BENGALURU: Bengaluru is not just the silicon valley of the country, but it is also the hub of the real estate market. The city sets the benchmark for deciding the initial deposit for property owners or for fine tuning the processes to check documents and to build infrastructure.
Amit Kumar Agarwal, CEO and co-founder of NoBroker.com, in a conversation with The New Sunday Express speaks about the reasons behind citizens seeking gated communities and how one should avoid investing only on residential properties.
How has the real market changed post-Covid?
In real estate, you need to break it in terms of rental, buy/sell and commercial. In rentals, the market was bad for owners during Covid, especially in cities like Bengaluru because many went back to their hometowns and flats remained vacant. Owners who depended on rental income were in trouble. But post-Covid, it is exactly the opposite. The demand is high and customers are happy to pay more, but supply is limited as no new construction happened during Covid. As companies have called their employees back to offices, suddenly there is an influx of employees, and everybody wants to live in a gated apartment close to their office. In specific areas, rentals have spiked 30-40%.
What about buy and sell?
I had assumed that buy and sell would see a crash during Covid, but the opposite happened. This is because not many middle and upper middle-class jobs were lost when compared to the lower middle-class. Covid coincided with the bottoming of the real estate cycle, because in early years GST and demonetisation had happened. In general, in India, 2010-20 had not been great in terms of capital appreciation. The 2000-2010 period was excellent because of the big IT boom and increase in prices. Then 2020 saw a huge demand in buy and sell from end customers. Villas were sold like hot cakes during Covid. But in the commercial sector, it was horrendous as people either left places or asked owners to reduce the rent.
How do you see the growth of real estate in 2020-30?
I say 2020-30 will be very good for buy and sell and the reason is every asset class -- be it real estate, gold or equity -- goes through ups and downs and that is the nature of the market. The most logical explanation is that today, end consumers are buying property, and right now people compare rent with EMI and they buy a house.
In which parts of Bengaluru has real estate picked up post-Covid?
Hebbal was anyways a good area so that continues. Right now, areas along Outer Ring Road, Bellandur, HSR Layout, Koramangala and Indiranagar are doing well. But for the longer term, I would say entire Bengaluru seems good if you want to buy a property.
What should be the principle to purchase a property?
The principle that you should use is to figure out the rental yield percentage. The way it is defined is the rent we get in the property for the year divided by the value of the property. Suppose a property is worth Rs 1 crore and the rent is Rs 30,000, the yearly rent is around Rs 3.6 lakh. As a ratio of Rs 1 crore, it is 3.6%. In terms of weightage, if it is more than 2.5-3%, it is a good buy. This is because you will get 8% as the loan value as interest on the EMI. Less than 3% means either the rent is too low, or the property is too expensive.
Has flooding, encroachments in Bengaluru affected the real estate sector?
Despite residents paying high taxes and the city being cash-rich, I feel we don’t invest much in basic services to prevent incidents like floods. Often, we wait for a crisis to happen before we wake up. Prices of luxury properties have crashed. It has been bad for those areas. Not only have buyers’ prices collapsed, even the rentals have crashed because nobody wants to take risks.
There is a boom in real estate in Bengaluru, but how is the situation in Tier-2 & 3 cities?
Metros continue to be the attraction point. People are shifting because of jobs and they feel metros provide a good quality of life. Real estate in Tier 2 and 3 cities is picking up because smart cities are coming up and many airports have been constructed. Also, companies feel that hiring tech and call centre staff from cities like Mysuru or Lucknow is much cheaper and employees stay longer. That is why such cities, including Jaipur, Surat, Mysuru, Visakhapatnam and many others, are becoming important. Also, real estate plots are being given more importance. For example in Mysuru, more people want to buy plots. The gated community culture is not so prevalent in Tier 2 cities.
Vaastu seems to be becoming more prevalent nowadays than before...
Indian customers believe in Vaastu. It’s a reality and even builders have accepted it. Property owners display these details and customers make decisions based on this.
Are more Indians and NRIs investing in properties?
No matter where NRIs live, they love buying properties in India. Most of our customers, I would say half of them, come from Dubai. That’s why we opened our office in Dubai. A large percentage of them come from the US, Singapore and other countries from across the world. Whatever jobs they do, they have a notion that one day they will return to India or they buy properties for their parents. Over the years, NRIs investing in India has become very strong.
What is the percentage?
Percentage wise, our NRI business has grown 50% YoY. In fact, now we are also doing property management services for NRIs.
Are people investing because prices are going up?
Today, more youngsters are investing than what the pattern was 20 years ago. Disposable incomes have increased and getting a home loan has become easy. Some 20-30 years ago, people would buy properties in their 50s and the loan percentage would be 30-40 because they would give 60-70 percent of the value of the property from their own savings. Now, it is exactly the reverse. People want to buy when they are in their 20s and 30s and they want to take 80-90% loan. They are comfortable because they believe their salaries will go up and they will be able to handle the loans.
The government is also into housing. What is the difference between them and the private agencies?
The government building apartments is an extremely good initiative. Its focus is on affordable housing and it has made housing loans affordable.
Post-Covid, builders started making 2.5 BHK homes. One can draw a parallel to people buying big cars...
During Covid and soon after that, people were working from home. For 2-3 years, work and interviews were through digital platforms. People discovered that they needed much more office space than what they were using because now they had to spend their entire day at home. I think that’s the reason people have shifted to 2.5 BHK and 3BHK. People are buying SUVs not just because they have more money, it is because there are so many potholes and they want to protect their families.
Bengaluru has always had potholes...
Yes, perhaps the sale of SUVs has increased because people have more money. It is not that people want more space, they just want a more comfortable ride.
Which city in India has picked up the most in terms of house-buying capacity?
The heroes keep changing every year. Last year, it was Hyderabad. Huge sales of houses happened. Before that, it was NCR, Gurugram and now some pockets of Bengaluru.
What is the component of women in your customer base?
The women customer base has been on the rise since 2014. This is because more women are working and taking financial decisions. Despite the husband starting the search, the woman takes the final call.
Leasing houses was very popular in Bengaluru. Why has it come down?
Leasing houses, which is prevalent in Bengaluru, recently extended to Mumbai. When we launched No Broker, we got maximum requests for leases from Bengaluru. The reason why it has reduced is that youngsters in the city cannot afford such hefty amounts. However, it’s still very popular.
The initial deposit amount sought is very high. Those coming from outside the city find it difficult to pay.
Only in Bengaluru, this happens. Owners ask for a 10-12 month deposit. There is no logic. All other cities have 2-3 months of deposit. A Bill came before the Lok Sabha that said only 2-3 months of rent should be sought for the deposit. If that comes into action, it will be illegal to charge so much deposit.
A tweet went viral about owners asking for marksheets. Does this happen?
I don’t think so. It just reflects the current situation where in some pockets the demand for houses is on the rise and owners have more choices.
Religious discrimination continues in buying properties...
This is very unfortunate that even after 75 years, we still go through this. A small fraction of people do it. Not just religion, but even food habits continue to be a criteria.
How do you use AI? Are you using generative AI?
The objective is to make customers’ lives better. AI takes data from the information given and then suggests you more relevant information. The AI model develops a Rent O Meter, in which the data for certain properties is fed and the system learns and gives out predictions for other similar properties.
Are there plans for exploring and expanding the platform in other regional languages?
We have been in discussion about this and working on it. This is our future plan.
What tips would you give to a person who wants to start a start-up?
The first tip would be, don’t start a start-up unless you are very enthusiastic about your idea. The reality is that 90% of the start-ups fail. It looks glamorous because of Shark Tank and other such concepts. It’s extremely risky, requires hard work and it’s an arduous journey. A person must be really passionate about his idea and should have a long-term execution vision, keeping in mind the finances at least for the next 1-2 years. Otherwise, you will get demotivated very soon.
How was your experience with government agencies and how governments are encouraging start-ups?
We did not have much to do with government agencies, because despite being in real estate, what we do is more of a consumer internet platform. But the governments are encouraging start-ups. The Prime Minister talking about start-ups and unicorns makes one proud and makes it easier for parents to allow their children to join start-ups. Generally, the government talking about start-ups itself encourages the entire ecosystem. Programmes like start-up incubators, grants, space, loans and access to customers that governments provide, many such good things are happening.
Which are the sectors that are picking up now?
Start-ups are now focusing towards complex problems like defence, space, climate change and water. Many start-ups are coming in these sectors. There is an acute need for more start-ups to work on climate and water. Water is a huge problem. I hope start-ups will now take up more challenging and more advanced problems.
What are the other services you are going to offer in the future and are you planning to go onboard the Open Network for Digital Commerce (ONDC) platform?
We are looking at ONDC seriously. But ONDC is mostly a B2B or B2C and ours is a C2C platform. Unless customers start using it for real estate, it doesn’t make much sense now. But ONDC is a revolutionary platform. As far as our company is concerned, we already have many services and the objective is to gain a higher market share in the existing services and expand to more cities.
Bengaluru is growing vertically, but still many prefer to buy plots and villas. Can people afford to buy individual properties in future?
It appears that as time passes by, more gated communities will come up and independent houses will reduce. In terms of security, amenities and things people want for their children, there is a preference towards gated communities. Developers are also making more gated communities. People either want gated communities or villas, which is basically a higher segment.
Is there any tax relief for start-ups?
Start-ups do not make profits initially so tax relief doesn’t apply to them. The government has given a six-year tax holiday which helps. The government’s approach towards start-ups has been favourable and some concession is being given for start-ups in every budget.
There is already a start-up policy. What suggestions or changes do you want the government to make?
Right now, the policies are much more focused on encouraging talent in metro cities, but there is amazing talent in the northeast and I haven’t seen many entrepreneurs coming from that part of the country. More work is required in making these initiatives much more geographically diverse so that talent from every nook and corner can come up. In terms of policy design, I would give very good marks as many have benefited.
What suggestions would you like to give to those who are interested in investing in real estate?
Think what will happen in 5-10 years and is this the place you want to live in. Suppose you are buying for your retirement and if you are in your 40s, it’s too early to think about it. Keep your workplace in mind while investing. When you are closer to retirement, think whether you need more peace, less noise and choose accordingly. I would suggest investing in commercial properties. Most middle class people look only at residential properties for investment. But even a 50-100 sqft commercial property can fetch good returns. If you are looking at appreciation, do consider small commercial properties.
Is this the right time to buy a property?
If you want to buy your own house, it’s a great time to buy a property.