Is the water crisis a threat to Bangalore real estate?

5 years ago

Is the water crisis a threat to Bangalore real estate?

There are cities in the world which face major water crisis forcing them to import water and a glaring example is Cape Town with few others. Is Bangalore’s water scarcity in the same lines that it has to put a check on the number of residents in the city? Bangalore real estate is performing in a never before mode and far outweighs the growth metrics of even the most populated metros of the nation. And along with the influx of new IT and ITeS companies and other industries in the city, the demand for housing fuels both the commercial and the residential realty sector of Bangalore. Along with it, a larger threat looms large on the residents of Bangalore – scarcity of water.

It has gone to such an extent that the state government is thinking of restricting the building of apartments and has been discussing whether the construction of new apartments could be ceased by legislation. The city’s suburbs face a serious threat of scarcity of drinking water as most of the suburbs are reported to rely entirely on the water tankers for drinking and usage for domestic purposes.

With the builders continuously supplying the housing needs of the city by constructing newer projects, it is increasing the water consumption and in the wake of it, the government is considering to prevent the aggravation of the impending problem. In such a context the government is seriously said to consider clamping a ban of five years on granting permission for the construction of new apartments. Although there are debates about the practical implications of such a decision, there has been an ambience of perceptible concern in the realty sector.

Probable Impact of the move
The analysts’ view of the move does not paint a happy picture with few apprehensions that would not only affect the growth of the realty sector but the city and the employment potential of Bangalore as well. Although there is very less clarity on the issue whether the ban would be on the under construction projects or the new projects but the forecasts are already in.

The experts feel that as the office absorption rate and the housing need of the city are huge and the demand for newer homes in Bangalore is also massive. The immediate reaction to this move would be an escalation of property and home prices as the supply would go down in the years to come and on top of that, Bangalore has the lowest amount of unsold stock in the country. The market would overnight turn into a sellers’ market scheming the purchasing power of the buyers with a higher price tag of homes and property.

As new supply would be very limited the prices for ready-to-move-in homes would increase abnormally compared to the prices of under construction homes.  The experts believe, the builders having a stock of ready-to-move-in homes and property would increase the prices by 10to15% at the least. This increment of prices would be a steady phenomenon as the supply would proportionately decrease. With the office absorption and increment of the industry at the present rate, the housing expenses of the city would increase above limits increasing the rental prices too. This, in turn, would make the city an even expensive one with the outstation workers of IT and ITeS industries demanding more salary because of the dearness and rise in cost of living. The impact of this would directly be felt by all the industries in the city with the prices of commodities going higher along with labour, which may compel companies to shift their operations to other cities.

Apart from these, the builders who acquired ample land banks for the future use waiting to launch new projects would face newer issues with this move of the government. The cost already incurred in developing the new projects would certainly have to be reviewed and the further cost involved would go in vain. Apart from that, the prohibition on the construction activity would lead to severe losses of jobs for the construction workers and the manpower of the ancillary industries. This would subsequently add to the problem of unemployment of the nation.

How large is the problem of water scarcity in Bangalore?
The growth of the population of Bangalore has undoubtedly been phenomenal with 12 million presently which is double the figure of 2001 and is estimated to grow to 20 million by 2031. The size of the city has exceeded triple its area in just about a decade with the present area being about 800 sq. km.

In such a rapid development the urbanization has led to swallowing of agricultural land, villages and many settlements.  BWSSB which is the main body that handles Bangalore’s drinking water supply is only able to provide 60% of the needs of the city. Most of the development of Bangalore and rapid employment generation in the city has earned it the name of the IT capital and the Silicon Valley of India. This can be attributed to the spurt of the IT industry in the city which it adopted in the early ’90s for which it has to pay a heavy price today.

The growth of the city has set alarms for the government regarding the water scarcity and the government has worked a lot to eradicate the problem. The authorities opine that 1.4 billion litres of water have to be injected to the city to meet its needs and still it falls short of about 800 million litres of water. As Bangalore is about 1000 metres above sea level, the government has to spend about $6 million of electricity bills a month to pump up the water uphill. Another new pipeline is also planned to be built and is on the way to be constructed to meet the city’s needs of water. In spite of all these efforts from the government, the city derives its water requirements from the tankers that sell water at a cost of Rs. 700 per tanker which can go up to Rs. 2000 depending on the demand-supply situation.

To prevent the situation to grow to any further adverse dimension, the authorities may be compelled to ponder on such a decision which would hinder the growth of the metropolis. Due to this, the question that arises is, is there any other alternative way out!