Residential sales grow by 6% in 2018; Launches rise by 76%: Knight Frank India

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Office space leasing at historic high, records 46.8 msf in 2018

Mumbai, January 10, 2018: Knight Frank India today launched the 10th 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 2018 (H2 2018). The report findings establish 2018 as the best performing year historically for the commercial office segment with leasing crossing 46 million square feet (msf). The residential market saw some upward movement in sales velocity, but the year stopped short significant recovery. Total sales of residential units were estimated to be 242,328 registering a 6% increase over full year 2017.

Residential market highlights for top 8 cities1

 2018 marks the first time in this decade when annual launch numbers have grown y-o-y.

  • The total new units launched in full year 2018 is estimated to be 182,207 which was higher by 75% as compared to the total units launched in 2017
  • H2 2018 saw a total of 89,500 (approx.) new unit launches which was 119% up compared to H2 2017
  • 60% of all launches were within the INR 5 million (50 Lakhs) bracket that most developers are concentrating on the affordable and mid – ranged segment
  • Mumbai (38,390 units), Pune (18,580 units) Bengaluru (11,830 units) saw the highest new unit launches in full year 2018
  • Mumbai saw the highest y-o-y growth of 220%, while Pune recorded a nearly 157% increase. A full-fledged RERA in both these cities in Maharashtra, coupled with the reprieve from dumping ground ban in Mumbai, facilitated the growth in new launches
  • Most markets recorded moderate growth in prices. Mumbai prices fell by 7% while Hyderabad prices vaulted by 7% YoY in
  • Pune (-3%), Kolkata (-4%) and Chennai (-3%) recorded a moderate correction in asking prices. NCR (+2%), Bengaluru (+2%) and Ahmedabad (+1%) meanwhile saw prices increase
  • An improving regulatory environment, reducing prices, indirect discounts and an increasing infusion of residential products that are more in tune with the homebuyer’s preferences have culminated in a 6% YoY growth in sales during 2018. Sales volume in full year 2018 was estimated at 242,328
  • Bengaluru saw the highest annual increase in sales by 27% YoY in 2018, riding on the back of economic stability and job security. Even the NCR saw sales improve by 8% YoY in 2018, on the back of stronger sales traction in NOIDA and Greater NOIDA
  • Kolkata (-10%) saw a decline in sales in full year 2018 over 2017
  • The total unsold inventory levels have reduced at the end of 2018 and are estimated to be 468,372 units which were lower by 11% since end of 2017 and close to 30% lower than
    Launch   Units Sold  
City     %

change (y-o-y)

    %

change (y-o-y)

  2017 2018 2017 2018
Mumbai 23,253 74,363 220% 62,256 63,893 3%
NCR 11,726 15,819 35% 37,653 40,643 8%
Bengaluru 22,410 27,382 22% 34,546 43,775 27%
Pune 12,705 32,684 157% 33,966 33,521 -1%
Chennai 9,235 10,373 12% 15,520 15,986 3%
Hyderabad 3,511 5,404 54% 14,243 15,591 9%
Kolkata 15,940 12,015 -25% 14,147 12,731 -10%
Ahmedabad 4,790 4,167 -13% 15,741 16,188 3%
All India 103,570 182,207 76% 228,072 242,328 6%

Source: Knight Frank Research

Shishir Baijal, Chairman and Managing Director, “The residential market in 2018 recorded a recovery after 7 years, which has been led by the affordable segment. Incentives from government such as lower GST rates and infrastructure status to affordable housing have fuelled the demand for the sector. The supply side has accordingly calibrated itself in this period. Having said that, NBFC crisis created a liquidity crunch in the second half of 2018, which restricted sales, particularly in Mumbai and NCR in H2 2018.”

The markets will remain in a cautious mode due to the upcoming general elections and the after-effects NBFC crisis through most of the first half of 2019. On the positive side, the anticipated downward revision of GST on under construction houses should provide a boost to the buyer sentiment. This, coupled with stable interest rates and inflation remaining largely under control, should lead to increased velocities in the second half of 2019. The focus is expected to continue in the affordable segment,” added Shishir.

Commercial market highlights for top 7 cities2 

  • The Indian office space market achieved record transaction levels in H2 2018 as well as for the full year, 2018. Growing by 12% YoY, both full year 2018 and H2 2018 saw the highest transaction volumes (46.8 msf and 25.2 msf respectively) achieved in this decade. The 46.8 msf transacted during 2018 was in fact the highest space transacted ever in the Indian office space market for any single
  • Bengaluru continued to lead the office space market recording the highest leasing volumes at 13.4 msf. Office space supply in the city was recorded at 7.6 msf in full year 2018
  • Hyderabad saw the highest percentage increase in space transacted YoY in H2 2018 at 30%
  • Except for Ahmedabad (-29%) and Chennai (-23%), leasing activities saw a positive growth trend in leasing in full year 2018 compared to same time 2017
  • Pune recorded the highest percentage growth at 46% YoY in 2018, but the significant jump in leasing volumes was in Hyderabad which, while recording a yearly increase of 24% in 2018, saw leasing worth 7 msf. This volume is significantly close to those in large markets such as NCR and Mumbai
  • Supply of new office spaces saw a commensurate increase to leasing volumes recording an increase of 13% in full year 2018 as compared to same time 2017
  • The total supply for 2017 was recorded at 36.9 msf
  • Pune (229%) and NCR (86%) saw maximum new completions during 2018
  • Mumbai (-37%) and Chennai (-28%) saw a decline. The decline in fresh supply in Chennai has also impacted level leasing activities
  • Vacancy has seen a marginal improvement in the last year settling at approximately 12% at the end of 2018, with southern cities of Bengaluru (4%), Hyderabad (7%), Chennai (11%) keeping the vacancies low. Pune also recorded a low vacancy (8%).
  • Leasing by Co- working spaces saw a significant rise of 52% YoY in H2 2018 (Jun – Dec) as compared to same time 2017. BFSI, led mostly by payment gateway companies, formed 18% of all leasing transactions in H2
 

 

City

New Completion (mn sq ft)
 

H1 2017

 

H2 2017

 

Full Year 2017

 

H1 2018

 

H2 2018

 

Full Year 2018

 

% change 2018/ 2017)

Mumbai 7.6 2.8 10.4 4.4 2.2 6.5 -37%
NCR 1.8 2.3 4.1 3.6 4.0 7.6 86%
Bengaluru 3.7 4.4 8.1 3.7 3.9 7.6 -6%
Pune 1.7 0.4 2.1 2.7 4.2 6.9 229%
Ahmedabad 2.2 0.7 2.9 0.9 2.2 3.1 6%
Chennai 1.1 0.8 1.8 1.2 0.2 1.3 -28%
Hyderabad 2.0 1.3 3.2 1.7 2.1 3.9 19%
Total 7 cities 20.1 12.5 32.7 18.2 18.7 36.9 13%

Source: Knight Frank Research 

Leasing Activities
 

 

City

 

 

H1 2017

 

 

H2 2017

 

 

Full Year 2017

 

 

H1 2018

 

 

H2 2018

 

 

Full Year 2018

%

Change (Full Year 2017 /

Full Year 2019

Mumbai 3.1 4.4 7.5 2.9 5.1 7.94 5%
NCR 3.2 3.2 6.4 3.4 3.9 7.34 14%
Bengaluru 5.8 5.9 11.7 6.5 6.9 13.40 14%
Pune 1.8 2.7 4.5 3.9 2.7 6.57 46%
Ahmedabad 1.1 0.3 1.5 0.5 0.6 1.03 -29%
Chennai 1.9 2.6 4.5 1.8 1.7 3.47 -23%
Hyderabad 2.3 3.3 5.7 2.7 4.3 7.03 24%
Total 7 cities 19.2 22.6 41.8 21.5 25.2 46.78 12%

Source: Knight Frank Research 

Shishir Baijal, Chairman and Managing Director, The commercial market surpassed  previous records and registered a new high in 2018. Bengaluru continued to demonstrate its front runner status, by clocking an all-time high transaction volume, Leasing volumes and fresh supply have shown growth trends in 2018 which are reflective of heightened economic activity. 2019 is expected to witness undercurrents of several geo-political events and resultant economic developments that may impact markets and businesses.”

Corporate Comm India(CCI Newswire)