Villas in suburbs see strong demand as buyers seek affordable luxury homes

Real estate sector has seen an uptick post pandemic period. A lot of pent-up demand has led to higher sales in the residential segment. Similarly, after initial uncertainty around return to offices, most corporates have adopted hybrid mode of working. This has led to return in demand in the commercial realty space. In Bengaluru market, demand for both residential and commercial realty remains strong despite interest rate hikes by the Reserve Bank of India (RBI). In a conversation with Bizz Buzz, Bengaluru-headquartered real estate major Vaishnavi Group’s Director Darshan Govindaraju told the Bizz Buzz that the real estate group is focused on coming up with premium properties like luxury villas and premium apartments among others in the residential space. Similarly, it is coming up with several commercial realty projects in the current calendar year. According to Govindaraju, Bengaluru market has space to increase prices in the office properties segment as demand remains strong. However, the price hike in residential housing market may not be sustainable in the current year, he added. Vaishnavi Group is also playing it big in the plotted development space, which has emerged as the most popular segment in the post-pandemic period. Going ahead, the realty group is eyeing a higher share of office spaces in its overall portfolio

How is the overall demand environment in the real estate industry? What are the impacts of interest rate hikes by Reserve Bank of India on the demand for residential realty? Can you share some thoughts on the commercial realty as well?

The demand in the residential real estate space remains high. The reason being people are seeing real estate as safe investment option. Though India is primarily an end user market, investors are looking at putting money in the residential market. So, we see demand for luxury homes, apart from buyers of first homes. Especially, villas, luxury homes, in our experience, have seen demand uptick. Such properties, which are usually the second homes, are experiencing good demand. There is also acceptance of higher prices for these units. For instance, we launched a project in this segment, where we had hiked prices and we used to see sales happening in those increased prices. So, people are willing to pay for premium products and locations. Villas across the cities in the peripheral areas have done well. Demand remains strong for these kinds of properties.

Recently, we see moves by some IT firms to consolidate their office spaces and move to bigger offices. Do you think this trend to pick up in the near future?

There were many corporates exiting properties during the pandemic period as there was no clarity on the return to office. But what we have seen since January 2022 that most corporates have asked their employees either to return to office or follow a hybrid mode in which they have to come to offices for a few days in a week. So, demand for office spaces has come back strongly.

As far as consolidation is concerned, I personally believe these are one-offs. What we understand is that some corporates are consolidating. They are moving from multiple small units to a bigger unit. But they are not exiting the market. It means if they have five units of one lakh sq ft each, then they are moving to one big unit, may be of four lakh sq ft.

What is Vaishnavi Group’s mix of portfolio with regard to commercial and residential segments?

With 25 years in the market, we have predominantly been residential player. Our mix is around 65 per cent residential and the rest 35 per cent is commercial. Going forward, our mix will be around 55 per cent commercial and 45 per cent residential. That is the split, which is going to be, going forward. We are equally bullish about both the markets. We are constantly working improve our pie in commercial space in the Bengaluru market.

Can you provide some data points on how many projects (in million sq ft term) will get executed in 2023?

We will be completing a 45-acre property development project close to 1 million sq ft of built up area. We started last year and that will be delivered by September this year. We will also be completing 1 million sq ft worth residential project, which is getting completed in next four months. There will be project of premium apartments that will be delivered in the CBD (central business district) area by end of this year. Due to the elections in Karnataka, approvals are likely to be slowed down for one to two months. As far project delivery timing is concerned, we don’t think that will be delayed because we will expedite the project.

For us, the focus will be on luxury villas. We are developing a 90 acre project in Bengaluru for this particular project. We are also developing a project in Mysore. We have signed a joint development project for development of commercial properties near the airport in Bengaluru. So, most of the focus will be on villas and office spaces. We have also a signed a prime project in south Bengaluru for an apartment project. All these products will be offered at more than Rs 10,000 per sq ft. We are basically looking at moving up in the product chain.

Real estate prices have risen post pandemic owing to higher demand. Do you think price rise is sustainable in the current high interest rate environment?

Yes, prices have risen. It was not only due to market sentiment but also owing to the rise in construction cost. This was passed on to the customers and there was acceptance of that hike by customers due to market sentiment. But what we see stabilisation in the cost of construction moving forward this year. So, it will be hard to sustain price rise going ahead. But some space is available for price hike in commercial rental.

What is Vaishnavi Group’s plans in the plotted development space, which has become popular in recent years?

Plotted development is a play which seems to be popular since mid-2021. In Bengaluru market, we have seen a host of launches till end of 2022. We have seen launches in north Bengaluru, and south Bengaluru where land prices are not too expensive. We have done a similar project and that was a tremendous success. But plotted development was popular because of the excess money that was flowing in the system at that time. So, we may not see that kind of demand, but still there is demand in the Bengaluru market as land prices are not that expensive.