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| Bangalore real estate market inches towards pre-recession period |
| Raghuvir Badrinath & Debasis Mohapatra / Bangalore Aug 17, 2010, 14:52 IST |
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The real estate market in Bangalore is increasingly showing signs of stabilisation after recent revival in the aftermath of recession.
Players in the market along with industry experts are of the opinion that with sound growth in residential demand and increasing signs of rentals in commercial space, the market is inching towards pre-recession level.
“Markets have stabilised and shown signs of tangible improvement in last two quarters.However, it will take some time to reach the peak level of 2007,” J D Sharma, managing director of Sobha Developers said.
Cash flow situation and realisation per sq ft have also improved in the recent time for most of the companies indicating a momentum towards 2007 level.
“Average realisation per sq ft is around Rs 4,000 in the last quarter and slowly inching towards Rs 4,500 of 2007 period,” Sharma added.
Sobha developers, which posted a two fold rise in its net profit to Rs 34 crore in the first quarter, is also ramping up its execution capacity to match the rising demand.
“Our present execution capacity of 6.5 million sq ft is likely to expand to 8 million sq ft by 2013, Sharma said.
Also, the real estate developer had given a pay hike of 10-15 per cent in April-2010 on the back of improved outlook in the market space.
Another city based developer, Puravankara Projects has also echoed similar sentiment.
“Our cash flow situation has improved on the back of sound sales volume and average realisation per sq ft has increased in last two quarters,” Jackbastian Nazareth, chief operating officer of Puravankara Projects said. With improved demand situation, the company, that is planning to launch 12 million sq ft of space in residential space, has already launched 1.8 million sq ft during first quarter of this fiscal, he added.
In addition to the current launches, these two publicly listed companies have also substantially reduced the debt level with leverage ratios under control. While Sobha has a debt book of Rs 1400 crore with a leverage of 0.8 times, Puravankara has a debt-equity ratio of 0.5 with a debt book of Rs 800 crores.\
“We are comfortable with the current debt level and any variation will depend on the demand of funds for upcoming projects,” Jack of Puravankara said.
Management of both companies also said that they were not looking at raising funds on the back of improved cash flow situation.
Real estate consultancy firm, Jones Lang LaSalle Meghraj, also said in one of its report that demand situation has improved in recent time.
While the first wave of absorption in residential space was led by NCR-Delhi, Mumbai and Pune during July-December period of 2009, the second wave of demand was led by Bangalore, Pune and NCR-Delhi during January-May period of 2010, the report said.
Referring to this isssue, Goutam Chakraborty, regional director, Colliers International said that though the market had shown signs of improvement, it was too early to touch the 2007 level.
He, however, said that the market was on a robust ground to bounce back to the pre-recession level.
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