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Knight Frank's flagship half yearly, comprehensive analysis of real estate, across the top 6 cities in India - both residential and office space markets.
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India Real Estate Outlook January – June 2014
Launches (units)
Absorption (units)
Jan – June 2014 142,983 -32% Y-o-Y July – Dec 2014 (E) 169,602 5% Y-o-Y 2014 Year End (E) 312,585 -16% Y-o-Y
Jan – June 2014 119,282 -27% Y-o-Y July – Dec 2014 (E) 152,764 26% Y-o-Y 2014 Year End (E) 272,046 -4% Y-o-Y
Residential
Market Overview
New Completions (mn. sq.ft.)
Absorption (mn. sq.ft.)
Vacancy %
Jan - June 2014 16.4 -4% Y-o-Y July – Dec 2014 (E) 20.9 9% Y-o-Y 2014 Year End (E) 37.5 3% Y-o-Y
Jan - June 2014 17.9 -4% Y-o-Y July – Dec 2014 (E) 18.7 22%Y-o-Y 2014 Year End (E) 36.5 8% Y-o-Y
2013 Year End 20% June 2014 19% 2014 Year End (E) 18%
Office
Market Overview
Residential
Mumbai
Pune
NCR
Bengaluru
Chennai
Hyderabad
DEMAND AND SUPPLY TREND Extreme volatility in demand and supply over the last 2 years across NCR, Mumbai, Pune, Bengaluru, Chennai and Hyderabad
Slow economic growth, rising interest rates, high inflation and weak rupee have led to negative sentiments but we see a revival in launches and
absorption, which will be far less than the peak of H1 2013
Half-yearly Launches and Absorption (Top Six Cities)
100,000
120,000
140,000
160,000
180,000
200,000
220,000
Num
ber o
f uni
ts
Launches Absorption
Residential Market
H1 2014 - New launches fell by 32% compared to H1 2013
H1 2014 - Sales volume dropped by 27%
Sales volume: H1 2014 - 119,282 H1 2013 - 164,000
CITY-WISE LAUNCHES: H1 Trend
Residential Market
Steep fall in launches during H1 2014 across all cities in comparison to H1 2013 NCR witnessed the steepest fall of 43% in H1 2014 compared to H1 2013, followed by Mumbai at 38% while Bengaluru fell by 16%
(units)
67,
948
45,
326
30,
537
31,
458
20,
332
10,
704
57,
007
62,
252
42,
155
20,
720
16,
832
11,
266
35,
512
35,
767
35,
545
16,
883
11,
377
7,8
99
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Mumbai NCR Bengaluru Pune Chennai Hyderabad
H1 2012 H1 2013 H1 2014
CITY-WISE ABSORPTION: H1 Trend
Residential Market
All markets witnessed shrinkage in demand with NCR at 37%, followed by Pune 30% in H1 2014 over H1 2013 Bengaluru witnessed a lowest de-growth of 14%
44,
609
35,
302
22,
935
23,
122
14,
461
9,1
67
41,
377
45,
302
31,
844
20,
937
14,
020
10,
009
31,
210
28,
500
27,
256
14,
719
10,
315
7,2
82
-
10,000
20,000
30,000
40,000
50,000
Mumbai NCR Bengaluru Pune Chennai Hyderabad
H1 2012 H1 2013 H1 2014(units)
CITY-WISE LAUNCHES: H2 Trend
Residential Market
Projection of an improved scenario in H2 2014 in comparison to H2 2013 Chennai leading by 31%,followed by Hyderabad at 25% in H2 2014 over H2 2013 Pune is the only market which is expected to witness a significant de-growth at 23%
53,
667
54,
804
37,
236
24,
513
16,
747
12,
022
52,
222
33,
516
36,
145
24,
652
8,0
15
7,3
76
57,
333
37,
000
36,
568
18,
960
10,
488
9,2
52
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Mumbai NCR Bengaluru Pune Chennai Hyderabad
H2 2012 H2 2013 H2 2014 E
(units)
CITY-WISE ABSORPTION: H2 Trend
Residential Market
All markets expected to improve in H2 2014 with Mumbai at 49% followed by Bengaluru at 26% over H2 2013 At 11% growth, Pune will be the lowest among the 6 cities
41,
369
45,
464
27,
757
24,
895
14,
961
9,8
84
32,
717
26,
119
25,
522
17,
858
10,
424
8,4
19
48,
812
30,
500
32,
044
19,
808
11,
929
9,6
72
-
10,000
20,000
30,000
40,000
50,000
60,000
Mumbai NCR Bengaluru Pune Chennai Hyderabad
H2 2012 H2 2013 H2 2014 E(units)
WEIGHTED AVERAGE PRICE INDEX
Residential Market
Price appreciation in Bengaluru fastest at 11% followed by Hyderabad at 9% in H1 2014 compared to H1 2013
Going forward, Mumbai expected to lead in price appreciation during H2 2014 at 10% compared to H2 2013, on the back of a strong revival in
absorption
90
100
110
120
130
Inde
x va
lue
(Bas
e:H
1 20
12=1
00)
Mumbai NCR Bengaluru Pune Chennai Hyderabad
TICKET SIZE SPLIT OF LAUNCHED UNITS January to June 2014
Residential Market
Pune emerged as the most affordable city during H1 2014 with 83% of new launches below the ticket size of `5 mn
0%
20%
40%
60%
80%
100%
Mumbai NCR Bengaluru Pune Chennai Hyderabad
Mumbai remains the most premium market, with 34% of total launches during H1 2014 being priced above the ` 10 mn price bracket
<2.5 mn. 2.5-5 mn. 5-7.5 mn. 7.5-10 mn.
10-20 mn. > 20 mn.
83%
34%
RESIDENTIAL MARKET HEALTH Age of Inventory compared to QTS
Residential Market
Mumbai’s health is the poorest with the highest QTS and maximum number of unsold inventories from previous years
Note: Size of the bubble indicates the quantum of unsold inventory QTS – Time period taken to liquidate the unsold inventory at the sales velocity of last 8 quarters
6
7
8
9
10
11
12
13
6 8 10 12 14
Age
of u
nsol
d in
vent
ory
in q
uarte
rs
QTS
Mumbai
NCR
Hyderabad
Bengaluru
Pune
Chennai
Bengaluru among the healthiest
Office
Mumbai
Pune
NCR
Bengaluru
Chennai
Hyderabad
VACANCY TREND New Completion, Absorption and Vacancy Level (Top Six Cities)
Office Market
Steady recovery over the last two years in the office markets, with vacancy levels falling from 21% in H2 2012 to 19% in H1 2014
16%
18%
20%
22%
-
5
10
15
20
25
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014E
Mn
sq ft
New Completion Absorption Vacancy (RHS)
H1 2014 has seen a turnaround which is expected to sustain for the next 6 months as a result vacancy levels to further drop to 18% by the end of 2014
NEW COMPLETION & ABSORPTION New Completion, Absorption and Vacancy Level (Top Six Cities)
Office Market
Absorption in 2014 to touch 36.5 mn sq ft – an 8% jump from the 33.9 mn sq ft reported in 2013
New completions will grow by 3% to 37.4 mn.sq.ft in 2014, compared to 36.4 mn sq ft in 2013
20
23
17.
1
19.
2
16.
4 2
0.9
17.
5
14.
7 18.
5
15.
3
17.
9
18.
7
-
5
10
15
20
25
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014E
Mn
sq ft
New Completion Absorption
CITY-WISE NEW COMPLETION – H1 Trend
Office Market
Bengaluru witnessed new project completion growth of 76% in H1 2014 over H1 2013 All other markets witnessed de-growth with Mumbai and Hyderabad being the highest at 25%
5.9
3.6 4.
1
0.9
3.1
2.4
3.8
3.5
1.7
2.4
1.7
4.0
2.9
4.0
3.0
2.0
1.5
3.0
-
1
2
3
4
5
6
7
Mumbai NCR Bengaluru Pune Chennai Hyderabad
Mn
sq ft
H1 2012 H1 2013 H1 2014
CITY-WISE ABSORPTION – H1 Trend
Office Market
3.4
3.4
6.0
1.4
1.2
2.1
3.8
3.4
4.7
2.8
1.2
2.6
2.5
3.5
6.0
2.1
1.8 1.9
-
1
2
3
4
5
6
7
Mumbai NCR Bengaluru Pune Chennai Hyderabad
Mn
sq ft
H1 2012 H1 2013 H1 2014
Mumbai witnessed a maximum fall of 34% in H1 2014 compared to H1 2013, followed by Pune and Hyderabad Chennai, Bengaluru and NCR witnessed a positive growth at 47%, 29% and 3% respectively
CITY-WISE VACANCY – H1 Trend
Office Market
Bengaluru, Pune and Chennai witnessed fall in vacancy from H1 2013 to H1 2014 Hyderabad saw an increase, Mumbai and NCR were stagnant
21%
20%
18%
25%
23%
13%
22%
21%
14%
22%
24%
16%
22%
21%
11%
20%
22%
19%
0%
5%
10%
15%
20%
25%
30%
Mumbai NCR Bengaluru Pune Chennai Hyderabad
H1 2012 H1 2013 H1 2014
CITY-WISE NEW COMPLETION – H2 Trend
Office Market
6.0
6.0
3.3
1.3
3.8
2.7
3.8
3.5
5.5
1.2
2.5 2.7
6.6
4.0 4.
5
2.6
1.1
2.1
-
1
2
3
4
5
6
7
Mumbai NCR Bengaluru Pune Chennai Hyderabad
Mn
sq ft
H2 2012 H2 2013 H2 2014 EPune and Mumbai expected to grow the fastest at 125% and 73% respectively in H2 2014 over H2 2013 South markets projected to plunge with Chennai at 58%, followed by Hyderabad and Bengaluru
CITY-WISE ABSORPTION – H2 Trend
Office Market
2.6 3.
0 3.4
1.6
2.1
2.0 2.
4
3.2
4.9
1.2
2.5
1.2
4.2
4.0
3.8
2.2 2.2
2.3
-
1
2
3
4
5
6
Mumbai NCR Bengaluru Pune Chennai Hyderabad
Mn
sq ft
H2 2012 H2 2013 H2 2014 E At 96%, Hyderabad will lead in absorption growth followed by Pune and Mumbai in H2 2014 over H2 2013 Bengaluru and Chennai to witness a decline
CITY-WISE VACANCY – H2 Trend
Office Market
Other than Mumbai and Hyderabad where vacancy levels will remain stagnant, all other markets will witness a decline in H2 2014 over H2 2013
23%
22%
17%
23%
24%
14%
23%
21%
14%
21%
23%
18%
23%
20%
11%
20%
20%
18%
0%
5%
10%
15%
20%
25%
30%
Mumbai NCR Bengaluru Pune Chennai Hyderabad
H2 2012 H2 2013 H2 2014 E
SECTOR-WISE ABSORPTION SPLIT January – June 2014
Office Market
IT/ITeS continues to hold the maximum share in total absorption across all cities, except Mumbai The share of IT/ITeS ranges between 39-78%
The share of the other services sector (consulting, retail, eCommerce, infrastructure and real estate) has been increasing steadily over the last few years
0%
20%
40%
60%
80%
100%
Mumbai NCR Bengaluru Pune Chennai Hyderabad
IT/ITeS BFSI (Including support service) Manufacturing Other Services
IT / ITeS
Manufacturing (excl factory)
BFSI (including support services)
Other Services
DEAL SIZE ANALYSIS
Office Market
The total number of deals has increased from 542 in H1 2013 to 623 in H1 2014 An increase in the number of deals indicates a wider participation in transaction by occupiers
However, the average deal size has reduced in all the cities except Bengaluru
-
20,000
40,000
60,000
80,000
Sq ft
H1 2013 H1 2014
RENTAL INDEX MOVEMENT
Office Market
Growth in office rentals has been relatively constrained across the 6 cities, unlike residential
The weighted average rentals in Mumbai has been going down since 2012 due to PBD and SBD shares increasing steadily compared to CBD & off-CBD markets 80
100
120
140
Inde
x va
lue
(Bas
e:H
1 20
12=1
00)
Mumbai NCR Bengaluru Pune Chennai Hyderabad
In contrast, Pune has higher demand of CBD and SBD markets compared to the PBD ones