NCR , January 11, 2017: Knight Frank India today launched the sixth 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 six cities) market performance for the period July – December 2016 (H2 2016).
Sales volume and new launches fall by 23% and 46% respectively in H2 2016
Demonetisation move plagues fourth quarter (Q4 2016); sales volume drop by 44%
Y-o-Y and new launches fall by a massive 61% Y-o-Y
All eight cities witness a crash in Q4 2016, including the usually resilient Bengaluru. 2016 replaces 2015 as the worst performing year in terms of sales volume in the recent history; sales volume in the top eight cities drops by 9% in 2016 to 244,680 units from 267,960 units in 2015
Resilient Bengaluru residential market registers a fall for the first time since its peak in 2013; new launches and sales decline by 17% Y-o-Y and 7% Y-o-Y respectively
NCR the most affected market; witnesses a de-growth in demand and supply by 29% and 73% respectively
MMR market loses recovery mode; launches and sales plummet by 53% and 26% respectively
Half- Yearly Launches and Sales Trend:
Source: Knight Frank Research
Impact of Demonetisation:
Source: Knight Frank Research
H2 2016 sees demand holding steady in all six cities; consistent with 2015 level
Transactions fall by 12% to 20.4 mn sq ft from 23.2 mn sq ft in H2 2015; new supply reduces by 46% in H2 2016 to 10.1 mn sq ft from more than 18.7 mn sq ft in H2 2015
Average rental values rise to their sharpest level since 2013 at 11% Y-o-Y during H2 2016. Mumbai leads with a 16% Y-o-Y jump; NCR and Bengaluru follow closely at 14% and 12%, respectively
IT/ITeS sector continues to be the largest driver of office space in India with the sector accounting for nearly half of the transactions during H2 2016; in Mumbai, BFSI sector contributes the lion’s share
Half Yearly new completion, transactions and vacancy level
Speaking on the occasion, Shishir Baijal, Chairman & Managing Director, Knight Frank India said, “The residential market of the top eight cities in India started off on a positive note in 2016 with H1 2016 witnessing a 7% jump in sales volume compared to H1 2015. H2 2016 also began at the same pace with Q3 2016 sales volume showing a positive growth on the back of the start of the festive season. All these factors coupled with political stability, regulatory environment, enhanced infrastructure, strong investments, approval to the GST bill and amendments to REITs led us to the feeling that the year would end on a high note for the residential property sector.
But, the demonetisation move pulled down the last quarter sales across all cities. The fall in Q4 was intense, H2 2016 ended below H2 2015. 2016 ends at launches and sales being lowest since global financial crisis.
Uncertainty is likely to continue in the next quarter. It will be important to see how developers recalibrate their businesses to the changing environment and, whether buyers capitalise the opportunity of various reforms and change their status quo position of ‘wait and watch’. In 2017, lower home loan interest rate, RERA & GST, likely fiscal benefits for taxpayers in Union Budget, enforcement of Benami Transactions (Prohibition) Amendment.
Act and Remonetisation are likely to infuse the “feel good factor” which is extremely important for the revival of the industry.
The office market on the other hand has grown from strength to strength with 2016 office demand holding steady and consistent with the 2015 level. Vacancy levels reached a record 9-year low with cities like Pune and Bengaluru having vacancy levels in single digit. In spite of a strong demand from occupiers, transaction volume is facing a challenge across all cities due to supply crunch. Not much new supply is on the anvil in 2017 and rentals will be on a continuous rise. In 2017, we also look forward to the first listing of REITs that will bring in depth in the funding of commercial real estate sector. However, it will be important to take note of President-elect Trump’s policy and outcome of Brexit that are likely to decide the growth trajectory of the office market.”