Home sales rise 1% in 2019; Bengaluru tops the chart: Report

Representative image

The residential segment in the country's top eight cities - Mumbai, National Capital Region (NCR), Bengaluru, Hyderabad, Chennai, Pune, Ahmedabad, Kolkata -- demonstrated unexpected resilience and recorded a marginal growth of 1% year-on-year in sales volume in 2019, says a new report.

Total sales volume was recorded at 245,861 units in 2019 over 242,328 in 2018 as affordability improved, and developers aligned themselves with the needs of home-buyers by reducing ticket-sizes and unit-sizes in a bid to encourage sales, says the India Real Estate: H2 2019 by Knight Frank India, an analysis of the residential and office market performance across eight major cities for the July-December 2019 (H2 2019) period.

H2 2019 experienced similar flat sales growth at a marginally lower 1% YoY to 116,576 units, the report says.

Bengaluru registered the highest increase in sales at 10%, followed by Hyderabad and Kolkata at 9% each, and Chennai at 8% in H2 2019. NCR saw a marginal rise of 2% in sales, while MMR and Pune witnessed degrowth in sales of 14% and 10%, respectively.

Hyderabad witnessed the highest annual rise in home prices during 2019 at 10% and was the only city to register double-digit growth. Bengaluru saw a 6.3% YoY rise in home prices, followed by NCR at 4.5%, Kolkata at 3.1%, Ahmedabad at 2%. Mumbai, Pune and Chennai witnessed degrowth in home prices at 2.5%, 3% and 5%, respectively, the report says.

Residential launches rise by 23% year-on-year

New residential unit launches rose by 23% Y-o-Y in 2019 to be recorded at 223,325 units. Home launches across the top eight cities in India grew by a robust 23% to 223,325 units in 2019, the report says.

The growth in launches was more pronounced in H2 2019, at 25% to 112,150 units. 61% of launches in H2 2019 occurred in ticket sizes under Rs 50 lakh and 81% under Rs 1 crore as developers focused on affordable housing and lower ticket sizes, the report says.

Mumbai saw the highest number of homes launched in 2019 at 79,810 units, followed by Pune at 44,660 units, and Bengaluru at 33,772 units.

“After a slew of policy measures such as RERA, GST and demonetisation, the developer community is steadily coming to terms with this new normal and finding its footing, which is evidenced from the recovery in the volume of apartments launched since H1 2018. Affordable and low-cost housing, which have largely been the focus of the regulatory and financial measures taken by the government, will continue to be focus-areas for builders as they align themselves with the needs of home-buyers," says Shishir Baijal, Chairman and Managing Director, Knight Frank India.

“2019 can be seen as a relatively positive year for the real estate sector. The historic rise in office transactions is a significant growth indicator for the office market as it represents the continued commitment of domestic and global corporations in the country’s growth potential despite the ongoing economic slowdown. The residential sector also overcame the negative market outlook by registering a growth in sales volumes as well as new launches,” adds Baijal.

Unsold inventory declines

Unsold inventory across the top eight markets improved in 2019, registering a 5% decline to 445,836 units. Mumbai had the highest quantum of unsold inventory at 145,301 units, followed by NCR at 122,084 units and Bengaluru at 78,414 units.

Office market registers 56% growth

The office market recorded its historic best year in terms of transaction volumes in 2019, recording 60.6 million square feet (msf), backed by a surge in leasing activity by the information technology segment. New completions surged by 56% in 2019 and was recorded at 61.3 msf, marginally surpassing demand.

Close to 61.3 million sq ft (msf) of office space was delivered during the year, amounting to a 56% YoY growth over 2018. Bulk of 2019’s office space supply came online during the second half of the year (H2 2019) at 37.5 msf, registering a 78% YoY growth over the previous period, the report said.

Year 2019 saw Bengaluru experience the highest quantum of new supply at 16.1 msf, followed by NCR at 12.3 msf and Hyderabad at 10.9 msf. Except MMR and Pune, all other markets saw a positive growth in office supply.

Office leasing activity in 2019 touched a historic high 60.6 msf despite the ongoing slowdown in the economy, registering a 27% YoY growth over 2018. H2 2019 also saw a similar growth in transaction volumes at 29% and accounted for a record high of 33.2 msf.

Bengaluru, which has dominated this decade in terms of transaction volumes, saw the highest volume of office space leased again in 2019 at 15.3 msf, followed by Hyderabad at 12.8 msf, nearly twice its previous annual high.

However, Bengaluru was overtaken for the first time in terms of space transacted in a half yearly period, during H2 2019. Bengaluru came second to Hyderabad which saw a massive 8.9 msf of space transacted during H2 2019 and it was the market that experienced the most transaction activity during the period.

The IT sector accounted for 41% of the total office space leased in H2 2019, against 31% in H2 2018; while the share of Banking, Financial Services and Insurance (BFSI) reduced to 16% in H2 2019, from 18% in H2 2018, as the sector reeled under the shadow of the NBFC crisis.

Co-working companies leased 4.1 msf of office space in H2 2019 and accounted for 12% of the total space transacted in the top eight cities, a substantial increase from 8% share in H2 2018.

"Office leasing in India has been growing from strength to strength despite a sluggish economy, with ample investment demand for high-quality assets. It would be interesting to see if the massive supply that is lined up to come online in the near future across major markets, and macro-economic headwinds put rental growth under pressure," says Baijal.