Rain, traffic and water shortages in Bengaluru are causing a stir; how infrastructure problems are affecting property prices

Meanwhile, Manaal Desai, a 29-year-old entrepreneur, is considering whether to buy a three-bedroom house on the ground floor or first floor. While his biggest concern is putting as little strain as possible on his ageing parents' knees, Desai wants to avoid any potential problems with water accumulation in the future, no matter what the sales agents say. “The horrors of the 2022 floods are not lost on me,” he said.

Local realtors and sales professionals who spoke to HT.com confirmed that in recent years, there has been an increase in inquiries from potential homebuyers regarding water supply and management in new residential projects.

In September 2022, Bengaluru experienced one of the worst floods and waterlogging caused by heavy rains in the city's recent history. Over 130 mm of rain brought the city to its knees and inundated not only the low-lying areas. India's Silicon Valley reportedly recorded a loss of over ₹225 Crores.

Read also: Hebbal in Bengaluru flooded after light rains. “Can’t you handle a little rain?”, netizens ask

As a result, new apartment launches in Bengaluru fell 27% quarter-on-quarter during October-December the same year, according to a report by JLL Research. At the same time, sales in the three-month period fell 6.6% quarter-on-quarter to 11,203 units.

“The quarter was marked by a decline in new listings as developers went into a wait-and-see mode and planned to launch their projects in 2023,” the report said. Given rising prices and interest rates, homebuyers are undecided.

“No reputable developer wants bad PR when the negative experiences of home buyers are still fresh in their minds. It's like taking a small loss in the short term because they know they will make money in the long term anyway,” argues Sudhanshu Mishra, principal partner, Square Yards.

Manoj Agarwal, founder of Agarwal Estates, spoke of a 30% slump in real estate activity in select areas following the torrential rains in 2022. “Certain areas like Yemalur in East Bengaluru are still reeling from the impact of the unfortunate event,” Agarwal pointed out.

However, it was also the time when companies urged their employees to return to offices as the Covid-19 pandemic receded to better levels. This led to a sudden surge in demand for rental properties, which eased the situation and accelerated the recovery of the city's real estate market. As a result, the aggregated real estate data did not reflect a severe slump after the event.

Read also: Report: Bengaluru to dominate India's commercial real estate market by 2030 with 330-340 million square feet of office space

It is worth noting that certain areas continue to be avoided by Bengaluru's informed and savvy residents, such as select neighbourhoods in Yemalur and Hebbal. However, this is not evident as a clear trend in the zone data due to the unusual rise in rents in other areas of the zone.

The average rent in Bellandur rose by almost 50% compared to the previous month to ₹53,500 in October 2022, from ₹36,000 in the previous month, as per data from Housing.com. Interestingly, the Mahadevapura zone in East Bengaluru was among the worst affected regions during the unprecedented heavy downpour in 2022. Meanwhile, in Whitefield in the same zone, another hub for the IT scene in the city, the average rent increased by over 30% compared to the previous month. ₹28,000 of ₹21,250 in the same period.

Rental data is often seen as an indicative harbinger of what is to follow in the sales market, pointed out Madhusudhan G, Chairman and Managing Director, Sumadhura Group. “Generally, the immediate sentiment is clouded and there are short-term impacts. But the long-term impact is a collective response to multiple factors. A single incident cannot easily change the overall market direction,” he added.

How has the Bengaluru market evolved two years later and why?

According to JLL, Bengaluru emerged as the leading real estate market across India during the April-June period of the current calendar year. During this period, 18,548 residential units were sold and 16,537 houses were launched. The IT capital accounted for about 21% of all residential properties and around 23% of house sales across India during this three-month period.

Apparently, the city has been on a general upward trend marked by robust demand since the fourth quarter of calendar year 2022. What's going on?

Read also: Bengaluru leads in residential sales and will launch in Q2 2024 across India, ₹63% of new launches are in households in the 1-3 million range

Demand exceeds supply

The IT corridor along the Outer Ring Road East was among the worst affected areas during the 2022 floods. However, the demand for residential properties in this belt has historically outstripped supply. Moreover, public transport connectivity in this region is currently limited due to the construction of a metro line. In fact, traffic congestion during peak hours along the ORR often makes headlines in local news.

The supply and demand dynamics in this belt have kept property prices on a growth trajectory, Mishra explained. Moreover, in an effort to save time and reduce commuting costs, home buyers are inclined to buy properties near their offices, ensuring a positive response to new residential projects in this region, he added.

Social infrastructure is the top priority

Industry experts who spoke to HT.com agreed that due to faulty urban planning, several areas in Bengaluru get flooded during heavy monsoon rains and there is water scarcity during the dry season, especially in the north and east of Bengaluru.

“Home buyers often view these events as anomalies and tend to prioritize the surrounding social infrastructure, schools and offices while choosing the location for their property purchase,” said Darshan Govindaraju, director of Vaishnavi Group. This, in turn, leads to rising property prices and rental income despite infrastructural problems, he added.

“These micro-markets have become self-sustaining ecosystems where homebuyers have access to all amenities and lifestyle options,” agreed Anshuman Magazine, Chairman and CEO, India, Southeast Asia, Middle East and Africa, CBRE.

Technology as a savior

As long as a potential project site has well-developed social amenities in the area and is close to a subway station, a developer would be more likely to try to find innovative solutions to the problems of the surrounding infrastructure than to miss the opportunity, according to industry representatives.

“If height is not an issue in the project, then as a developer I may set the podium higher than the natural ground level, build a stilt parking or a single stilt parking at the basement level and place the apartments on a higher floor so that even if the infrastructure in the area is not up to standard, the overflow from it would not intrude and adversely affect your building,” added Govindaraju.