62% of all launches in sub INR 7.5 million ticket size; 82% below INR 10 million ticket size.
Volume of office space transacted in the city record 61% rise (YoY) in H1 2019: Knight Frank Report
Mumbai, July 10, 2019: Knight Frank India today launched the 11th edition of its flagship half-yearly report – India Real Estate. The report presents a comprehensive analysis of the residential and office market performance across eight cities for the period January – June 2019 (H1 2019). The report findings establish that the number of residential launches in Mumbai increased by 22% in H1 2019 to 43,822 from 35,874 in H1 2018. The housing units sold saw an increase of 4% in H1 2019 to 33,731 from 32,412 in H1 2018.
Mumbai’s office market witnessed 61% increase in volume of office space transacted in H1 2019 to 0.43 mn sq m (4.6 mn sq ft) from 0.27 mn sq m (2.9 mn sq ft) in H1 2018. The Other Services sector, which includes media, consulting, ecommerce, co-working, etc. continued to dominate transaction activity in H1 2019 garnering 39% share of total transactions followed by BFSI at 34%.
RESIDENTIAL MARKET HIGHLIGHTS OF MUMBAI:
- The launches growth tapers to 22% year–on year (YoY) during H1 2019, after registering a stellar 220% YoY growth in 2018.
- 62% of the launches during H1 2019 were in the sub–INR 7.5 million ticket size and 82% were below INR 10 million ticket size.
- Thane market witnessed the largest quantum of new launches on account of new projects launched by some of the country’s biggest corporates.
- During H1 2019, sales in MMR grew marginally by 4% YoY to 33,371 units
- Sales in H1 2019 were affected by two major events– GST ambiguity and election uncertainty.
- Homebuyers yet to benefit from RBI‘s policy rate reductions, banks have passed on only 10–30 bps out of the 75–bps cut by RBI in 2019.
- GST change has failed to enthuse homebuyers; most developers have opted for earlier GST regime for 12% with ITC for on–going projects.
- Peripheral Central Suburbs witnessed the highest sales growth in MMR of 9% YoY during H1 2019 followed by Thane at 7% YoY.
- Affordable houses continued to drive sales in H1 2019, relatively affordable markets of MMR – Thane, Peripheral Central Suburbs and Peripheral Western Suburbs combined, grew by 6% YoY during H1 2019. However, sales in the pricier BMC markets grew only by 3% YoY in the same period.
- On account of launches being higher than the sales, the unsold inventory levels in MMR have inched up 14% YoY to 136,525 units during H1 2019.
- Quarters–to sell (QTS) for the MMR market went up from 8 quarters in H1 2018 to 8.5 quarters in H1 2019. The current QTS of 8.5 quarters should not be interpreted as a sign of a healthy market. Over the past few years, in MMR, launches have constantly surpassed sales since H2 2014 till H1 2017.
- The liquidity crisis in the NBFC sector, which struck during H2 2018, is still casting its shadow on the MMR market and cost of funds have gone up for developers to the tune of 180–250 bps.
- The weighted average price for MMR was down 3% YoY during H1 2019. The prices have corrected by 12% from the peak of H2 2016.
- Host of indirect offers and freebees remain in the market, they include: no floor rise, no stamp duty, 2 years maintenance free period, no club house charges, 2 years assured rentals schemes, various subvention schemes, deferred payment plans, etc.
- Earlier subvention schemes and deferred payment plans were available only in under–construction projects, but now it is available in few OC ready projects as well.
- Unprecedented investment in infrastructure in Mumbai. Over INR 2 trillion or INR 2 lakh crore being invested. Metro projects worth INR 1.16 trillion or INR 1.16 lakh crore under–construction.
Gulam Zia, Executive Director– Valuation & Advisory, Retail & Hospitality said, “The mood of residential realty in Mumbai continues to be sombre and withdrawn. With more skeletons tumbling out of NBFC cupboards the shadows on Indian housing industry are getting longer. The respite offered in the finance bill may still not be able adequate to pull the sector out of its current situation. to rescue a few more developers who’re already on the brink of an imminent collapse. Affordable housing segment has emerged as a silver lining in these dark clouds. The finance minister has announced more sops for this segment to step closer to the dream of “housing for all”. The developers who desire to remain relevant after this catastrophic period of downturn will have to recalibrate their business models and focus on creating more affordable homes.”
COMMERCIAL MARKET HIGHLIGHTS OF MUMBAI:
- The transaction activity in the Mumbai Metropolitan Region (MMR) ofﬁce market was strong 0.43 mn sq m (4.6 mn sq ft) in H1 2019 registering a growth of 61% YoY.
- There were several large transactions in H1 2019, which involved occupiers from the Banking, Financial services and Insurance (BFSI) segments, Other Services sector and co-working players.
- In H1 2019, new completions dropped by 56% year-on-year (YoY) at 0.18 mn sq m (1.9 mn sq ft).
- Only three out of six business districts witnessed addition in supply in H1 2019 – peripheral business district (PBD), suburban business district (SBD) Central and SBD West.
- The SBD Central market has been gaining traction, witnessed 143% YoY growth in transactions in H1 2019.
- PBD had the highest share of transactions in H1 2019 at 31%. SBD West and SBD Central, combined, garnered 50% share of the transactions in H1 2019.
- The Other Services sector, which includes media, consulting, ecommerce, co-working, etc. continued to dominate transaction activity in H1 2019 garnering 39% share of total transactions followed by BFSI at 34%.
- Co-working operators took up 0.02 mn sq m or 0.3 mn sq ft of ofﬁce space in H1 2019 and constituted 14% of the transactions by the Other Services sector in H1 2019.
- Vacancy levels declined by almost 400 bps from 21.5% during H1 2018 to 17.8% during H1 2019. As supply could not keep pace with the transactions for two consecutive periods of H2 2018 and H1 2019.
- Weighted average transacted rentals for the MMR ofﬁce market went up by 7.8% YoY during H1 2019, as share of the expensive business district of Bandra Kurla Complex (BKC)and off-BKC in transaction activity was higher than it was during H1 2018.
- Central Mumbai witnessed the highest rental growth of 6% YoY during H1 2019, followed by BKC at 5% YoY and SBD Central at 5% YoY.
- The trend of consolidation of space by occupiers continues across the MMR ofﬁce market. Despite the number of transactions in the same period increasing from 105 to 160, the average size of deals increased from 2,548 sq m (27 ,429 sq ft) per deal to 2,700 sq m (29,059 sq ft) per deal.
Gulam Zia, Executive Director– Valuation & Advisory, Retail & Hospitality said, “The office market has been growing steadily across India with strong record of transactions each successive year. Mumbai witnessed record half-yearly growth in transactions led by occupiers in BFSI and other service sectors. While the city level vacancy remains elevated, we have a scenario where preferred markets in the city have significantly low vacancy level. SBD Central has been witnessing significant growth in occupier interest over the past few years and would soon join the list of tight supply markets like BKC and Central Mumbai.”
Corporate Comm India(CCI Newswire)