Bangalore Real Estate

February 26, 2007

I was in Bangalore recently and could not help but notice the apartments that are popping up everywhere. Real estate prices are at an all-time high. So are the stock market valuations for apartment builders. The IPO of ‘Soba builders’, a local builder, was oversubscribed 108 times.

Finding 5-star hotel rooms is also difficult. There are only 5 such hotels in Bangalore and apparently they get booked a year in advance. The availability of 5-star hotel rooms is also at an all-time low. A silicon valley VC I was chatting with a couple of days ago mentioned that he paid $650/night to stay at the Leela palace (which is close to one of the IT hubs in Bangalore). More than what he pays to stay at the Waldorf! Another bay area company that has a substantial presence in Bangalore pays $350/night for its senior execs to stay at the Leela. The reason they got a better deal?:) They have a long term contract for the rooms with the Leela!

Given this pressure on land prices (and on cost of talent), some of the capital is likely to move (or is already moving) to Tier 2 cities near Bangalore or to Hyderabad, Chennai (Madras), Poona among others. Mysore is likely to benefit from this capital flight. It is about 3 hrs from Bangalore. But with a new multi-lane highway being built between Bangalore and Mysore, the commute time will decrease. Moreover, Infosys already has presence with a large training center in Mysore.