financial Results Operational Highlights (Q1FY21)

Residential

Achieved 0.4 mn sq ft. of new sales in Q1 FY21 valued at Rs. 250 Crore vs 1 mn sq ft. valued at Rs. 593 Crore in the corresponding quarter of the previous year

Realization per sft has gone up by 14% compared to the same period in the previous year

Jasper Block at Brigade El Dorado of 0.62 mn sft launched during the quarter

Strong pipeline of 16.24 mn sq ft. and upcoming 2.06 mn sq ft. to be launched in FY21

Lease rental:

Leasing segment for offices remains stable with over 95% collections

Construction of the Brigade Twin Towers development has commenced

Hospitality:

All hotels are operational with Ministry of Home Affairs and State Government protocols in place

Average occupancy of 11% due to impact of COVID-19 & lockdown

All non-essential capital expenditure and renovation has been deferred to reduce cash outflows

Various cost saving measures taken including reduction of manpower costs of about 40% and reduction of about 70% in other overheads during the quarter

Financial Highlights:

Consolidated Performance Q1FY21 vs Q1FY20: 

Total Revenues at Rs.214 crores vis-à-vis Rs. 717 crores

EBITDA at Rs. 58 crores vis-à-vis Rs. 191 crores

EBITDA margin at 27%

PAT/(Loss) after Minority Interest at Rs. (53 crores) vis-à-vis profit of Rs. 41 crores

Commenting on the results, Chairman & MD Mr. M.R Jaishankar said, “While this quarter was  impacted by COVID-19, our continued focus on digital marketing,  online booking of apartments  and collections have yielded results even though most of the first quarter was under lockdown.    Despite the pandemic, our total collections for the quarter was Rs. 376 crores. The rental collections from Office in the Leasing Segment is stable. Although the biggest impact has been in the hospitality and retail segment, all efforts are being taken to improve their performance and we are positive that these segments will normalize soon.”

COVID-19 Impact & Outlook

Company outlook:

Construction has resumed at 30% labour strength post unlock 1.0 & has now crossed 50%. We expect to reach 100% by end of Q3 FY21

Green shoots are visible in residential business with a pickup in enquiries and sales

Office business remains stable with 95% collections, retaining a positive outlook

Business in malls and hotels will pick up gradually along with the improvement in economy

Brigade has a strong balance sheet and is in a good position to manage operations while maintaining liquidity to meet business obligations

Industry outlook:

Rate reduction by RBI and consequent low rate of interest for housing loans is a big positive

Adequate liquidity in the economy has helped restrict the damage

Recent announcement by RBI to allow banks to restructure loans in impacted sectors is a step in the right direction

Economy is expected to rebound in the later part of the calendar year; however, GDP contraction is expected for the financial year

Operational Impact:

Construction activity was impacted because of intermittent lockdowns

Lower revenue recognition in real estate segment was due to government office shutdowns

Malls and Hotels underperformed because of the lockdown, travel restrictions and weak consumer sentiment

Collections were impacted because of the reasons mentioned above though partially mitigated by prudent capital expenditure and reduction in overheads

Relief & Efforts:

John’s Health Centre at Brigade Meadows was inaugurated on June 24, 2020

Donation for purchase of an ambulance by St. John’s

Donation for purchase of prefabricated 5 bed ICU module to K C General Hospital

Donation for purchase of ventilator to Sri Vasavi Hospital

Dry ration to more than 3000 families in Bangalore

Sustenance allowance provided to migrant workers and supported them with ‘dry rations

80,000 Meals provided during lock down period

Workers engagement programmes viz. exercises, aerobics, yoga, as well as workers’ counselling

Awards and Recognitions:

Brigade Enterprises Ltd. has been recognised as one of India’s Top 100 Best Companies to Work For 2020, in one of India’s largest workplace study conducted by the Great Place to Work®️ Institute and The Economic Times.

This year, Brigade Enterprises Ltd has been "Ranked 43", in the coveted Top 50 category, across companies. Brigade Enterprises Ltd also has the distinction of being among India’s Top 100 Best Companies to Work For, 10 years in a row.

Brigade Hospitality Services Ltd. has been ranked 3rd amongst India’s Great Mid -Size Workplaces in 2020 by the Great Place to Work Institute and The Economic Times.

Salarpuria Sattva Employs Native Labours to Keep the Construction Momentum On

In a bid to reiterate its commitment towards quality construction and on-time project handovers, Salarpuria Sattva Group, employed 600+ native labourers’ at their projects across Karnataka to boost the real estate sector, during this COVID breakout. This will not only help in continuum of production, investment, labour and native supply chains in the state, but it will also be instrumental in revival of the real estate sector, sooner than anticipated.

With millions of workers migrating to their hometowns, continuing the momentum at the construction sites has been a constant challenge for the developers. In a grim scenario like this, while Govt. is taking measures to uplift the present economic situation, companies across industries will have to be proactive and  self-sufficient.

Being at the forefront of the real estate industry, Salarpuria Sattva, decided to tap into the indigenous manpower of Karnataka and neighbouring states, by employing labour in the construction sites across their projects.

Commenting on the same, Mr. Bijay Agarwal, MD, Salarpuria Sattva, said, “The pandemic has impacted industries across every domain including real estate. Amidst this major economic slowdown, we feel that the need of the hour should be employment and demand generation. Therefore, we have decided to take charge of the situation and empower our indigenous manpower in order to narrow the project delivery margin as much as possible. We hope this will not only help us in handing over projects on time, but also will help ease the labour shortage in Karnataka and neighbouring states, and help them to survive during this unprecedented time.”

This labour clutter has been divided into different sets, basis their skills in masonry, carpentry and interiors. Considering the present situation, the company is prioritizing projects and engaging native labour for completion and handover. All proactive safety measures like screening, sanitization, social distancing etc., are undertaken at sites for the safety of the workers.

About Salarpuria Sattva Group:

Present over the past 3 decades, Salarpuria Sattva Group has grown into one of the most trusted builders in the country today. Headquartered in Bengaluru, India, it also a well-known name in Hyderabad, Kolkata, Pune, Coimbatore, Jaipur and Goa. The Group will soon be expanding its presence in Mumbai. With 48 million sq.ft spaces completed consisting of world class commercial spaces, cutting edge tech parks and elegant residences, 36 million sq.ft under construction and 32 million sq.ft in the planning stage, Group is one of the leading developers in India today. Salarpuria Sattva’s flagship commercial project and Asia’s Best IT Tech Park- Knowledge City is located in Hitec City, Hyderabad. The Group’s other cutting edge upcoming projects in Hyderabad include: Knowledge Capital, Knowledge Park and Image Towers (a unique project for gaming and animation industry with world class facilities, in P.P.P model with Telangana State  and industrial infrastructure corporation). By further expanding into various ventures such as co-working, co-living, education, aerospace, embedded technology, hotels, facilities management and warehousing, the Group today stands tall as a frontrunner, shaping India’s growth story. The Group’s unwavering adherence to quality has given it the “trusted” tag among builders in the country, renowned for its “A Stable” CRISIL rating.

Cut costs & beat recession with cloud computing

The global recession is taking a toll on every industry and the construction industry is no exception. However, Aurigo Software Technologies, a provider of software and solutions for the construction and real estate, is offering companies its web-based products on a cloud computing model to save on huge IT expenditure.

Established in the US in 2003, Aurigo launched its solution BRIX for the Indian market in early 2008. Aurigo has three customers in India now - RDS Projects, IDEB and Navin Housing. All three companies have opted for the cloud computing model, thereby reducing their burden in managing the IT infrastructure, investing in the server hardware and software components and also on the power that is a huge expenditure.

Talking to CXOtoday, Balaji Sreenivasan, Founder and CEO of Aurigo Software, said, "Cloud computing is becoming a necessary requirement by customers seeking to deploy IT solutions even in the construction and real estate industries and is here to stay for the long haul."

Cloud computing helps companies and end-users access solutions without the hassle of having to invest in the computing power (hardware and software) required to run that solution internally. So if you are using gmail or hotmail to access your email, you are already a cloud computing proponent.

"As customers generally do not own the infrastructure, they merely access or rent, they can avoid capital expenditure and consume resources as a service, paying instead for what they use," said Sreenivasan. Many cloud computing offerings have adopted the utility computing model, which is analogous to how traditional utilities like electricity are consumed, while others are billed on a subscription basis.

Other benefits of time-sharing style approach are low barriers to entry, shared infrastructure and costs, low management overheads and immediate access to a broad range of applications.

In fact, IDEB's cloud computing model is expected to go live within the next six months, while RDS Projects, which has multiple projects spread across six locations in the country is expected to go live in the next 8 weeks. The remotely located and managed servers belong to various server farm providers that are highly secure, ISO 9001:200 certified and are located across India with overseas backup mirror locations with a committed 99.96% uptime.

Since these projects are yet to go live it would take a minimum of six months to one year to assess the actual ROI. However, BRIX is fairly well deployed across the US and at the Oregon Department of Transportation (ODOT), which is involved in a $3 billion bridge reconstruction, they have experienced a near 40% boost in productivity. This was measured by computing the reduced time to carry out inspections, transmit the data and increased information retrieval speed after deploying BRIX. The solution has been delivered on the cloud computing model with the entire solution being hosted on a central server and accessed by all the stakeholders at ODOT.

CXOtdoday