Bengaluru Real Estate Market Shows a Robust Performance in H1 2018: Knight Frank India

Knight Frank India launched the ninth edition of its flagship half yearly report – India Real Estate. It presents a comprehensive analysis of the residential and office market performance of Bengaluru for the period January – June 2018 (H1 2018).

Office Takeaways:
• With total transaction volume of 0.61 mnsq m (6.5 mnsq ft) at a rate of 13% YoY growth, Bengaluru retains top slot with highest half-yearly transaction volume since 2012
• Strong occupier demand, healthy pre-commitments and emerging sector’s expansion trigger growth in transactions
• City level rentals grow at 17%; low vacancy pushing rentals up. Acute shortage of quality spaces
in CBD & Off CBD and ORR led to a 17% and 15% YoY rental growth respectively
• Pre-commitments and expansion of emerging sectors push vacancy below 5%; ORR and CBD & Off-CBD reeling under single digit vacancy pressure
• Co-working garners 19% of total H1 2018 transactions; share of IT/ITeS sector continues to weaken

Residential Takeaways:
• Bengaluru’s residential market witnessed a remarkable comeback with 11% annual upswing in launches from 14,026 units in H1 2017 to 15,556 units in H1 2018. RERA compliance and good end-user traction encouraging developersto foray afresh in market
• 60% of Bengaluru’s total launches are in the INR 25-50 lakhs bracket
• Prices remain largely stagnant with2% annual drop from INR 52,000 per sq. m. (INR 4,831 per sq. ft.) in H1 2017 to INR 50,881 per sq. m. (INR 4,727 per sq. ft.) in H1 2018.Developers in no hurry to mark down prices as RERA registered projects and PMAY eligibility revive sales
• Sales rebound with22% YoY uptrend to 25,802 units in 2018 from 21,210 units in H1 2017. Marketing campaigns highlighting RERA compliancy, PMAY eligibility and Occupancy Certificate (OC) help developers regain buyers’ trust
• Of the total sales volume in H1 2018, South Bengaluru accounted for 48% of the whole pie, followed by North Bengaluru at20%
• Project lifecycle of less than 6 years as residential sales recovery underway; Quarters-to-sell (QTS) highest at 10.7 since 2015

Speaking about the findings, Shantanu Mazumder, Senior Branch Director – Bengaluru said,“Bengaluru’s real estate market has posted a robust half yearly performance in H1 2018 on both residential and office front.The city retains its top position as the best performing occupier market across the eight cities. In H1 2018, the transactions touched a new milestone of 0.61 mnsq m – the highest volume recorded in any half yearly period since 2012. Healthy occupier demand coupled with a strong pre-commitment pipeline and expansion of new sectors such as co-working were instrumental in achieving this high. Going forward, we expect BFSI, IT/ITeS as well as steady uptrend in co-working to dominate the office space demand. The real challenge would be to keep the delivery timeline of new completions and ensure adequate supply as vacancy continues at sub 5% levels.

The residential sector got as new lease of life with RERA compliance streamlining at developers’ end helping them to focus on marketing strategies in a changed operating environment. Growth in both residential sales and launches outshines the subdued sentiment prevalent in other markets. The aggressive marketing of PMAY, OC received and RERA approved projects is creating the right buzz and we are hopeful the trend will continue and bring more and more fence sitters back to the table.”