Profile/Bangalore: Ireland's visitors to India this week went to a city as obsessed with property prices are we are. Roshin Varghese on why prices have close to doubled in Bangalore

The south Indian city of Bangalore, which was known for its gardens and sedate pace, has in the last decade reincarnated itself as India's Silicon Valley. Bangalore is seen as the city where property prices are spiralling nearly as fast as its population of 7.5 million.

The city, which attracts a nomadic tribe of computer software engineers, a growing base for the outsourcing business and a large expatriate community, offers a mild spring-like climate (an average of 24°C) throughout the year and a cosmopolitan lifestyle unlike the rest of India.

As Hugh Brito, vice president of Nitesh Estates, a fast growing real estate development firm in Bangalore, says: "India is probably one of the largest markets waiting to be prised open", and many eyes are focused on the one-time sleepy city of Bangalore.

This seems to be endorsed by the fact that Bangalore is now on the British Airways map. Since October 31st last, there has been a non-stop BA flight from London Heathrow to Bangalore five times a week.

The escalating cost of buying property in Bangalore has left many breathless with wonder. In the last year property prices have been climbing to unparalleled heights and in most cases has more than doubled. Bangalore had seen a similar growth a decade ago which was followed by a slump in prices.

But architect Tom Thomas, who virtually changed the Bangalore skyline with his chrome and glass high rise buildings during the last 12 years, attributes this current boom to "housing loans (the government of India changed the laws for sanctioning loans to buy homes), a large middle class population earning higher salaries because of the information technology (IT) growth in the city and the fact that most households have dual incomes".

In short, the economy has woken up and people are looking at ways to spend money.

Thomas, who is currently working on a project which is popularly known as UB (United Brewery) City in central Bangalore, will transform 10 acres of land into 139,354sq m (1.5 million sq ft) of floor space. UB City will resemble the Manhattan skyline and have a mix of service apartments, corporate offices, galleries, restaurants and a J W Marriott hotel in the middle of it. As Thomas sees it, Bangalore is on a win-win streak where real estate prices are concerned.

A look at residential properties in central Bangalore shows tremendous growth. There is Nitesh Wimbledon park, an exclusive building with 11 flats which overlooks one of Bangalore's three golf courses.

It is being sold at €1,184 per sq m (€110 per sq ft) and less than 18 months ago there were not many takers in the same area at €646 per sq m (€60 per sq ft).

Another set of apartments in the heart of the city on Lavelle Road is being sold at an unbelievable €1,722 per sq m (€160 per sq ft). It has gone up by double in price in a period of one year. Most three-bedroom flats in these areas were being sold for between €120,000 and €140,000 a year and a half ago but today they are going for about €200,000 and €220,000.

As central Bangalore gets more congested, and more unaffordable, there has been large scale migration to the suburbs and to former farmlands which hug the outer city limits. Whitefield, about 18kms from the city centre, was a semi-rural settlement; today it is the main hub of the IT business, with all IT companies jostling for a presence there.

Two years ago, Munni Balakrishnan bought land in Whitefield to build her house. She paid €65 per sq m (€6 per sq ft). Today she has been offered €538 per sq m (€50 per sq ft) for the very same property.

Whitefield's self-sufficient "gated communities" which are equipped with gyms, giant swimming pools simulated to look like beaches complete with white sand, restaurants and shops, are much sought-after by the expatriate families who are employed in IT. They live in a cocoon of luxury homes which go by anglophile names like Palm Meadows, Prestige Langley at a cost of €160,000 and €220,000.

This Indian hang-up for British-sounding names goes even further and faithful reproductions of English townhouses, some even with mock-Tudor facades, are recreated, completely incongruous in an Indian landscape.

In the general direction of the much touted new international airport, prices too have skyrocketed. The new airport, which will replace Bangalore's tiny existing airport (owned by the Indian defence establishment), is expected to be completed by 2007.

So land which cost €20,000 an acre two years ago in the vicinity of the new airport is now going at anywhere between €100,000 to €140,000 an acre today.

Around Angasana Spa, plots of land which were sold for €40,000 in December 2003 now go for €90,000. One of Bangalore's property developers is all set to start a 64-villa project, and is awaiting sanctions.

Their prediction is that the new airport will fuel a need for large spacious homes complete with gardens. The Key Biscayne project, 32kms from the city centre, will cost €230,000 per villa.

As Ajesh Kumar S of AKS Law Associates, who specializes in property and real estate legalities says, the Indian government's foreign exchange management act - which came into effect in mid 2000 - now makes it very easy for non-Indians to acquire immovable property in India. Although there seems an interest by both non-Indian individuals and private firms in the property market, there are no figures to corroborate what purchases have been made.

Last week, Hugh Brito escorted an Israeli delegation all over Bangalore to check out property prices and infrastructure there.

Historically, the real estate market growth in Bangalore can be traced back to the early 1990s. It was a time when Hong Kong was reverting to China and many rich Indians, who had made their fortunes in Hong Kong, started looking at Bangalore to park their money. Fuelled by a speculative market, property prices started climbing. This was further propelled by the dot.com boom of the mid-1990s.

But this was the beginning of the end of Bangalore's British colonial homes with their large, wild unstructured gardens and leisurely afternoon teas on manicured lawns. Every house which was knocked down was replaced by a building with 20 to 30 flats. Hundreds of apartment blocks mushroomed overnight.

As one old-time resident of Bangalore says: "In the mid 1990s, if you cycled around in the neighbourhood on a dark evening, you would see that at least 30 per cent of the flats were shrouded in darkness, with no lights on." They were empty, with no end-users for them.

For Bangalore did not deliver. There were not enough people to occupy the flats - ironic in a country of burgeoning millions. The Hong Kong non-resident Indians (NRIs) did not arrive in droves and the prices had shot to unrealistic proportions and local price resistance set in. The slide began in mid-1996.

In 1994 in central Bangalore's Langford town, plots of land were changing hands at €818 per sq m (€76 per sq ft) and three years later it was down to €301 per sq m (€28 per sq ft).

In the upmarket suburb of Indira Nagar, famed for its wide tree-lined streets, many retired folks and pensioners made small fortunes by selling their sprawling homes for €904 per sq m (€84 per sq ft) and moving into more manageable apartments. But by 1997 the same Indira Nagar properties had plummeted to €517 per sq m (€48 per sq ft).

But this time round, most Bangaloreans are confident that the property prices are not hyped up - and that they are here to stay. After all, there is only so much land available to buy, sell or build.

Property dealers and architects both subscribe to the theory that, if there is going to be a decline in prices, it will only be in the peripheral areas of the city.