Unsold Inventory reduces by 10% amidst RERA ambiguity and declining launches: Knight Frank Indi

Bengaluru, January10, 2018: Knight Frank India today launched the eighth edition of its flagship half yearly report - India Real Estate. It presents a comprehensive analysis of the residential and office market performance of Bengaluru for the period July – December 2017 (H2 2017).

Residential Takeaways:

·         The unsold inventory has come down by 10% YoY in H2 2017, courtesy competitive pricing in a sluggish market. However, the quarter-to-sell (QTS) graph indicates that India’s IT capital would take more than two years to offload unsold homes in the city.

·         New projects dwindled by a 37% YoY in H2 2017 as developers’ focus shifting on two primary aspects – fast tracking delivery of under construction projects and compliance to RERA.

·         Although the weightage average price fell by 5% in H2 2017, home sales plummeted by 34% during the same period.

·         Is it a good time to buy a house in Bengaluru? Developers’ focus on fast tracking delivery of under construction projects coupled with marketing campaigns at IT parks, widespread promotion of RERA registered projects, discounts on base selling price and , festive period freebies and the drop in average weightage price are collectively wooing buyers.

·         Neighbourhoods such as Sarjapur Road, Kanakpura Road and Devanahalli were among the pick of residential micro markets. Upcoming metro connectivity to Whitefield has pushed absorption pace of residential units in this location.

·        ·        ·        ·        ·        Bengaluru office marketsrecords staggering weighted rental growth of 9.% YoY

Speaking about thefindings,ShantanuMazumder, Senior Branch Director – Bengaluru said,“Bengaluru’s residential markethas been impacted by a variety offactorsimpacting both demand andsupply.Residential sales have witnessed a 34% YoYdecline in H22017 over H2 2016. On the launches front, though the declining trendbegan since2014, the rate of decline was never asmarked as in 2017 as the newsupplynosedived by a mammoth 71% from thepeak witnessed in 2013.North and Southzones have witnessedmaximum curtailment of new launchesregistering a YoYdecline of 66%and 52%, respectively, in H2 2017,as developers put newprojectlaunches on the backburner whilst theyprioritised RERA compliance. On aYoYbasis too, overall city launches declinedby 37% in H2 2017.Competitivepricing coupled with asharp decline in new launches in 2017has worked in thefavour of Bengalurudevelopers; as a result, the unsoldinventory has graduallydeclined by10% YoY in H2 2017. In terms of micro-markets Sarjapur Road,Kanakpura Road,Thanisandra and Devanahalli have been the buyers’ choice;however, with the metroconstruction in full swing,Whitefield too has pickeduppace.

In H2 2017, thetotal transactionvolume was noted at 5.91 million sqft registering a 12% YoYgrowth overH2 2016. This high transaction volumereaffirms Bengaluru’s topposition asthe leading office market across the topeight cities.Of all themicro markets, Outer RingRoad (ORR) continued to fare well interms of occupierstickiness accountingfor 47% of total transactions in H22017 thereby recordinga massive YoY growth of 83% over H2 2016. Despitelimited new supply and lowvacancy,the absolute quality of office assets keptoccupiers interested inleasing any newspaces that became available in thismicro market.An interestingtrend that emergedduring H2 2017 was the dominanceof smaller deal sizes in thetotaltransaction volume with 82% of the total numberof deals belonging to a spacetakeup of less than 50,000 sq ft.TheIT/ITeS sector accounted for 44%of grossleasing in H2 2017, 20% lower than the space consumedin H2 2016. Amidst automationandreskilling challenges, cautious hiringprevailed in this sector thus deterringthe expansion momentum.E-commerce, on the other hand, emerged as asurprisefrontrunner for space consumptionaccounting for a 16% share intotaltransaction volume.Co-working operators, too, continued expandingfootprint accounting for a 6% share in H2 2017 leasing volume. ORR alsoaccounted for 69% of the 4.4 million sqft of newsupply in H2 2017 which waswell received by occupiersand eased the supply crunch in this belt, albeit inthe short-term.”

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