The Silicon City of India, Bangalore has a number of property projects and establishments constructed across the city. There are also a good number of key real estate developers who aim at constructing major establishments in the city. However, these developers and real estate builders are facing many issues and challenges which have act as a hindrance to their projects and also slowed down the construction time of the projects:
- Funding: Arranging funds is one of the major hindrance for the real estate developers. The real estate industry in Bangalore has witnessed a huge lack of inflow of the funds in the past years. This inflow has primarily been backed by the low running global economy. The FDI is the real estate sector has also drastically reduced in years that pose a stop to the construction projects.
- Input costs: Due to inflations, the input costs rise steeply in the market. The real estate sector is both a capital and labour based industry and the rise in total costs of construction materials and the labour work costs act as a barrier for the developers to lower the prices of the unsold units. Also the rise in the cement costs and steel per tonne have also backed the slow real estate sector growth.
- Financing cost: Developers are continuously facing high financing costs. With the increase in the number of defaulters, the commercial banks act tight to lend finance to the developers. As such, they ultimately rely on borrowing money from alternate sources with a higher interest rate, which simultaneously raises the property prices. This results in many unsold ready to move flats in Whitefield staying in the loop without any customers interested in buying them.
- Demand and Supply: There is a widening gap between the demand as well as supply of good homes in Bangalore. There is a major shortage of urban housing in the city in comparable to its never ending demand by customers who look forward to owning an asset in the tech city. However, there is a difficulty in emphasizing the build up of affordable housing. The Central Government has stated that the developers need to well reserve 20% of any particular developed project for good affordable housing. This means that the additional burden on the developer can be passed on the rest 80%.
- Speculation: A speculation in the property and land prices has given rise to the unreal price of the real estate market in Bangalore. This overpricing has simultaneously deterred the customers from purchasing homes leading to many unsold units. This situation is hugely blamed on the Foreign Private Equity funds as they seek a high return amount within a short time period.
- Lack of transparency: A short of transparency is another major factor restricting realtors and real estate developers. Illegal land encroachment, a lack of an efficient regulation act is a deterrent to the foreign investors who look to invest in the real estate market of Bangalore. A good and independent body regulating the land prices as per the efficient international standard is the urgent need of the real estate market of Bangalore and India.