The Chief Minister of Karnataka, Mr. Siddaramaiah, recently unveiled the Karnataka Budget 2018-2019. This was the final budget before the assembly polls that are scheduled in May. The budget stated that Karnataka’s Gross State Domestic Product (GSDP) grew at a rate of 8.5%, as compared to 7.5% during 2016-2017. Karnataka Budget 2018-2019 followed the lines of the central budget, by extensively focusing on agriculture, education, healthcare, and infrastructure development. Although, the budget lacked direct implications on the real estate sector, the Chief Minister has taken cognizance of Bangalore’s crisis, and provided monetary cure to the issues such as infrastructure, parking and further employment boost.
“The Karnataka Budget 2018-2019 did not have any direct implications on the real estate sector, but the state government’s focus in this budget on infrastructure up gradation; rejuvenation of lakes, provisions for parking in the city will be welcomed by the real estate industry. Due to the rapid expansion of IT/ITES companies in the city, the infrastructure of Bangalore needs a definite upgrade or else it would start losing its advantage to others with better infrastructure, like Hyderabad. The speed of implementing these initiatives will now be the key for the companies to take comfort in the hope that there will soon be relief from their 2-3 hours commutes,” says Joe Verghese, Managing Director at Colliers International India.
The budget highlights that are likely to impact Bangalore’s real estate sector are mentioned below: An outlay of INR 2,500 Crore has been allocated for the ‘Comprehensive Development of Bangalore’, which focuses on improvement of roads, lakes and water drains along with construction of grade separator in 8 major junctions are some of the initiatives. The allotment of funds to improve roads and water drains should cure the immense traffic congestion problem and flooding of the city, time and again. Addressing the dearth of parking space in Bangalore, the budget has proposed the construction of multi-storied parking at locations such as Gandhi bazaar near Koramangala, Jayanagar complex, Yeshwanthpur Truck terminal (INR 40 Crore) and MS Building (INR 20 Crore) near Cubbon Park, which are to be constructed as per a PPP model.
Whitefield, an emerging micro market in Bangalore, which contributes to around 13% of the annual total absorption and embodies 36% of the upcoming supply, received an infrastructure up gradation from the budget. Provisions to improve 14 roads connecting Whitefield have been proposed. This will most likely replace Outer Ring Road (ORR) as the most sought-after commercial real estate micro market in Bangalore with Whitefield.
Keeping in view the government’s Smart City Mission, Special Purpose Vehicles (SPV) has been constituted to implement the various projects under the scheme. A grant of INR 500 crores from both the Center and State governments has been allocated, under which, projects such as development of 25 major roads under Tender SURE model, rejuvenation of KR Puram market, development of Ulsoor Lake and Sankey Tank, etc. have been listed out.
To achieve a rapid inclusive growth and balanced regional development between the two competing markets, Bangalore and Hyderabad, an outlay of INR 1,500 crores to Hyderabad Karnataka Regional Development Board (HKRDB) has been allotted.
Boost to the logistics and warehousing sector: A multi-modal logistic park spreading over an area of 400 acres near Bangalore and in an area of 50 acres at Hubli is proposed to be developed in the budget. Infrastructure assistance to Peenya Industrial area and 11 new industrial townships has also been proposed in Bangalore’s metropolitan area, which will encourage development in Tier II and Tier III cities in the state, and further boost employment generation in Bangalore.
In line with the Union Budget 2018-2019, the state budget also promotes tourism in the form of Sericulture Tourism (Seri Tourism) on the Bangalore-Mysore corridor in collaboration with the Central Silk Board. This will ensure revenue generation to the state along with uplift in the retail, hospitality and F&B sector.
The state government’s monetary aid to Bangalore’s crisis is in the right direction towards development. However, Colliers Research deliberates that the key lies in the timely implementation and completion of all the infrastructure projects.
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