Bengaluru PG Crisis: Hundreds Shut Down as Tech Layoffs and New Rules Hit Accommodation Sector

Investment analyst Hardik Joshi has highlighted a mounting crisis in Bengaluru's paying guest accommodation sector, with dozens of facilities shutting down across the city's IT corridors while the broader housing market continues to show strong performance.

Mass Closures Hit Tech Corridors Hard

According to Joshi's analysis, PG facilities in key areas like Mahadevapura and Marathahalli are experiencing revenue losses of up to 25%. The situation has become particularly severe in Mahadevapura, where more than 100 PG facilities have already been sealed by authorities.

The analyst reported that an estimated two PG facilities are closing every day across Bengaluru's technology belts, creating what he described as a "quiet crisis affecting thousands" of residents.

Multiple Factors Drive the Decline

Joshi identified several interconnected factors contributing to the crisis. The technology sector layoffs have significantly reduced demand from young professionals, who traditionally formed the core tenant base for PG accommodations in Bengaluru.

New regulations from the Bruhat Bengaluru Mahanagara Palike (BBMP) have created additional operational challenges. The civic body now requires trade licenses, hygiene and fire safety compliance, and has banned PG operations on roads narrower than 40 feet.

Regulatory Compliance Becomes Major Hurdle

The new BBMP mandates represent what Joshi characterized as "a death blow" for many budget operations, particularly those located in older, denser neighborhoods where road widths may not meet the new requirements.

Rising utility costs have further strained the sector. Increasing electricity and water tariffs are eating into already thin profit margins, making it difficult for operators to maintain viability without significant rent increases.

Registration Gap Highlights Informal Sector Size

Despite the city's heavy dependence on migrant workers and students, only approximately 2,500 PG facilities are officially registered with authorities, suggesting a much larger informal sector that may be particularly vulnerable to regulatory changes.

Joshi noted the irony that these facilities, often criticized as "chicken coops" for being overpriced, overcrowded, and poorly maintained, represented "the only way in" for countless newcomers to the city.

Broader Real Estate Market Remains Strong

The PG sector crisis contrasts sharply with the performance of other segments in Bengaluru's real estate market. Residential and commercial sectors continue to show growth, infrastructure projects are expanding, and demand for premium housing remains robust.

However, Joshi warned that the foundation supporting the city's growth story may be weakening. He described the situation as not merely "a market correction" but rather "watching a ladder disappear for thousands trying to step into Bengaluru's promise."

Impact on Affordable Housing Ecosystem

The closure of PG facilities represents a significant reduction in affordable housing options in Bangalore, particularly affecting the entry-level accommodation sector that serves new arrivals to the city.

Joshi's analysis suggests that while Bengaluru's premium real estate segments flourish, the crisis in budget accommodation may be creating barriers for the very demographic that has historically driven the city's technology sector growth.