Today’s Times of India reported a surge in demand for luxury housing in Bangalore. (Link: http://timesofindia.indiatimes.com/city/bengaluru/Luxury-home-launches-in-Bengaluru-up-531-in-4-years/articleshow/46096719.cms). The report quotes that ‘Homes starting from above Rs 5 crore is where the luxury market actually begins’. And there are 6000 units being built in 2014 alone. Phew, is Bangalore becoming another London or Hong Kong? Data says not yet and there is time for it. Why go out of India, Bangalore’s property market is lot smaller than that of Delhi and Mumbai both in pricing and number of units being sold. But the demand surge and the unusual growth rate it is witnessing can put Bangalore on par with global markets pretty quickly, for many reasons.
Housing and real estate in general are a broader representation of the underlying economy. Like good stocks command higher P/E multiple than broader stock market, towns with higher growth potential may command premium over others. If Bangalore’s luxury housing market is gaining traction, one needs to see who is driving it and how long that would go on.
As Bangalore became IT capital of India, having an office in Bangalore became a must for many global enterprises, either to do their core activities or to outsource their back office work. It attracted many entrepreneurs even from non IT sectors like GE, GM and Toyota to name a few. As the operations of these global enterprises grew, the number of high profile jobs too grew in Bangalore. Probably Bangalore has highest number of expats in India now. Many NRI too made a comeback to their home country and made Bangalore their home.
In the fresh wave of entrepreneurship with businesses going online and internet applications replacing the desktop based applications, Bangalore is emerging out as one of the start-up capitals of the world. It is doing what California does for US, putting product developers, marketers and businessmen together in the same geographic location creating an ecosystem suitable to create next generation businesses. So we see Amazon’s Jeff Bezos directly landing in Bangalore and not begin India’s journey from Delhi.
It is the migrants from outside India are a major source of demand for luxury housing in India, they form first tier of buyers for these houses which costs few to many crores of Rupees. Significant skilled and management resources are migrating from other parts of India to Bangalore to meet the demands of growing global business footprint. They form the second layer of demand. Competing with them are those residing in Bangalore and breaking into higher levels of income. They ensure base demand for luxury housing does not shrink but expand.
If India is set to grow economically, Bangalore might grow at a higher pace than it. So will be the housing market and luxury housing at the top of it. Don’t blame Bangalore is becoming prosperity island, migrants being the new owners of the town. That is how the economy works. The winner takes it all.