Bangalore And Economics

Is Bangalore the most happening city in the country? Well the locals of Bangalore certainly think so, to such individuals Bangalore is the epicenter of the nation and the beating heart of the new economy and they even go so far as to claim that one day Bangalore shall overshadow Mumbai in importance.


Whether such people are right or wrong is not as important as their audacity to believe in such claims which would have been considered outlandish by these same individuals even 20 years ago. So what has brought about such changes in the worldview of so many? What has made them come to believe that Bangalore has such an outstanding future ahead of itself? Well almost certainly the fact that legions of new jobs continue to be created in the city’s Information Technology sector resulting in unmatched prosperity in the city is the leading contributor to this belief.


How does such growth in only one sector benefit an entire city which has hundreds upon hundreds of occupations and industries? Well once again we come to our friend and noble peace prize winner Milton Friedman, who won the prize for what we now term as “trickledown economics”.  As the salaries in one sector or region of a city’s economy rise, the benefit trickles down to other parts of the economy. Let’s see how trickledown economics affects the price of property in Bangalore.

Well as salaries for a significant segment of a population increase in a city the people in the concerned segment begin to demand a higher standard of living, this includes luxuries such as eating out at chic restaurants, wearing fancier clothes (the demand for designer clothing increases), traveling abroad for vacation with one’s family, and purchasing bigger and fancier homes.


The last point is relevant as due to it the price of flats in Bangalore has continued to appreciate over the past few years whereas there has been a slump in many other larger real estate markets in the country.  What has led this to occur? Well we only need high school economics to be able to understand this; to put it simply as the demand for something increases its price goes up. With so many new families working in Bangalore the demand for housing increases which leads to the price of housing in all parts of the city to increase. The more of something people want, the more expensive it becomes.


So what effect has this had on the price of apartments in Bangalore? To put it bluntly the prices of real estate property in Bangalore has been shooting up while the same in other parts of the country has been stagnating or slipping lower. Why? Well Bangalore’s IT industry needs new programmers to meet the increasing demand for new software for clients located all across the globe. Such new migrants into the city need a home for themselves and for their families; this causes the demand for homes to increase and subsequently leads to the prices of homes to appreciate as well.

flats in bangalore


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