In case of office market, co-working service providers expanded their footprint collectively picking up nearly 1.3 million sqft of office space
Homes launches in 2017 plummeted by staggering 78 percent from the peak of 2010. The volume of new projects entering the market in the second half of 2017 stood at approximately one-fourth of the supply levels in 2015, says a Knight Frank India report launched on Wednesday.
The eighth edition of its flagship half-yearly report - India Real Estate presents a comprehensive analysis of the residential (across eight cities) and office (across seven cities) market performance for the period July – December 2017 (H2 2017).
All cities witnessed a fall in launches year-on-year with Hyderabad being the worst hit. At 84 percent, Hyderabad recorded the steepest fall in launches. Other IT/ITeS dominated markets such as Pune (58 percent), Bengaluru (37 percent), Chennai (33 percent) also witnessed a massive drop in launches, the report said.
Sales volume hit a seven-year drop. It was 62 percent down from the peak of 2011 with a year-on-year drop of 7 percent in 2017, it said. Sales in Bengaluru were down by almost 34 percent. Mumbai (19 percent) and NCR (21 percent) saw a spike on a demonetisation base effect.
Bengaluru, in particular, recorded negative growth in both launches (-37 percent) and sales (-34 percent) for the first time in the second half of 2017. Hyderabad also recorded the decadal low in home launches, the report said.
Home launches in NCR halved in 2017 over the previous year recording historically low supply in the region. New projects in the second half of 2017 recorded 25 percent de-growth year-on-year, it was marginally better sequentially. While residential sales in 2017 dropped by 6 percent, the second half of 2017 recorded 21 percent surge year-on-year in comparison to the demonetisation-hit second half of 2016.
The share of affordable homes among new projects increased from 53 percent in 2016 to 83 percent in 2017 indicating developers’ focus towards properties within Rs 50 lakh price bracket. Sops from the Haryana government have been a key driver. While Gurugram continued to be the chosen micro-market in NCR accounting for more than half (54 percent) of the homes launches in the second half of 2017, new projects dried up in Noida (77 percent) and Greater Noida (76 percent). Weightage average prices saw a sharp fall of 9 percent in the second half of 2017 since the peak recorded in 2015, the report said.
While the unsold inventory in the second half of 2017 came down by 13 percent, the NCR market would take at least five years to exhaust its stock of unsold homes – one of the highest in India, the report said.
The weighted average prices fell by an average of 3 percent across cities with Pune witnessing the highest decline of 7 percent year-on-year followed by Mumbai at 5 percent year-on-year. Markets high on ready to move inventory such as Hyderabad and Ahmedabad saw prices move up 3 percent and 2 percent respectively.
As for office market, co-working service providers expanded their footprint collectively picking up nearly 1.3 million sq ft of office space.
New completions increase by 7 percent in 2017 but not at par with occupiers’ demand. Supply in the second half of 2017 was up by 13 percent year-on-year, the report said.
Transactions maintained a steady momentum. Technology sector headwinds and supply crunch responsible for subdued growth. Major cites record robust transactions, Bengaluru maintained its lead, the report said.
Vacancy levels hit 5-year low in the face of inadequate supply. Want of quality office stocks glaring in turbulence-hit IT/ITeS dominated markets such as Bengaluru (3 percent), Pune (6 percent) and Hyderabad (5 percent)
While the share of the office market held by the tech business tapered from 39 percent in the second half of 2016 to 37 percent in the second half of 2017, the other services sector captured more than one-third of transactions recorded in the second half of 2017, the report said.
Co-working service providers, an emerging phenomenon until the beginning of 2017, fortified its position by taking up approximately 1.3 million sq ft office space in the second half of 2017.
Except Mumbai, that saw surprise new supply of office stock, strong rental growth was recorded across other office markets. While Mumbai saw flat year-on-year rental growth, Hyderabad and Bengaluru experienced the strongest rental growth at 8.5 percent and 9.2 percent year-on-year respectively.
“2017 was been packed with uncertainty, volatility and long-term promise of new opportunities. While a battery of reforms tested industry stakeholders, the new paradigm of transparency and consolidation achieved in the process should pave the way for healthy momentum in the near future. Until the end of 2017, India’s residential sector had shrunk to a fraction of its size in less than a decade," said Shishir Baijal, Chairman & Managing Director, Knight Frank India.
"Nevertheless, the near standstill triggered by demonetisation seems to have tapered with time. At the same time, stakeholders are growing in confidence with the gradual acceptance of structural reforms such as the Real Estate (Regulation and Development) Act, 2016,”The industry, however, is still grappling to navigate its way through the new tax regime post the introduction of the Goods and Services Act. Meanwhile, select markets wherein RERA has matured have witnessed developers re-launch projects at attractive prices which led to an uptick in sales volumes in 2017. The strategic switch in developers’ approach has led to a price reduction is most markets. All in all, it is a buyers’ market today. And, we hope the momentum to hold steady in the near future, he said.