Diverging Trends in Bengaluru’s Real Estate Market: Mid-Segment Decline and Luxury Segment Growth in Q2 2024

In the second quarter of 2024, Bengaluru's real estate market has undergone notable transformations, revealing a clear divide between the struggling mid-segment apartment sector and the thriving luxury property market. While the mid-segment, defined as properties priced between ₹60 lakh and ₹1 crore—has seen a significant 8% drop in demand due to escalating property prices and slower income growth, the luxury segment is experiencing robust growth. High-end properties priced above ₹3 crore have enjoyed a 4% increase in demand, driven by new developments and continued interest from affluent buyers. This period of contrasting trends underscores the challenges faced by the mid-segment amidst broader economic pressures and highlights the continued appeal of premium real estate investments.

Trends in the Mid-Segment Apartment Market

During April to June 2024, there was an 8% decrease in demand for mid-segment apartments in Bengaluru, a significant change from the preceding quarter. According to data from NoBroker, the demand for properties priced between ₹80 lakh and ₹1 crore fell by 8.5%, while the demand for homes in the ₹60-80 lakh bracket dropped by 12% . This reduction in demand reflects a broader market trend where increasing property prices and limited availability have made it challenging for many potential buyers to afford mid-segment homes.

Shift Towards Renting

As buying a home becomes less feasible for many, there has been a noticeable increase in rental demand. NoBroker reports a growing interest in rental properties as individuals and families opt for renting over buying due to high property prices. This shift is evident from the increase in rental property searches and inquiries, which have risen in response to the unaffordability of mid-segment apartments.

Growth in the High-End Real Estate Segment

While the mid-segment market struggles, the high-end real estate sector is flourishing. MagicBricks data shows a 4% increase in demand for properties priced above ₹3 crore in Q2 2024. This growth is driven by new high-end developments and the appeal of luxury residences to affluent buyers and investors. Developers are focusing on this segment due to the higher profit margins and pent-up demand among wealthy individuals looking to invest in premium properties.

Impact of New Inventory and Price Adjustments

The rise in high-end property supply has contributed to moderating overall price increases in the real estate market. According to MagicBricks, the growth of new inventory listings increased from 2.7% to 4.8% in Q2 2024, with a significant portion of this new supply directed towards the premium and luxury segments. Despite this increased supply, overall demand across the market fell by 8%, leading to a slower price increase of 3% quarter-on-quarter, compared to 4.5% in the previous quarter.

Economic Factors Influencing the Real Estate Market

Several economic factors are shaping Bengaluru’s real estate trends. A report by Aon Group reveals that average salary hikes in India decreased from 10.6% in 2022 to 9.7% in 2023. This stagnation in salary growth, combined with rising property prices, exacerbates the affordability crisis in the mid-segment market. Additionally, a growing cost-of-living crisis is affecting potential buyers, causing many to downsize their housing expectations or delay their home-buying plans.

Future Outlook for Bengaluru’s Real Estate Market

Looking forward, Bengaluru’s real estate market is expected to continue evolving. While the mid-segment market faces challenges, the luxury segment remains robust. Local brokers anticipate that the market may experience a temporary slowdown due to recent general elections and upcoming budget announcements, which could influence future market dynamics.

Conclusion

The second quarter of 2024 has been a period of significant transformation for Bengaluru’s real estate market. The decline in demand for mid-segment apartments highlights the growing affordability issues faced by many homebuyers, while the rise in demand for high-end properties and rental options reflects shifting market priorities. As the market continues to adjust to these changes, it will be crucial for stakeholders to stay attuned to these trends and prepare for the evolving dynamics of Bengaluru’s real estate sector.

As the second quarter of 2024 draws to a close, Bengaluru’s real estate landscape reflects broader economic trends and shifting consumer behaviour. The market's future will hinge on its ability to adapt to these changes, providing affordable solutions for mid-segment buyers while continuing to cater to the high-end segment's robust demand. For developers, investors, and policymakers, understanding and responding to these trends will be essential in navigating the evolving real estate market of Bengaluru.