Supply Outshines Demand In Office Market
Knight Frank India today launched the ninth edition of its flagship half yearly report – India Real Estate. It presents a comprehensive analysis of the residential and office market performance of NCR for the period January – June (H1 2018).
Office Takeaways:
- The first half of 2018 fared well for the NCR office market with closing of some large deals. The region clocked 0.31 mn sq m (3.4 mn sq ft) in H1 2018 registering a single digit growth of 4% from the same period in 2017
- Supply outshone the transaction activity and approximately 0.33 mn sq m (3.6 mn sq ft) of new office supply entered the market in H1 2018 as opposed to 0.17 mn sq m (1.8 mn sq ft) in the same period in 2017
- Gurugram yet again outperforms other markets and takes up 66% share of the total transaction pie; YoY growth of 28%
- Overall rents remain stable; lack of quality supply puts pressure on rentals in select office areas in Gurugram
- Steady leasing brings down vacancy levels to16.5%
- Other Services’ sector takes up 54% from the overall transaction pie. BFSI and IT/ITeS improve their performance in H1 2018
Residential Takeaways:
- Resurgence of new launches in H1 2018 registering a YoY growth of 90% though way below peak levels; Gurugram with 47% share is a significant contributor
- Revival of new launches in the mid segment of INR 5 – 10 mn bracket; share of launches in less than INR 5 mn bracket reduces to 35% from 81% YoY
- Stagnant prices signal price resistance; with stagnancy in price growth, effective price discount reaches to 10-15%
- Demand for newly launched projects in NCR moves in the same range as in H1 2017. First half of 2018 sees 18,000 units being sold compared to 17,188 units in H1 2017, registering a minor YoY increase of 5%
- Sluggish implementation of RERA and delay in execution of major infrastructure projects have marred buyer confidence
- Gurugram and Greater Noida account for 67% of the sales in H1 2018
- QTS remains unchanged at 12% reduction in unsold inventory levels. Gurugram sees a significant improvement in its quarters to sell from 19 to 13 in H1 2018. 63% of the unsold inventory is in Greater Noida and Gurugram
Speaking about the findings, Mudassir Zaidi, Executive Director – North said, “At a broad level, the first half of 2018 has started on a positive level for the NCR real estate market. The supply side is seen to be upbeat largely because of structural reforms like RERA and GST taking shape. This is evident from the fact that many notable developers have launched new projects in the first half of 2018 marking the resurgence of the mid segment ticket bracket. However, a lot of effort needs to be put to re-instill confidence in the buyers who are still wary of the market. Given the market dynamics, we see ready-to-move-in projects to garner interest from buyers, since it gives them the confidence for the delivery of the project. On the office front, we see that the steady demand has brought down the overall vacancy levels with an upward pressure on rentals. Going forward, we believe that the office market will continue to hold onto its current reins.”
