Mumbai saw a fall in both new residential launches as well sales by six per cent and 14 per cent in in second half (H2) of calendar year 2019.
According to the latest report 'India Real Estate: H2 2019' by Knight Frank released on Tuesday, Mumbai despite registering the highest residential launches and sales at 35,988 units and 27,212 units in H2 2019, the same fell on a year-on-year (YoY) basis from 38,389 units and 31,481 units, respectively. For the entire 2019, Mumbai saw the highest number of homes launched at 79,810 units, followed by Pune at 44,660 units, and Bengaluru at 33,772 units.
However, the report observed that despite headwinds of economic slowdown, Indian real estate sector has recorded an overall growth in 2019. The residential segment in top eight cities of India demonstrated unexpected resilience and recorded a marginal growth of one per cent YoY in sales volume in 2019. "Total sales volume was recorded at 245,861 units in 2019 over 242,328 in 2018 as affordability improved, and developers aligned themselves with the needs of home-buyers by reducing ticket-sizes and unit-sizes in a bid to encourage sales," the report stated.
Hyderabad emerged at the top among the eight cities with a 375 per cent growth in residential launches in H2 2019 on a YoY basis by adding 8065 units as against 1698 in H2 2018.
Rise in launches and sales also resulted in unsold residential inventory across the top eight markets improve in 2019, registering a five per cent decline to 445,836 units. Mumbai, however, had the highest quantum of unsold inventory at 145,301 units, followed by NCR at 122,084 units and Bengaluru at 78,414 units.
Sector-wise split of office transactions
"The residential sector also overcame the negative market outlook by registering a growth in sales volumes as well as new launches. Economic headwinds such as slower GDP growth, reduced industrial output, poor consumer sentiments, amongst others, presented significant challenges to the residential market throughout the year. However, the slew of recent fiscal and monetary incentives by the government and Reserve Bank of India, seem to have had an arrestive impact on the real estate sector," said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
Hyderabad also topped the list in terms of growth in office transactions at 105 per cent while Mumbai showed zero growth YoY in H2 2019. Kolkata and Ahmedabad have seen the highest office space vacancy levels at 43 per cent and 36 per cent in H2 2019 whereas Bengaluru tops the list for highest residential sales growth at 10 per cent YoY.
New residential unit launches rose by 23 per cent YoY in 2019 to be recorded at 223,325 units. The office market recorded its historic best year in terms of transaction volumes in 2019, recording 60.6 million square feet (msf), backed by a surge in leasing activity by the Information Technology segment. New completions surged by 56 per cent in 2019 and was recorded at 61.3 msf, marginally surpassing demand.
While it posted a 115 per cent growth in new office completions in H2 2019 at 8.4 msf, 2019 saw Bengaluru experience the highest quantum of new supply at 16.1 msf, followed by NCR at 12.3 msf and Hyderabad at 10.9 msf. Except MMR and Pune, all other markets saw a positive growth in office supply.
New residential unit launches rose by 23 per cent YoY in 2019.
"After a slew of policy measures such as RERA, GST and demonetisation, the developers’ community is steadily coming to terms with this new normal and finding its footing, which is evidenced from the recovery in the volume of apartments launched since H1 2018. Affordable and low-cost housing, which have largely been the focus of the regulatory and financial measures taken by the government, will continue to be focus-areas for builders as they align themselves with the needs of home-buyers," Baijal added.
In terms of office space leasing transactions, Bengaluru saw the highest volume in 2019 at 15.3 msf, followed by Hyderabad at 12.8 msf, nearly twice its previous annual high. However, Bengaluru was overtaken for the first time in terms of space transacted in a half yearly period, during H2 2019. Bengaluru came second to Hyderabad which saw a massive 8.9 msf of space transacted during H2 2019 and it was the market that experienced the most transaction activity during the period.
Sector-wise, Information Technology (IT) accounted for 41 per cent of the total office space leased in H2 2019, against 31 per cent in H2 2018; while the share of Banking, Financial Services and Insurance (BFSI) reduced to 16 per cent in H2 2019, from 18 per cent in H2 2018, as the sector reeled under the shadow of the NBFC crisis. Co-working companies leased 4.1 msf of office space in H2 2019 and accounted for 12 per cent of the total space transacted in the top eight cities, a substantial increase from eight per cent share in H2 2018.
According to Baijal, the growth in the sector in H2 2019 and 2019 signified continued commitment of domestic and global corporations in the country’s growth potential despite the ongoing economic slowdown. "Office leasing in India has been growing from strength to strength despite a sluggish economy, with ample investment demand for high-quality assets. It would be interesting to see if the massive supply that is lined up to come online in the near future across major markets, and macro-economic headwinds put rental growth under pressure."
Going forward, Baijal said Knight Frank expected the GDP growth of the country to start recovering and touch 6- 6.5 per cent by FY'21. "Consequently, the real estate sector growth should also maintain its momentum. While the office space is expected to sustain demand, increasing supply could weigh on rents and vacancy levels. Liquidity constraints and home-buyer sentiments will continue to keep buyers tentative in residential segment. Thus, even maintaining this newfound stability in demand would need commitment from all stakeholders in the residential market," Baijal added.