The real estate residential market witnessed sales rising by 51% year on year (YoY) and recorded 232,903 units across the top eight cities of the country in 2021. New home launches also saw a significant rise of 58% YoY with the addition of 232,382 units in 2021, a new report by Knight Frank India said on January 5.
For the commercial office segment, the year was a mixed bag. Leasing volumes, recorded at 38.1 million square feet though remaining at similar levels as 2020, clearly indicated towards the potential the market has in terms of leasing. Noteworthy is that an overwhelming 68% of the total leasing in 2021 took place in the second half of the year.
Bengaluru led the pack with 12 mn sq ft of total leasing during the year. New completions in 2021 for office space was recorded at 39 mn sq ft, higher by 9% over the preceding year, it said.
The 16th edition of its flagship half-yearly report - India Real Estate: 2021 – which presents a comprehensive analysis of the residential and office market performance across eight major cities for the July-December 2021 (H2 2021) period, noted that 133,487 housing units were sold in second half of the year 2021 cumulatively for the top eight cities. This also showcased a substantial 41% increase Year-on-Year (YoY).
Around 69,477 housing sales were reported in Q4 2021. Residential prices stayed steady or recorded marginal growth in seven of eight cities during the year. Homes priced over Rs 50 lakhs constituted around 58% of the overall sales in H2 2021.
Mumbai (34,382), National Capital Region (23,599) and Bengaluru (23,218) were the leading residential sales performers in H2 2021. Hyderabad and Bengaluru witnessed the highest home sales (in terms of percentage growth) during H2 2021 at 135% and 104% YoY respectively. In the calendar year 2021, Mumbai (62,989), Bengaluru (38,030) and Pune (37,218) led in terms of sales.
Despite the stamp duty cut window closure in March 2021, Mumbai and Pune accounted for 41% of the home sales during H2 2021. Homebuyers in the Information Technology sector dominated markets were relatively less impacted by pandemic induced disruptions and were well poised to take the plunge in H2 2021. This has primarily been the reason for positioning Hyderabad and Bengaluru as the leading sales growth markets (in percentage terms) in the country in H2 2021, the report said.
In terms of 12-month residential price change, Chennai, Hyderabad and Bengaluru registered increment of 7%, 5% and 4% respectively. Mumbai witnessed a marginal increment of 1%. The prices were recorded to be stable in Pune, Kolkata and Ahmedabad. National Capital Region marked a marginal decline of 1%. However, price levels in seven of the eight markets under review were observed to remain at the same level or record marginal growth in the 6-month period.
“Despite the disruptions caused by the pandemic, residential sales momentum increased across the key eight markets of the country due to a plethora of demand stimulants such as lowest home loan rates, government sops and change in attitude. Sentiments remain strong and should continue to aid market volumes in the near term. While buyer preferences were skewed towards ready inventory, established developers with a robust execution record are increasingly finding a market for their under-construction inventory,” said Shishir Baijal, chairman and managing director, Knight Frank India.
25.9 mn sq ft of office space transacted during H2 2021; co-working gains ground
On the office market performance, Knight Frank India cited that the top eight cities recorded transactions of 25.9 mn sq ft in July – December 2021, whereas the office completions were recorded at 23.7 mn sq ft in the same period.
Six of the eight markets saw transaction volumes grow in YoY terms during H2 2021. With the increasing need for flexibility and a hybrid working environment, co-working/ managed office sector’s transactions share increased to 18% in H2 2021 from 10% in H2 2020. With 8.7 mn sq ft transactions in H2 2021, Bengaluru recorded its highest ever office leasing activity in a half yearly period, the report said.
Marking a recovery of office assets, 25.9 mn sq ft of office space was transacted during H2 2021 compared to 12.3 mn sq ft in H1 2021. On year-on-year basis, H2 2021 observed a growth of 17% in comparison to 22.2 mn sq ft in H2 2020. While the 38.1 mn sq ft transacted in 2021 almost equalled 2020 levels (-3% YoY), it could have comfortably crossed the same but for the uncertainty caused by the emergence of the Omicron variant towards the end of the year. Market traction also got curtailed in Q2 2021 owing to the second intensive wave of the pandemic.
With labour shortages and other supply chain bottlenecks having been overcome to a large extent in H2 2021, office completions also picked up significantly with 23.7 mn sq ft getting delivered during H2 2021, a 38% growth YoY. Bengaluru, Pune and Mumbai accounted for 62% of the new completions with Bengaluru seeing the most space delivered at 0.6 mn sq m (6.8 mn sq ft).
From sector wise transaction split in H2 2021, information technology leads with 27% followed by manufacturing sector with 21%, and other services sector accounting to 19% of the space transacted.
While the IT sector deferred some of its leasing activity, it was the primary driver for the spike in the co-working/ managed office sector’s transactions during the Omicron influenced Q4 2021. The share of the co-working sector in total transactions increased to 29% in Q4 2021 from 11% in Q4 2020. Also gathering momentum in every successive quarter of 2021, 84,000 seats were taken up in managed office premises in 2021.
Rental levels across markets were observed to be stabilizing towards the end of the year.
“Commercial market showcased resilience against pandemic and market recovered in the second half of CY 2021. The active adoption of managed office premises by large enterprises is expected to continue as employee health considerations will necessitate a high level of flexibility in their workspace considerations,” Baijal said.
“Given the substantial hiring that has occurred in the IT sector during the year, it is a matter of time before its share in transactions reverts to its longer-term average. As business could only take place for 8 out of the 12 months of the year, due to disruption, the potential of the market was far higher, and we expect this pent-up demand to hit the market in the new year,” he added.
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