Sale of residential units increased in six cities -- Delhi-NCR, Mumbai, Bengaluru, Chennai, Hyderabad and Ahmedabad; but declined in two cities -- Kolkata and Pune.
An improving regulatory environment, right sizing and right pricing, indirect discounts and an increasing infusion of residential projects that are more in tune with the homebuyers preferences culminated in total sales of 2.42 lakh units registering a 6 percent increase over full year 2017, says a report by Knight Frank India.
The report notes that 2018 marks the first time in this decade when annual supply numbers have grown year-on-year. The total new units launched in the year 2018 is estimated to be 182,207 which was higher by 75 percent as compared to the total units launched in 2017. Supply of new launches spike by 119 percent, says the 10th edition of Knight Frank’s half-yearly report - India Real Estate.
Market traction could have been even better during the second half of 2018 but for the NBFC liquidity crunch that put a spanner in the works for the already cash-strapped developer who has few financing options left in the market today.
The international consultancy’s 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).
Of the eight cities under coverage, only Kolkata and Ahmedabad saw supply fall further during 2018 while supply volumes in Mumbai and Pune vaulted by a massive 220 percent and 157 percent, respectively.
Maharashtra has been the front-runner in applying the RERA in letter and spirit and this caused some distress on the supply side in 2017 but this seems to be gradually resolving itself as can be inferred from the fact that they have accounted for almost 59 percent of the units launched during the year.
Residential launches up
As for new launches, the second half of 2018 saw a total of 89,500 new unit launches which was 119 percent up compared to the second half of 2017. As many as 60 percent of all launches were within the Rs 50 lakh bracket proving that most developers are concentrating on the affordable and mid – ranged segment in line with changing preferences of the customer.
Mumbai (38,390 units), Pune (18,580 units) Bengaluru (11,830 units) saw the highest new unit launches in 2018. Mumbai saw the highest year-on-year growth of 220 percent, while Pune recorded a nearly 157 percent increase. A full-fledged RERA in both these cities in Maharashtra facilitated the growth in new launches.
Middling growth in prices
As for prices, while most markets show middling growth in prices, Mumbai and Hyderabad saw prices move in opposite directions. Mumbai prices fell by 7 percent while Hyderabad prices vaulted by 7 percent year-on-year in 2018, says the report.
Pune (-3%), Kolkata (-4%) and Chennai (-3%) recorded a correction in asking prices. NCR (+2%), Bengaluru (+2%) and Ahmedabad (+1%) meanwhile saw prices increase marginally.
The reduction in prices has in fact significantly improved home affordability. The long-awaited drop in prices is a healthy step toward market recovery as this along with other measures such as reduction in unit sizes across cities will address the contemporary homebuyer’s needs, boost affordability and eventually get buyers back to the market, the report says.
As for future outlook, the report points out that the pace at which developers align themselves to the new regulatory norms and launch new products in the right ticket sizes that appeal to the homebuyer’s interests, will determine the trajectory of the market going forward.
While it would be presumptuous to consider the current periods’ growth in market traction as a turning point in the residential market’s fortunes, it does hold the promise of a more sustained recovery. However, developers still need to grapple with the funding crisis and buyer inertia that is a big threat to their financial survival in the short term. The government relaxing norms for NBFCs to liquidate their loan portfolios and contemplating the roll-back of taxes to reduce costs for the homebuyer will play its part in stimulating the market, it says.
Growth in sales
There was a 6 percent year-on-year growth in sales during 2018. Sales volumes in the full year of 2018 were estimated to be 242,328 units. Bengaluru saw the highest annual increase in sales by 27 percent year-on-year in 2018, riding on the back of economic stability and job security. Even the NCR saw sales improve by 8 percent year-on-year in 2018, on the back of stronger sales traction in Noida and Greater Noida.
Kolkata (-10%) and Pune (-1%) saw a decline in sales in full-year 2018 over 2017.
The total unsold inventory levels have improved at the end of 2018 and are estimated to be 468,372 units which were lower by 11 percent since the end of 2017 and close to 30 percent lower than 2016, the report says.
While this is the first time that sales have increased year-on-year in any year during this decade, volumes are still a far cry from 2011 highs. The Mumbai residential market experienced the largest sales volume among all the cities. However, the most year-on-year growth was experienced by Bengaluru at 27 percent and 35 percent for 2018, and the second half of 2018 respectively.
The homebuyer in this city has been especially receptive to the relaxations in the qualification criteria for projects under the PMAY, such as interest subsidies and increase in the extent of carpet area to 160 square metres for MIG – I and 200 square metres for MIG – II, the report adds.
Commercial real estate
As for the commercial market, the Indian office space market grew by 12 percent year-on-year both full year 2018 and the second half of 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 year, says the report.
Hyderabad saw the highest percentage increase in space transacted year-on-year in the second half of 2018 at 30 percent. 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 percent year-on-year in 2018, but the significant jump in leasing volumes was in Hyderabad which, while recording a yearly increase of 24 percent in 2018, saw leasing worth 7 msf. This volume is significantly close to those in large markets such as NCR and Mumbai.
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
Leasing by co- working spaces saw a significant rise of 52 percent year-on-year in the second half of 2018 (Jun – Dec) as compared to same time 2017. BFSI, led mostly by payment gateway companies, formed 18 percent of all leasing transactions in the second half of 2018, the report added.
Vandana.ramnani@nw18.com
