Knight Frank India, an international property consultancy, launched the 14th edition of its flagship half-yearly report called India Real Estate: H2 2020 recently. It presents a comprehensive analysis of the residential and office market performance across eight major cities, Mumbai, National Capital Region (NCR), Bengaluru, Hyderabad, Chennai, Pune, Ahmedabad and Kolkata, for July-December 2020 (H2 2020). .
Source: Knight Frank Research
Office market
The office market in these 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. However, the government-imposed lockdown owning to the pandemic led to temporary economic inactivity and translated into a sharp fall in office leasing activities in Q2 2020. Soon after the lockdown was lifted, the gross leasing revived to 31 per cent of the quarterly average of 2019 in Q3 2020, eventually surging to a staggering 115 per cent in Q4 2020.
Mapping the performance on a quarter-on-quarter (QoQ) basis, office transactions for the eight cities grew by a massive 271 per cent in Q4 2020 to 17.5 mn sq.ft. as against 4.7 mn sq ft in Q3 2020. Pre-commitments contributed 24 per cent of the total transacted volume of 1.63 mn sq.m. (17.5 mn sq ft) in Q4 2020, indicating that the businesses are re-initiating expansion plans in the new normal.
When it comes to leasing spaces, Bengaluru witnessed a surge of 8 per cent year-on-year (YoY) to 7.5 mn sq ft in H2 2020. This growth can be attributed to large occupiers who remained committed to their long-term business expansion plans. Among the occupiers, the Information Technology sector dominated this market. Bengaluru, Hyderabad, Pune and Chennai saw an unprecedented spike in QoQ transacted volumes during Q4 2020 at 459 per cent, 640 per cent, 919 per cent and 227 per cent respectively.
Source: Knight Frank Research
“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,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
He further added that 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.
Home sales
When it comes to home sales in these cities, the sale of 94,997 units during H2 2020 was recorded. As India pivoted towards normalcy, residential sales reached almost 54 per cent of the 2019 quarterly average with 33,403 units during Q3 2020 and recovered to almost 100 per cent of the pre-COVID levels.
Homes priced over Rs 50 lakh made up approximately 57 per cent of the total sales during H2 2020. While new home launches were lower in H2 2020 by 23 per cent year on year at 86,139 units, Q4 2020 witnessed a significant growth of 77 per cent QoQ at 55,033 units.
India Residential Market. Source: Knight Frank Research
Mumbai and Pune markets led the revival with both sales as well as new launches recovering significantly in the second half of the year. While all India residential sales saw a QoQ rise of 84 per cent; Mumbai (193 per cent) and Pune (143 per cent) recorded higher than average QoQ growth. This was mainly due to the Maharashtra State Government’s initiative to reduce stamp duty by 300 basis points (BPS) for a limited period between September and December 2020, making home buying very attractive.
The second half of 2020 saw a residential sale revival due to certain specific reasons. First being the correction in values made the purchase of homes across all major markets highly attractive. Large volume markets like Bengaluru, Mumbai and Pune saw YoY revisions of 1 per cent, 3 per cent and 5 per cent respectively. The second reason being home loan rates reduced to a multidecadal low, which made fence-sitters, especially those with sound financials, took advantage and made their purchase. The third reason was the direct result of the pandemic. The need and desire to own houses that took care of buyers’ requirements influenced purchase decisions.
Home sales in the Rs 50 lakh and above category constituted 57 per cent of all sales in H2 2020, indicating growth trend. Interestingly, this year saw a rise in transactions in the high-end category as buyers in that segment saw this as an opportune time to enter the market. Overall, buyers with strong financial fundamentals, with the capability of servicing long term debt, were seen making their house purchases during this period.
New launches were also on the road to revival as most high-volume markets saw developers announcing new projects as teh demand trends were seen to be highly encouraging. Both Mumbai and Pune saw an identical 121 per cent QoQ rise in new launches. The leader on the board with over 480 per cent QoQ rise was Hyderabad. With total launches across the country at 1,46,628 units, launches were lower by 34 per cent YoY in 2020; and while unsold inventory levels improved, sluggish sales velocity in mid-2020 led Quarters to Sell (QTS) to rise to an average of 10.1 quarters.
“The rebound in residential sales in H2 2020, has been much stronger than what was anticipated a few months back. Apart from pent-up demand, there has been a combination of factors like lower housing prices, attractive offers/ discounts by developers, multi-decade low-interest rate, high household savings that has given a strong fillip to residential sales,” said Rajani Sinha, Chief Economist and National Director, Research, Knight Frank India.
She further added that the government policy support like the stamp duty cut in case of Maharashtra has been a very supportive factor for the pick-up in residential sales in this region. Interestingly, the Maharashtra government’s revenue collection from registration has also picked up, implying that pick up in housing sales has more than compensated for the lower stamp duty.
