Thought this would be a topic of interest to many people who are looking to relocate. One word - Bangalore real estate is still red hot, no two words about it. A 3 bedroom apartment of 1500-1600 sq. ft in a decent locality, where commute is within 40-50 minutes can set you back by 75-80 lakhs or so. Most of the apartments are quite decent, with good facilities that you can use. However, main concern here is - unlike before where people bought the site and built the house on their nest egg, I would say majority of the apartments now are loan-driven. Banks like HDFC have home loan agents available in their extension branches in the company premises pretty much through out the day and can complete the loan financing in few weeks(where as they are available for opening accounts only for certain periods of the day!). And, I have seen many of my colleagues signing papers without much clue on the details of the loans and what would happen if the jobs vanish. Similarly, not quite sure what Banks would do if the tech market collapses. Didn't we see the same happening in US/California during 2004-2007 when the real estate bubble was still bubbling? (equations in India could be different but this is something that is new in India and hasn't seen before)
Most of the folks staying in these apartments are techies and are loan driven. What will happen if there is a US/Europe recession and job growth stops are even lay-off wave hits? Majority of the folks don't have secondary income and wouldn't be able to keep the homes. Working with colleagues at work, most of them don't have a clue how the job market can change, unlike in US, Indian techies still think their jobs are pretty safe and their performance can take them thru'. What they may not realize or have exposure is - whole departments can vanish and that take you down along with everybody else, immeterial of the performance. I sincerely hope that day wouldn't come and Indian market keeps it's growth.
Ok, that was the pessimistic side. On the optimistic side - it could be that apartments in Bangalore are undervalued, if, that is a BIG if, growth accelarates or keeps the phase. A similiar 1500-1600 sq. feet, 3 bed room apartment in Mumbai can cost upwards of 1.5 crores. So, why wouldn't Bangalore price reach that point? Quite possible but few things to consider - Jobs in Bangalore are entirely tech driven whereas Mumbai has a distirbution of other sectors like finance, movie industry, port etc. Doesn't seem Bangalore's other industries like defence companies(govt subsidiries), banking etc can hold up the prices. So, if the growth continues in tech industry, prices would hold or even go up further since there is a good in-flux of people still coming to the city from other parts of India due to Job factor, weather etc.
At the end of the day, guess this is another 'time will tell' issue. I recall visiting the builders during 2000-2001 and they were quoting 35-40 lakhs for apartments that were being built (in Outer ring road area) and that seemed quite expensive that time. Now, the same apartments cost upwards of 75 lakhs, which is more than double, in a span of 10-11 years. Not bad at all. (However to note, even a investment in Fixed Deposit(FD, same as CDs in US), would have returned pretty much the same amount of returns or even more but with tax implications).
Appreciate your feedback and comments, please leave a comment if you found this post useful (or not!) ...
Most of the folks staying in these apartments are techies and are loan driven. What will happen if there is a US/Europe recession and job growth stops are even lay-off wave hits? Majority of the folks don't have secondary income and wouldn't be able to keep the homes. Working with colleagues at work, most of them don't have a clue how the job market can change, unlike in US, Indian techies still think their jobs are pretty safe and their performance can take them thru'. What they may not realize or have exposure is - whole departments can vanish and that take you down along with everybody else, immeterial of the performance. I sincerely hope that day wouldn't come and Indian market keeps it's growth.
Ok, that was the pessimistic side. On the optimistic side - it could be that apartments in Bangalore are undervalued, if, that is a BIG if, growth accelarates or keeps the phase. A similiar 1500-1600 sq. feet, 3 bed room apartment in Mumbai can cost upwards of 1.5 crores. So, why wouldn't Bangalore price reach that point? Quite possible but few things to consider - Jobs in Bangalore are entirely tech driven whereas Mumbai has a distirbution of other sectors like finance, movie industry, port etc. Doesn't seem Bangalore's other industries like defence companies(govt subsidiries), banking etc can hold up the prices. So, if the growth continues in tech industry, prices would hold or even go up further since there is a good in-flux of people still coming to the city from other parts of India due to Job factor, weather etc.
At the end of the day, guess this is another 'time will tell' issue. I recall visiting the builders during 2000-2001 and they were quoting 35-40 lakhs for apartments that were being built (in Outer ring road area) and that seemed quite expensive that time. Now, the same apartments cost upwards of 75 lakhs, which is more than double, in a span of 10-11 years. Not bad at all. (However to note, even a investment in Fixed Deposit(FD, same as CDs in US), would have returned pretty much the same amount of returns or even more but with tax implications).
Appreciate your feedback and comments, please leave a comment if you found this post useful (or not!) ...
Very good analysis. Indian techies think IT job is some kind of perm job.
ReplyDeleteAbout Indian techies - when you are working in an environment where work has been quite stable and you are not exposed to US type of work environment, it is natural to think these jobs are permanent, while reality can be quite different. I have seen surprised faces when I said, in US, employer can lay off a whole group in a day's notice!
ReplyDelete