Bangalore Real Estate – Investment Options

There are a few ‘Real Estate Hotspots’ in Bangalore – areas that have a positive outlook about them. I’ve split the city by geography and examined them below –

1) North Bangalore – Undoubtedly, this is where all the action will happen in the next 5-10 years. Proximity to the Airport, ease of access to the city(via Bellary Road), Manyata Tech Park, good infrastructure, etc. are a few reasons why North Bangalore is the #1 investment destination in Bangalore Real estate. You can look at Hennur Road, Thannisandra, Tumkur Road and Yelahanka as possible options

2) East Bangalore – Though many consider this market to be saturated, a couple of good projects are coming up in this area. Whitefield and Sarjapur Road, which have shown phenomenal growth over the past 8 years, are still growing. Other investment options in this area include Varthur Road(Near Varthur Lake and Gunjur), Kadugodi and Hosakote.

3) South Bangalore – Areas like JP Nagar, Jayanagar, BTM Layout and Kormangala are never bad investment options. Good tree coverage, availability of parks and calm residential neighborhoods are all reasons why people like staying in South Bangalore. Real estate investments here might not yield returns as high as North or East Bangalore, but the risk factor is lot lesser. Popular areas for investments in South Bangalore include Bannerghatta Road and Kanakapura Road.

4) West Bangalore – This is a tradition market and doesn’t have scope for much growth in the years to come.

5) Central Bangalore – From a commercial real estate perspective, it might make sense to invest in Central Bangalore. In a growing city like Bangalore, the CBD will always have a good demand for office/retail space. From a residential stand-point, there’re better alternatives as mentioned above.


FB buys Whatsapp – a zillion opinions from a million people

My 2 cents on this topic:This is probably the hottest news we’ve heard in a while. So good that it has managed to topple whatever Arvind Kejriwal did today from the top of my news feed[For Indian readers only:) ]! While the acquisition is great news for the WhatApp team and a story all start-ups can draw inspiration from, I’m getting a bit annoyed at some peoples’ view about what the learning from this episode is.

“The main lesson is not to think about money too early. Build a customer base first, then think about revenue”

This is probably the most common lesson people are drawing from the Whatsapp story. But isn’t this obvious? This is probably the 1st sentence of Start-up 101. The real question is, how many start-ups can afford to wait that long?

A few years back when Jack Dorsey was asked how Twitter was planning to monetize, he coolly replied “We’ll figure something out”. Twitter eventually conceptualized ‘Promoted Tweets’ and ‘Promoted Trends’ and are minting money through that model. By the time Dorsey made that statement, Twitter had already accumulated Millions of users and their valuation was going through the roof. VC’s were more than willing to take a Billion dollar exit a few years later than a few hundred Million immediately. All start-ups are not that lucky.

Founders are always optimistic about their venture(as they should). They always believe that their company is the Next Big Thing. They want their users to have the best experience using their product and make it go viral. After all, monetizing your product leads to slow growth(charge your users –> slow growth, put ads on your product –> bad user experience –> slow growth), a lesson everyone knows about. So, let’s not make money just yet. Simple!

Every once in a while, founders need to take a reality check. Not every company goes on to become Twitter or Whatsapp. Not everybody will be as optimistic about the outlook of a company as it’s founders. Investors(and the outside world) may not believe in the company as much as the team. We can take the case of that closed a few weeks back. Despite having a good user base, they weren’t able to generate steady revenue. 

To sum it up, “To monetize or not to monetize early, is the question”.

“Do you really have a choice?” is my answer

Outlook for the Indian Real estate market in 2014 – My 2 cents

“Real Estate prices in India will never go down and it’s the best investment in this country” – Most Indian people.

The emergence of a strong middle class, expansion and development of urban areas, a strong economy and positive investor sentiment, influx of capital from NRIs, etc. over the past couple of decades lead to Real Estate emerging as the 1 investment destination for people in our country. Until now, it was totally justified. Investments in real estate have consistently outperformed other channels with the median return in this sector being ~ 15-20%. Real Estate was considered a ‘safe bet’.

Now, people are starting to think otherwise. The much talked about (less thought about) real estate bubble has been growing rapidly(and inorganically). Will it burst? Shrink in size? Or will it continue to grow? My research and thoughts below.

Bangalore seems to be the only major market that’s doing well. The buying trends in this market are positive (both prices and number of properties sold are going up). Inventory levels(number of unsold apartments) of builders in most parts of the city are low and in general, there’s a positive sentiment amongst the people. In Bangalore, most people buy houses with the intention of living there and not just as an investment. Hence, this is fundamentally a sound market. Jaipur (The fastest growing Real Estate market ~ +60% YoY!) is another market which seems to be doing well.

Apart from this, other markets seem to be on the decline. Mumbai, NCR and Chennai are the hardest hit by this. It’ll take 4 years in NCR, 2 years in Mumbai and 18 months in Chennai to clear the inventory at current absorption levels. This is a negative indicator for the outlook of these markets. Though the prices haven’t dropped by much, the number of transactions are decreasing QoQ. Whats making things worse is that builders are refusing to lower their prices as this might cause panic amongst potential buyers. The fact that RBI is increasing their interest rate doesn’t help either. The situation is similar in Pune, Hyderabad and Kolkata though the magnitude varies.

So does this mean that this is the end of the road for Indian Real estate? I don’t think so.

We need to remember that this is India. And this is Real Estate. The market is driven more by people’s sentiment and less by logic.There’s a very strong emotion that people have towards their houses. Society ‘expects’ people in their late 20’s to buy their first house. Relatives throw questioning glances at young married couples who choose to rent houses rather than buy one of their own. There’s a strong increase in the number of people in their 40’s who’s first investment in Real Estate gave them amazing returns and are considering a 2nd investment in the same sector. There’s a sense of pride associated with owning a home in India which you will not find in other countries.

So what’s the verdict on the Real Estate bubble? I think the bubble will shrink in size, stay in the new size for a brief period of time before it starts growing again. Hopefully this time, more organically.

What does it take to close a rental deal in real esatate?

‘1)Location 2)Location 3)Location’ is what most people assume Real Estate is all about. I don’t quite think this applies to the residential rental market. Customers liking the apartment is just the 1st step. Beyond this, I’ve observed that the following 4 reasons end up determining if a deal goes through or not.

Disclaimer: This article is written from Bangalore, India. If you’re reading this from some other part of the world, this might not be applicable

1) Customer Profile: A group of guys/girls (normally 4 to 6 in number) employed in the IT/ITES industry is probably the most common demographic of apartment seekers in Bangalore. Many home-owners/landlords don’t prefer this segment of customers and are willing to rent out their property only to family members (I’ve expanded on this point in one of my previous blog posts). I believe that this is the most important parameter in the current rental market. Most landlords will compromise on the other factors to get a good demographic of customers to stay in their property.

2) Rent:  Well, duh. Of course rent is an important factor! The point I’d like to raise is that the rent isn’t set in stone and in most cases, the rent is negotiable to a greater extent than one would imagine. There’s always a perception amongst Indians that rent rates will keep increasing YoY. This is definitely not the case. The rental market shows seasonal variations. While May-June-July sees peak demand and high prices, Nov-Dec-Jan represents the other end of this cycle. The rent for a property will change depending on this. Other factors that’ll give you leverage to negotiate rent include unpainted walls, lack of furnishing, infrastructure of the apartment complex, etc.

3) Date of moving in: The earlier the tenant moves into the house, the earlier the owner gets rent. This is a very important factor in determining the success of a deal. For a ready to move in property, most owners will agree to a sub-prime rent if the tenants are moving in immediately.

4) Security deposit: Bangalore’s rental market works differently. It’s probably the only city where the owners demand 10 months rent security deposit prior to tenants moving in. While most deals close for 6-7 months of rent as deposit, this is still significantly higher than the rest of the country. From an owners perspective, a tenant who’s willing to pay a bulky security deposit is preferred as they can deduct any damages to the property against the security deposit they’ve paid.

For rental deals, the above 4 factors are crucial. While negotiating the deal, ask your self which amongst the above 4 factors are in your favor? A bad customer profile can definitely be offset by a higher security deposit. You can negotiate rent by agreeing to move into the house a few weeks early. It’s always a trade between these factors.

For Reuben.

Wow. Brilliantly written!

Your Idea is Worthless

Whoa! I think I offended every entrepreneur with that title, many of them might even consider this blasphemy. But with each passing day, I’m beginning to realize that this just may be true. Before I explain why I’m of this view, let me set some context on what lead me to this –

I have a HUGE circle of friends many of whom want to help in my start up. As I don’t require much capital (and coz most of my friends are broke ;)), helping with cash is out of the table. Few have offered to connect me with their ‘contacts’ or ‘Angels’, which I truly appreciate. The rest of them have either said ‘Lemme know if you need someone to brainstorm with’ or ‘I can give ideas on how to market your website’ or ‘I’ll help by giving inputs on design’.  

I think there’re 2 aspects in starting/running a business – ideation and implementation. Understandably, the ideation part is the ‘cooler’ of the 2. It includes, amongst other, a thorough understanding of your customers’ requirements, clarity on the long term vision of your company, a good mix of domain knowledge – first principles and creativity. But this is just half the story. It’s the implementation part which is tricky.

I’d define implementation as ‘getting the job done’. This is where it gets difficult. Getting your team to ‘understand’ your idea and making them carry it out to perfection can be a very arduous task. Implementation requires a lot of thinking on your feet. Everything that can go wrong will go wrong during this phase. It’s physically and mentally taxing. And above all, it takes time.

During the early part of your start-up, I’m sure you’ll find a hundred different people who’ll be giving ideas and these people are easier to find. The challenge will lie in getting ‘implementers’ to work with you and ensuring that your plans are carried out.

I’ll conclude this post by rephrasing my topic. “Your idea is worthless…unless you have a good enough team to implement the same”.

Sharp Dressed Man

I’ll keep this post short. I have a meeting with a real estate agent whom I’m looking to work with in the future. I thought I should dress sharply, and I did. Just found out that they have a ‘leave your shoes outside’ policy in their office. I removed my shoes to find that my socks have big holes in them. Right now, am sitting in their reception in proper formals, but torn socks.

Note to self – Dressing sharply includes inners too. You can never tell when you might have to take the outers off.