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India Real Estate H2 2020 July-December2020

Mumbai and Pune witness surge in sales by 10% and 9% YoY respectively in H2 2020

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India Real Estate H2 2020 (July-December2020)

In their latest report, Knight Frank IndiaIndia Real Estate: H2 2020, reveals that the office market in top eight cities recorded transactions of 22.2 mn sq ft in July – December 2020 period, whereas new completions were recorded at 17.2 mn sq ft in the same period. The year began on a high note with office leasing achieving 96% of the quarterly average of 2019 in Q1 2020. However, the government-imposed lockdown to combat the pandemic’s fury led to temporary economic inactivity and translated into a sharp fall in office leasing activities in Q2 2020. With the return to normality, gross leasing revived to 31% of the quarterly average of 2019 in Q3 2020, eventually surging to a staggering 115% in Q4 2020.

The report notes that home sales in India’s top eight cities were recorded at 94,997 units during H2 2020. As the country moved towards normality, residential sales reached almost 54% of the 2019 quarterly average with 33,403 units during Q3 2020and recovered to almost 100% of pre-COVID levels at 61,593 units Q4 2020. Homes priced over INR 50 lakhs made up approximately 57% of the total sales during H2 2020. While new home launches were lower in H2 2020 by 23% YoY at 86,139 units, Q4 2020 witnessed a significant growth of 77% QoQ at 55,033 units.

REPORT HIGHLIGHTS OFFICE MARKET – H2 2020 (JULY – DECEMBER 2020)
REPORT HIGHLIGHTS OFFICE MARKET – H2 2020 (JULY – DECEMBER 2020)   Source: Knight Frank Research

Office leasing

  • Office leasing activity in H2 2020 was led by Q4 2020 recording 1.63 mn sq m (17.5 mn sq ft) – 271% higher than the previous quarter.
  • Total office transactions for H2 2020 dropped by 33% YoY to 2.06 mn sq m (22.2 mn sq ft), which was far better than anticipated.
  • With transaction volumes growing at 8% YoY to 7.5 mn sq ft, the Bengaluru office market accounted for over a third of the transactions during H2 2020. It was the only market to register growth on a YoY basis. Almost 33% of the total space transacted in Bengaluru during the period was pre-committed by global technology giants such as Google and Amazon.
  • Average office rents in Bengaluru, Chennai and Hyderabad maintained 2019 levels despite the volatility experienced in 2020. However, rents in Mumbai, Pune and NCR fell by 5.6%, 6% and 4.4% respectively.
  • The sectoral share of transactions remained relatively unaffected for the Information Technology and BFSI sectors during H2 2020. A significant 33% of the area transacted by BFSI sector companies occurred in Hyderabad. Simultaneously, Bengaluru accounted for the highest share of the transactions executed by Information Technology, Manufacturing and Co-working sector companies at 35%, 39% and 45% respectively. The transactions claimed by the Other Services sector (18%) fell marginally in H2 2020 compared to 2020. Co-working (10%) segment remained stable during the same period.

Office supply

  • New office completions in 2020 dropped by 42% YoY to 35.5 mn sq ft. Half-yearly growth numbers for new completions declined by 54% YoY to 17.2 mn sq ft.
  • However, in Q4 2020, new completions grew by 41% QoQ to 10 mn sq ft than Q3 2020.
  • Bengaluru and Hyderabad markets saw the most supply online in H2 2020, accounting for around 60% of 17.2 mn sq ft.

Quarter 4, 2020 Snapshot

Q1 2020 Q2 2020 Q3 2020 Q4 2020
Transactions mn sq m (mn sq ft) 1.4 (14.6) 0.2 (2.6) 0.4 (4.7) 1.6 (17.5)
Transactions as % of 2019 Quarterly average 96% 17% 31% 115%
New completions mn sq m (mn sq ft) 1.2 (13.2) 0.5 (5.2) 0.7 (7.1) 0.9 (10)
New Completions as % of 2019 Quarterly average 86% 34% 47% 65%

Source: Knight Frank Research

Top 8 cities: Annexure quarterly split of transactions in a million square feet 

CITIES Q1 2020 Q2 2020 Q3 2020 Q4 2020
Mumbai 2.5 1.3 1.0 1.1
NCR 2.0 0.0 0.9 1.7
Bengaluru 4.2 0.6 1.1 6.4
Pune 1.4 0.6 0.2 1.5
Ahmedabad 0.5 0.1 0.8
Chennai 1.3 0.1 0.7 2.4
Hyderabad 2.2 0.5 3.3
Kolkata 0.5 0.2 0.2
All cities 14.6 2.6 4.7 17.5

Source: Knight Frank Research

Top 8 cities: Annexure quarterly split of completions in a million square feet 

CITIES Q1 2020 Q2 2020 Q3 2020 Q4 2020
Mumbai 2.5 1.1 0.3 1.4
NCR 0.3 0.5 0.6 1.5
Bengaluru 4.0 1.1 4.4
Pune 0.2 0.5
Ahmedabad 2.6 1.5 1.0
Chennai 3.3 0.1 0.0
Hyderabad 0.2 3.6 3.6 1.3
Kolkata 0.1 0.0
All cities 13.2 5.2 7.1 10.0

Source: Knight Frank Research

Mapping the performance on a quarter-on-quarter (QoQ) basis, office transactions for the eight cities grew by a massive 271% in Q4 2020 to 17.5 mn sq ft as against 4.7 mn sq ft in Q3 2020. Pre-commitments contributed 24% of the total transacted volume of 1.63 mn sq m (17.5 mn sq ft) in Q4 2020, signifying that businesses are re-initiating expansion plans the new normal.

In terms of the share of sectoral occupiers, Information Technology (IT/ITeS) sector dominated with a 41% share in H2 2020, followed by BSFI and Manufacturing sectors with 16% each, while Other Services and Co-working sectors recorded 17% and 10% respectively.

Bengaluru witnessed a surge of 8% year-on-year (YoY) to 7.5 mn sq ft in H2 2020 in leasing activities. This growth can be attributed to large occupiers who remained committed to their long-term business expansion plans. Among the occupier’s Information Technology sector dominated markets. Bengaluru, Hyderabad, Pune and Chennai saw an unprecedented spike in QoQ transacted volumes during Q4 2020 at 459%, 640%, 919% and 227% respectively.

Shishir Baijal, Chairman and Managing Director, Knight Frank India, says, “The commercial office space has arguably been the best performing property type during this decade. Economic upheavals brought about by the pandemic had broken its momentum in 2020 temporarily. With the possibility of a viable vaccine being made available soon, occupiers have renewed their search for expansion opportunities as evidenced by the strong transaction activity in Q4 2020. Knight Frank believes that while the events of 2020 may hasten the evolution of the office space into a more flexible, sustainable and wellness-oriented environment in the long run, it is unlikely that the need for traditional office space will reduce in the foreseeable future.”

 

Rajani Sinha, Chief Economist and National Director Research, Knight Frank said “There has been a robust resurgence in office demand in Q4 2020, despite most corporates adopting to Work From Home during the pandemic. There have been increased pre-commitment activities in Q4 2020, reflecting that corporates have started planning their office expansion plans. Going forward, as things return to normalcy, corporates will experiment with hybrid work models. So even while they give more flexibility to the employees to work from anywhere, that will not result in lower office demand.” 

Launched today, India Real Estate: H2 2020 is the 14th edition of Knight Frank India’s flagship report, which presents a comprehensive analysis of the residential and office market performances across eight major cities July-December 2020 (H2 2020) period.

REPORT HIGHLIGHTS RESIDENTIAL MARKET – H2 2020 (JULY – DECEMBER 2020)
REPORT HIGHLIGHTS RESIDENTIAL MARKET – H2 2020 (JULY – DECEMBER 2020) Source: Knight Frank Research

New launches

  • Home launches across the top eight cities in India recorded 86,139 units in H2 2020. The launches grew by 77% QoQ to 55,033 units in Q4 2020.
  • In H2 2020, Hyderabad was the only market out of eight cities to witness a growth in new launches by 4% YoY to 8,404 units. NCR residential market was the worst hit, with new home launches declining 44% YoY during H2 2020. 

Sales volumes

  • Total sales in the top eight markets registered 94,997 units during H2 2020, a 19% fall YoY. However, sales momentum in the Mumbai and Pune markets remained strong, growing at 10% and 9% YoY. Sales in Mumbai and Pune during Q4 2020 exceeded the 2019 quarterly average by a significant margin of 47% and 46% respectively. This strengthening in sales can be attributed largely to a limited-period 300 basis points cut in stamp duty that the Maharashtra State Government introduced in Q3 2020.
  • In H2 2020, buyers were more inclined to look for larger apartments while upgrading from their current accommodations, which reflected in the sale of apartments priced over INR 5 mn, recording a larger share of total sales at 57% compared to apartments priced under INR 5 mn at 43% during H2 2020.
  • The temporary reduction in stamp duty played an important part in driving sales momentum in Mumbai and Pune. Sales increased by 10% YoY to 30,042 units in Mumbai and 9% YoY to 16,870 units in Pune in H2 2020.
  • In H2 2020, weighted average residential prices fell significantly across markets. Prices fell the most in Chennai at 9% YoY, followed by Pune and NCR at 5% and 4%.

Unsold inventory

  • Unsold inventory across the top eight markets dropped marginally in 2020. Developers continued to focus on liquidating existing inventory, pushing down unsold inventory volumes for the sixth consecutive year by 2% to 437,920 units in 2020.
  • In H2 2020, Mumbai had the highest quantum of unsold inventory at 146,916 units, followed by NCR at 110,674 units YoY and Bengaluru at 74,764 units.

Top 8 cities: Annexure new launches

CITIES Q1 2020 Q2 2020 Q3 2020 Q4 2020
Mumbai 22,388 1,011 8,389 18,515
NCR 1,422 4,110 4,292
Bengaluru 8,963 1,843 4,720 4,403
Pune 12,650 785 6,721 14,836
Chennai 3,520 2,547 1,167
Hyderabad 3,002 1,420 1,234 7,170
Kolkata 858 1,934 1,356
Ahmedabad 2,102 525 1,451 3,294
Total 54,905 5,584 31,106 55,033

Source: Knight Frank Research

Top 8 cities: Annexure home sales

CITIES Q1 2020 Q2 2020 Q3 2020 Q4 2020
Mumbai 15,959 2,687 7,635 22,407
NCR 5,446 6,147 9,641
Bengaluru 8,693 3,484 4,912 6,490
Pune 7,813 2,235 4,918 11,952
Chennai 2,981 3,085 2,588
Hyderabad 3,808 974 1,609 3,651
Kolkata 2,937 3,921 2,054
Ahmedabad 2,268 252 1,176 2,810
Total 49,905 9,632 33,403 61,593

Source: Knight Frank Research

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