Friday, December 22, 2006

Whitefield hits correction phase down 30%

Whitefield hits correction phase
Anil Urs / Chennai/ Bangalore December 22, 2006
Property prices down 30%.

Residential apartment prices at Whitefield and the south eastern part of the city, which had skyrocketed a couple of months ago, is now spiralling southwards. Property prices in the area are down 20 per cent to 30 per cent.

The Whitefield area presently commands Rs 2,700 per square feet as against Rs 3,200 a couple of months ago. At the beginning of the year prices were in the range of Rs 2,000 to Rs 2,500 per square feet.

The main reason given by people associated with the realty business is that the area had 40 per cent speculative interest and now the speculators are exiting the area to invest in north Bangalore.

In addition to speculators, apartment builders in the area also hold 30 per cent to 40 per cent dead stock (unsold properties) in Whitefield and south-eastern parts of the city.

The area saw large scale construction in the beginning of the year, eyeing the large concentration of IT and ITeS companies. About 25,000 apartments, which were under construction, are now hitting the market pushing down the real estate prices.

This shift in investments from Whitefield and south east Bangalore to north Bangalore areas, especially Bellary Road, has made property prices move up from Rs 2,800 per square feet a couple of months ago to Rs 3,500 per square feet.

In the beginning of the year, Whitefield was the favourite destination for it had better infrastructure than other investment destinations in the city and was closer to the workplace for a majority of the techies. But now the north is gaining in importance due to the new international airport coming up and plenty of space available for growth.

Giving the reason for this shift from the southeast to north Bangalore, Ram Chandnani, head-south, CB Richard Ellis South Asia, said, "During the second quarter there was a clear gravitation towards the northern part of Bangalore. Mainly lured by large land parcels, good roads and open possibilities, companies, equity funds and developers alike are queueing up in the Hebbal-Devanahalli stretch along the Bellary Road.”

“Now this is happening on a large scale,” he added.

In addition to residential apartment prices, office space rentals are also down in Whitefield. According to international real estate consultants, Debenham Tie Leung (DTZ), peripheral business districts like Whitefield are witnessing a 10 per cent fall in rentals, with Grade A leasehold office space being transacted at an average rental of Rs 26, down from Rs 30 in the beginning of the year.

“The rentals are expected to rise slightly across most micro markets in the next quarter except in the peripheral business district (PBD), where it is expected to remain stable. The areas along the Outer Ring Road in the PBD will contribute significantly to next quarter’s absorption because of good connectivity and availability of space,” said Hugh Hamilton, Director, global corporate services, DTZ Debenham Tie Leung, India.

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