Why Property Prices are Rising in Bangalore?

Bengaluru, often called the ‘Silicon Valley of India’ and the ‘Garden City’, has become a thriving real estate hub, witnessing a significant rise in property prices.

The city has experienced growth in various areas ranging from residential projects to commercial spaces. Let’s explore the key reasons behind the surge in property prices in Bangalore.

Booming IT and Commercial Sector

A huge factor in why Bengaluru’s real estate property value increases is the entrenchment of the core IT sector in its economy. The city has many international corporations, Global Capability Centres (GCCs), technology corporations and start-ups. As per the CBRE India Office Figures Q2 2024 report, the office leasing volumes surged by over 24% in the October – December 2023 period when compared to that of the previous year.

For the January-June 2024 period alone, from the first half of 2024, Bengaluru witnessed upwards of 8.5 million sq. ft. in office leasing. The arrival of massive amounts of technology and life sciences companies has driven both office and housing demand which results in increasing the property rates.

Surge in Residential Demand

The residential sector of the city has shown very aggressive patterns of growth during our research findings period. According to a report, the city has witnessed an increase in the residential price by about 57% over the last five years. As of H1 2024, the price per square foot reached ₹ 7,800 from ₹ 4,960 per square foot in H1 2019.

Such development can be attributed to the fact that there are investors and home buyers who are keen on acquiring houses. This rise is also due to the evolution of Bengaluru as a business and technology hub that attracts professionals from almost every corner of the country.

Increase in Possible Construction Expenses

The price increase of construction materials is also an essential factor in the upsurge of property prices. There was increased disruption within the supply chain and even inflation after COVID-19 which led to the increase in the price of building materials like steel, cement, and even labour.

The situation was so dire enough for developers to increase the different property estate prices in response to these extra costs. This trend is most noticeable in the city’s premium and luxury housing markets, where prices have increased due to a spike in demand.

High Demand for Premium and Luxury Segments

In 2024, there are many new launches on the residential front in Bengaluru, with a large majority of them being in the premium and luxury housing segments. Nearly 3/4ths of the new supply in H1 2024, a total of 32,500 units, was absorbed in these luxury segments.

But with so many high net-worth individuals and investors looking for properties in these regions, the average prices have skyrocketed, particularly in North Bengaluru, the average capital value being more than ₹ 7000 per sq. ft. This obsession with upscale real estate is one of the main reasons that real estate prices have increased.

Infrastructure Development and Connectivity

Bangalore property values have also gone higher owing to the urbanization of the city’s infrastructure. Facilities like Namma Metro Phases 2 and 3, Bengaluru Satellite Rings, expressway systems and airport cities are enhancing the settlement patterns of the city.

With better and more developed infrastructure, more people and companies are coming in which increases the need for both the housing and the business space. These projects have also diversified the scope of the real estate sector within the city limits especially the peripheral regions hence propelling the prices of properties.

Continued Increase in Office Rentals and Commercial Demand

There is still vibrant growth in the commercial real estate sector in Bangalore. Office rentals in strategic areas have been increasing in rates year on year ranging from 4% up to 8% and the city ranked among the leading locations for high technology operations and flexible space providers. In the year 2024, the claimed top spot in office leasing across India, accounting for about one-quarter (25%) of the total office leases delivered nationally.

The office space market, especially in technology centres, has impacted even the most residential real estate in that professionals want to live close to where they work hence increasing the cost of residential real estate.

Post-Pandemic Recovery

In the post-COVID period, the sentiment of demand and interest in the city’s real estate market has revived completely. The pandemic initially caused a brief dip in sales, but the pent-up demand for homes, coupled with changing buyer preferences for larger homes and better amenities, has led to a surge in sales.

The demand for real estate post-pandemic is partly driven by the need for secure, comfortable living spaces, which has encouraged developers to raise prices to meet the increased interest.

Conclusion

The robust demand for residential and office space, growing building prices, and the city’s continuous infrastructural development are all contributing reasons to Bengaluru’s booming real estate market.

Bengaluru is likely to see a significant increase in property values in the upcoming years due to its role as a global hub for technology and its ongoing growth into both the premium residential and commercial segments. For investors and buyers, the city remains a viable real estate investment destination.