Residential property prices have dropped by up to15 per cent in Mumbai, NCR, Pune and Kolkata in the first half of 2018 despite government incentives and reduced prices as developers battle with unsold inventory that will take another three years to clear up, Knight Frank said today.
“Effective price drop of 10-15 per cent continues in cities such as Mumbai, NCR, Pune and Kolkata. Hyderabad bucks the trend with an exceptional price growth at 8 per cent year-on-year,” it said in a report.
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said the turbulent times that started with demonetisation and continued with RERA and GST have impacted the residential market.
Uncertainty Ahead
“With the forthcoming general elections, high inflation and interest rates slowly inching up, a lot of uncertainty still exists in the market. It could perhaps still be a rocky way ahead for the real estate industry and we all continue to look ahead to the impetus that is required for the industry to revive,” he added.
While the launch of new housing units jumped 46 per cent over the first half of 2017, sales saw a growth of just 3 per cent at 1,24,288 units. Unsold inventory in the top seven cities still stands at close to five lakh units.
The bright spot
Office space, however, has seen the highest transaction volumes in the last six years, leading to a growth of 13 per cent. Bengaluru clocked the highest number of transactions, and led the southern region with the lowest vacancy levels. Overall, the weighted average rental moved up 5 per cent to Rs 72 per sq ft per month. “The office sector has been doing very well, with vacancy levels at single digits in many cases, and rentals moving steadily upwards,” Baijal said.
Most Indian cities experienced strong positive rental growth in the office segment. Bengaluru saw the highest growth at 17 per cent year-on-year and a greater share of relatively lower priced business districts led to reduced rentals for Mumbai, the report said. Co-working service providers accounted for 13 per cent of the total transacted space, while the share of IT/ITeS declined.
Hyderabad residential launches up 44% in H1
The Hyderabad residential market saw a bounce-back in launches during the first half (H1) of 2018 as against H1 of 2017. The sector reported growth of over 44 per cent, with the majority of new launches in the Rs 75 lakh to Rs 1 crore category.
The western part of Hyderabad, which caters to the IT hub of the growing metropolis, continues to be the biggest market accounting for 71 per cent of new launches, according to Knight Frank.
Amidst a price correction in most cities, Hyderabad recorded an appreciation in prices. A lack of launches, steady demand and a shortage of ready-to-move in houses has pushed up prices by about 8 per cent.
Sales crossed the 8,000 mark for the first time post-bifurcation of the state about four years ago. The strong performance of the office market also helped lift the residential segment.
The report has identified improved infrastructure and political stability as major catalysts for growth of the realty sector.
Samson Arthur, Director, Hyderabad, Knight Frank, said, “The worst seems to be behind us, and the real estate market of Hyderabad is expected to witness new benchmarks. Sluggish residential launches until now, due to policy issues, is soon set to transform with the announcement of several new projects.”
“Benefits of robust office demand rubbing off on the residential sector is now distinct, with record 8,000 units sold in the first half of 2018. The office market is expected to continue the good run for the second half of 2018 and this together should be a harbinger of another strong performance of Hyderabad amongst the key property markets of India,” he said.
In the office segment, new completions were down 13 per cent during H1 of 2018, but the segment continues to show good numbers with transactions up at 15 per cent.
While the share of the IT/ITeS sectors shrunk to 36 per cent, the share of other services increased 43 per cent. Significantly, co-working spaces, now in a rapid growth, garnered 29 per cent space.