Monday, January 15, 2018

Indian Home Launches Crash by 41% in 2017, New Supply Now One-Fourth of 2015 – Knight Frank India

Knight Frank India today launched the eighth edition of its flagship half-yearly report -India Real Estate. The report 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).

Residential takeaways:
  • Homes launches in 2017 plummeted by staggering 78% from the peak of 2010. Volume of new projects entering the market in the second half of 2017 stood at approximately one-fourth of the supply levels in 2015
  • Launches below the demonetisation-hit H2 2016
  • All cities witness fall in launches YOY, Hyderabad worst hit
  • At 84%, Hyderabad records steepest fall in launches. Other IT/ITeS dominated markets such as Pune (58%), Bengaluru (37%), Chennai (33%) also witnessed massive drop in launches
  • Sales volume hit seven-year; 62% down from the peak of 2011; YoY drop of 7% in 2017
  • Sales similar to demonetisation-hit H2 2016; down by 2% YoY
  • Sales struggle across markets; Bengaluru down 34%
  • Mumbai (19%) and NCR (21%) see a spike on a demonetisation base effect
  • Bengaluru, in particular, recorded negative growth in both launches (-37%) and sales (-34%) for the first time in H2 2017. Hyderabad also recorded the decadal low in home launches
  • The weighted average prices fell by an average of 3% across cities with Pune witnessing the highest decline of 7% YoY followed by Mumbai at 5% YoY. Markets high on ready to move inventory such as Hyderabad and Ahmedabad saw prices move up 3% and 2% respectively.
Office Takeaways
  • New completions increase by 7% in 2017 but not at par with occupiers’ demand. Supply in H2 2017, 13% up YoY
  • Transactions maintain a steady momentum. Technology sector headwinds and supply crunch responsible for subdued growth
  • Major cites record robust transactions, Bengaluru maintains its lead
  • Vacancy levels hit 5-year low in the face of inadequate supply. Want of quality office stocks was glaring in turbulence-hit IT/ITeS dominated markets such as Bengaluru (3%), Pune (6%) and Hyderabad (5%) 
  • While the share of the office market held by the tech business tapered from 39% in H2 2016 to 37% in H2 2017, the Other Services sector captured more than one-third of transactions recorded in the second half of 2017
  • Co-working service providers an emerging phenomenon until the beginning of 2017 fortified its position by taking up approximately 1.3 Mn sq. ft office space in H2 2017
  • Except Mumbai that saw surprise new supply of office stock, strong rental growth was recorded across other office markets. While Mumbai saw flat YoY rental growth, Hyderabad and Bengaluru experienced the strongest rental growth at 8.5% and 9.2% YoY respectively.
Speaking on the occasion, Shishir Baijal, Chairman & Managing Director, Knight Frank India said, “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. 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.”

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