Monday, January 15, 2018
Unsold Inventory, RERA Ambiguity Trouble Indian Real Estate Market in 2017
Knight Frank India has launched the eighth edition of its flagship half yearly report – India Real Estate. It presents a comprehensive analysis of the office market performance of Bengaluru for the period July – December 2017 (H2 2017).
Speaking about the findings, Shantanu Mazumder, Senior Branch Director – Bengaluru said,“Bengaluru’s residential markethas been impacted by a variety offactors impacting both demand andsupply.Residential sales have witnessed a 34% YoY decline in H22017 over H2 2016. On the launches front, though the declining trend began since2014, the rate of decline was never asmarked as in 2017 as the new supplynosedived by a mammoth 71% from thepeak witnessed in 2013.North and South zones have witnessedmaximum curtailment of new launchesregistering a YoY decline of 66%and 52%, respectively, in H2 2017,as developers put new projectlaunches on the backburner whilst theyprioritised RERA compliance. On a YoYbasis too, overall city launches declinedby 37% in H2 2017.Competitive pricing coupled with asharp decline in new launches in 2017has worked in the favour of Bengaluru developers; as a result, the unsold inventory has gradually declined by10% YoY in H2 2017. In terms of micro-markets Sarjapur Road, Kanakpura Road, Thanisandra and Devanahalli have been the buyers’ choice; however, with the metro construction in full swing, Whitefield too has pickedup pace.
In H2 2017, the total transactionvolume was noted at 5.91 million sqft registering a 12% YoY growth over H2 2016. This high transaction volumereaffirms Bengaluru’s top position asthe leading office market across the topeight cities.Of all the micro markets, Outer RingRoad (ORR) continued to fare well interms of occupier stickiness accountingfor 47% of total transactions in H22017 thereby recording a massive YoY growth of 83% over H2 2016. Despitelimited new supply and low vacancy,the absolute quality of office assets keptoccupiers interested in leasing any newspaces that became available in thismicro market.An interesting trend that emergedduring H2 2017 was the dominanceof smaller deal sizes in the totaltransaction volume with 82% of the total numberof deals belonging to a spacetake up of less than 50,000 sq ft.TheIT/ITeS sector accounted for 44%of gross leasing in H2 2017, 20% lower than the space consumedin H2 2016. Amidst automation andreskilling challenges, cautious hiringprevailed in this sector thus deterring the expansion momentum.E-commerce, on the other hand, emerged as a surprisefrontrunner for space consumptionaccounting for a 16% share in totaltransaction volume.Co-working operators, too, continued expanding footprint accounting for a 6% share in H2 2017 leasing volume. ORR also accounted for 69% of the 4.4 million sqft of newsupply in H2 2017 which was well received by occupiersand eased the supply crunch in this belt, albeit in the short-term.”