RESEARCH

INDIA REAL ESTATE  RESIDENTIAL AND OFFICE - JULY - DECEMBER 2016 TABLE OF CONTENTS

06 16 AHMEDABAD 26 BENGALURU 46 66 HYDERABAD 84 KOLKATA 96 MUMBAI 114 NCR 132 PUNE From the Chairman’s Desk For the office segment, further In the first half of 2017, the sector is RERA & GST, medium term impact clarification on REITs is a positive step expected to be largely muted and of demonetisation and listing of and is likely to give a greater impetus to there would be pressure on prices. REIT. During this phase, enterprises WEATHERING THE STORM - the commercial market. With consumers in a wait and watch are expected to streamline their mode, demand could be subdued business processes and implement GLOBAL DISRUPTIONS due to a mind-set that property prices international best practices to adhere AS REALTY REELS THROUGH On the global front, some uncertainty could undergo reduction along with to the upcoming changed business will prevail till the US President elect a substantial lowering of home loan environment. There will be a greater DISRUPTIONS, LONG-TERM formalises his policies. There will be a interest rates. Likewise, tax benefits in influence of FDI (Foreign Direct Shishir Baijal fundamental impact on the commercial the forthcoming budget will be another Investment) that will help create jobs realty market as it is heavily dependent Chairman and factor that could hold back demand for and revitalise growth within the sector. Managing Director BUOYANCY STILL INTACT on US outsourcing especially by the property in the initial quarters of 2017. Overall, institutional participation—both technology companies. Since buying a house is a discretionary domestic and global markets—will help Traditionally, the United States has need –a need that can be postponed, it the sector in getting high quantum is anybody’s guess that the real estate of funds at competitive rates. In view here is never a dull moment Just when the industry was gearing Indian economy with the real estate been one of the biggest investors sector will be the slowest to recover of the various procedural changes in real estate. 2016 began up to meet the deadlines set by sector being at the receiving end due in India with several manufacturing, from the impact of demonetisation vis- adopted by the government, it is also promisingly in comparison to the government for Real Estate to this move. technology and outsourcing hubs T à-vis other sectors. expected to be an important facilitator 2015; however as things stand, the Regulation & Development Act 2016 here. The technology sector has Another imminent change that will in bringing back stability within the real year isn’t expected to end on a healthy (RERA) and Goods and Services Tax an undeviating connection with the The office market is expected to face impact the sector is the partial estate sector. note. A major factor for this could be (GST), it received a jolt in the form country’s residential demand and any challenges to maintain the prevailing implementation of RERA. The Act attributed to the policy developments of demonetisation of the ` 500 and change in the US outsourcing policy pace in the following year. This could Going by the turn of events, it is lays down the broad parameters for by the government which in the short 1000 currency notes with immediate could have similar appalling effects be due to shortage of ‘A’ Grade difficult to crystal gaze into 2017. functioning of the real estate sector term have led to an unpredictable effect. While the broad motive of on India’s real estate domain. We office space, the geo-political risk of However, implementations of RERA and since land is a State subject, disruption but in the long run are the Government of India behind this need to wait until the new government a probable reduction in outsourcing & GST, lower home loan interest rate the Act required States and Union projected to augur well for the industry announcement was to curb the menace formalises its policies on various issues from the US, structural changes in regime and fiscal benefits for taxpayers Territories to come up with governing as a whole. On the global front, of fake currency notes and abolishing including outsourcing, to understand domestic economy and top technology in the Union Budget will infuse the rules by 31st October 2016. RERA, developments like Brexit and the US unaccounted money, the impact which way the wind blows particularly companies reducing their growth “feel good factor” which is extremely once implemented, will increase President elect are expected to have of this move could be felt across for India. targets. However, with the advent important for the revival of the industry. transparency, which in turn will bring their bearing on the Indian real estate economy and sectors including real of GST, the warehousing sector will The Prime Minister has already back buyer confidence. The real Earlier this year the UK voted in favour sector. The writing’s clearly on the wall estate. This move created a real dent see a consolidation thereby bringing announced a New Year’s gift to home benefits would be that the buyer will of Brexit, the unexpected outcome - 2016 will go down as a watershed in the residential real estate sector, efficiency in the entire system. buyers in the budget segment (both be ensured of a dedicated governing left the industry perplexed –a vote year in the history of Indian real estate. pulling back the last quarter trend of in rural and urban areas) in the form body, timely project completion, that translates into a complete shift By May 2017, RERA will be residential sales substantially across of interest subvention for home loans 2016 – WHERE WE STAND complete information on the project of business policies to be adopted implemented in the country. The after the cities; consequently sales are at a which will go a long way to realise the and amenities promised. Developers by the industry. The EU is a rather effects of demonetisation coupled The residential property market historical low and we expect 2016 to be government’s dream of ‘Housing for All as well as intermediaries will have to protectionist market and several Indian with legislations like the GST bill and witnessed improved sales in the first worse than 2015, which was one of the by 2022’. A lot of churning will happen recalibrate the way they do business business entities choose to invest in Benami Transactions (Prohibition) six months of 2016. Barring Delhi-NCR, worst years itself. in 2017 because of the implementation to be RERA compliant. However, as of the UK, with a view to get unrestricted Amendment Act, 2016, will further other markets did well in the first half of various policy changes and it is Interestingly, the office market date, only Maharashtra and Delhi have access to the European markets. The increase transparency and reliability of this year as compared to previous important to see how developers continues to do well in 2016 and the come up with and notified the draft scale of this effect, especially in the within the sector. Furthermore, this will years. Mumbai and Bengaluru led the recalibrate their businesses to the overall transaction volume by the year rules for their respective States. medium to long-term, will depend on also see a boost in institutional funds way and the manner in which markets changing environment and whether end will be at par with the 2015. the outcome of negotiations on the flowing into the sector at competitive responded in the initial phase of 2016 The enforcement of the Benami buyers capitalise the opportunity of the UK’s exit. rates which will enable the sector to gave us the feeling that the year would THE GAME CHANGERS Transactions (Prohibition) Amendment various reforms and change their status come out of the woods. end on a high note for the residential Act, 2016 will also prove to be yet OUTLOOK 2017 quo position of “wait and watch”. While most of us awaited the results property sector. The overall positive another disruption in 2017. IN A NUTSHELL of the US presidential elections on 8th All of the above mentioned factors The end of 2017 is most likely to sentiment was attributed to a host November 2016, the Prime Minister The above factors may have briefly put together point towards a subdued To conclude, the impact of see the initiation of a robust and of factors including political stability, of India brought about the most halted the march, especially of the beginning for 2017. With enquiries, demonetisation is a transient one and sustainable growth trajectory for regulatory environment, enhanced sweeping change in recent history by residential property market but in the walk-ins and sales drying up as a fall- the economy will undergo structural India’s real estate industry and will be infrastructure, strong investments, demonetising the ` 500 and 1000 notes long run they will help the sector grow out of demonetisation, the first two changes for the first three quarters recognised as the base for the future approval to the GST bill, and which was a rude awakening for the in a much more evolved manner. quarters of the coming year will result of 2017. The industry awaits the growth of this sector. amendments to REITs. in a substantial slow-down in sales. implementation of policy reforms like Hetal Bachkaniwala Vice President Research

ALL INDIA INDIA REAL ESTATE RESEARCH

RE RESIDENTIAL MARKET ANNUAL LAUNCHES AND SALES TREND IN THE TOP EIGHT CITIES • The residential market of the top any new launches and buyers 68,700 units, respectively. The LAUNCHES SALES eight cities in India started off on a turned extremely cautious before same numbers for H2 2015 were 500,000 positive note in 2016 with H1 2016 committing on purchases. 141,340 units and 126,860 units. The fourth quarter witnessing a 7% jump in sales • The fourth quarter numbers are • All cities have witnessed a crash, 400,000 numbers are a testament volume compared to the same a testament to the effect that the including the usually resilient 300,000 to the effect that the period of the previous year. More demonetisation move has had Bengaluru, during the fourth demonetisation move than 135,000 units were sold in H1 200,000 on the real estate market of the quarter of this year. As a result Number of units 2016 as compared to 126,620 units has had on the real country that was barely recovering of this, 2016 has replaced 2015 100,000 in H1 2015. from its earlier sloth. Sales volume in terms of the worst performing estate market of the • The second half of 2016 started dropped by 44% YoY in Q4 2016 year in terms of sales volume in 0 2010 2011 2012 2013 2014 2015 2016 country that was with the same pace, with Q3 and new launches fell by a massive the recent history. Sales volume in barely recovering from 2016 sales volume showing a 61% YoY during the same period. the top eight cities has dropped by Source R positive growth on the back of the 9% in 2016 to 244,680 units from Note: The top eight cities are Mumbai, NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata its earlier sloth. Sales • At 40,940 units, the Q4 2016 sales start of the festive season. Sales 267,960 units in 2015. and Ahmedabad volume is at its lowest quarterly volume dropped by 44% volume across the top eight cities level since 2010. The average • The drop in sales volume during RE YoY in Q4 2016 and were holding steady at 67,000 – HALF-YEARLY LAUNCHES AND SALES TREND IN THE TOP EIGHT CITIES quarterly sales used to be in Q4 2016 due to the demonetisation new launches fell by a 68,000 units per quarter since Q1 excess of 90,000 units in 2010. move has resulted in a massive LAUNCHES SALES 2016 and we expected Q4 2016 massive 61% YoY during The new launches number is much notional revenue loss of more than 180,000 numbers to be marginally better worse at just 24,300 units in Q4 `226 bn to the real estate industry 160,000 the same period than the first three quarters. As a 2016, which is not even one-fifth of across the top eight cities. In other result, we projected sales volume 140,000 its peak quarterly level observed words, if the Government of India of 2016 to be marginally higher 120,000 during 2010. had not taken the demonetisation

than 2015 and had estimated an Number of units move, the residential segment 100,000 8% growth during the year. • The fall in sales volume and new would not have suffered a revenue launches were so severe during 80,000 • However, the Indian Government’s loss of `226 bn. Similarly, the Q4 2016, that it brought down the 60,000 demonetisation move on 8 notional loss to the various state entire H2 2016 numbers, down H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 November brought the market governments on stamp duty by 23% and 46% respectively, to a complete standstill. Against collection has been in excess of Source R compared to H2 2015. H2 2016 Note: The top eight cities are Mumbai, NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata this backdrop, developers `12 bn during the last quarter of reported sales volume and new and Ahmedabad refrained from announcing 2016. launches of 109,160 units and RE NOTIONAL REVENUE LOSS DUE TO THE DEMONETISATION MOVE IN Q4 2016 IMPACT OF DEMONETISATION: QUARTERLY LAUNCHES AND SALES TREND LAUNCHES SALES Notional revenue loss to State government notional loss 100,000 the real estate industry (` bn) on stamp duty (` bn) 90,000 Mumbai 91 4.6 80,000 NCR 37 2.6 70,000 Bengaluru 48 2.4 60,000 Pune 20 1.0 50,000

Chennai 11 0.5 No. of units 40,000 Hyderabad 8 0.4 30,000 Kolkata 5 0.3 20,000 Ahmedabad 5 0.2 Note: The top eight cities are Mumbai, NCR, Bengaluru, Pune, Chennai, Hyderabad, Q3-2016 Q4-2015 Q1-2016 Q1-2014 Q2-2015 Q3-2015 Q4-2016 Q2-2014 Q3-2014 Q2-2016 Total 226 12.0 Q4-2014 Q1-2015 Kolkata and Ahmedabad

Source: Knight Frank Research Source R

8 9 INDIA REAL ESTATE RESEARCH

RE RE CITY-WISE HALF-YEARLY LAUNCHES TICKET SIZE SPLIT OF LAUNCHED UNITS IN H2 2016

< ` 2.5 mm ` 2.5-5 mm ` 5-7.5 mm ` 7.5-10 mm ` 10-20 mm > ` 20 mm H2 2015 H1 2016 H2 2016

40,000 100% 90% 35,000 80% 70% 30,000 60% 25,000 50% 40% 20,000 30% 15,000 Number of units 20% 10% 10,000

5,000 0 MUMBAI MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD KOLKATA AHMEDABAD

Source R Source R

RE RE CITY-WISE HALF-YEARLY SALES CITY-WISE QTS VS AGE OF UNSOLD INVENTORY ANALYSIS

H2 2015 H1 2016 H2 2016 MUMBAI BENGALURU CHENNAI KOLKATA PUNE HYDERABAD AHMEDABAD 40,000 NCR 20 35,000

30,000

25,000 15

20,000

15,000 Number of units 10 10,000 Age of unsold inventory in quarters 5,000

0 MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD KOLKATA AHMEDABAD 5 5 10 15 20 25 QTS* Source R Source R Note: The size of the bubble indicates the quantum of unsold inventory. QTS is the quarter to The first and foremost sell unsold inventory step that the industry • With this backdrop, the biggest industry needs to take is to make cities of India has been below and the government should take years and is likely to lower the question in the mind of the houses more affordable. Currently, retail inflation growth – a clear a proactive initiative to develop policy rates by another 25-50 bps needs to take is to make stakeholders of the industry is the biggest factor affecting reflection of time correction. But peripheral locations with required in the next three to six months. houses more affordable. – what next? Sales need to be sales is the unaffordability of the still this is not enough to make connectivity and infrastructure. Given the liquidity situation and Currently, the biggest revived and the following points homebuyers. House prices till housing affordable to majority of reduced policy rates, banks will • Another factor that will help to factor affecting sales is discuss various measures that 2012 have increased significantly the homebuyers in the top cities have sufficient elbow room to lower stimulate the demand for house we believe will help to revive the faster than the income level of of India. Developers need to give the home loan interest rate in the the unaffordability of the purchase is the reduction in home demand for homes in the coming homebuyers. During the last four a relook at the pricing, size and coming months. loan interest rates by banks. RBI homebuyers quarters. years, the growth in residential configuration of residential units has already reduced its policy • Fiscal incentives on home purchase prices in most of the top eight in their planned developments • The first and foremost step that the rate by 175 bps in the last two could go a long way in reviving the

10 11 INDIA REAL ESTATE RESEARCH

demand and any move towards Development) Act, 2016 within have started showing a positive addressing this in the upcoming the stipulated timeframe could be impact on the residential segment, OFFICE MARKET budget will give a huge boost to a major factor in bringing back we will see the emergence of a the industry. Any move by the the confidence of homebuyers in new base that will be used to • The office market across the top falling gradually with each passing Government of India to increase the real estate sector. The timely analyse the future growth of this six cities of India has performed year and is currently at one of its the limit on tax exemption on home implementation of this Act across sector. exceedingly well in 2016 despite lowest levels in recent history at loan interest and principal amount the country will not only make the major challenges such as 13%. For cities like Bengaluru and payment in the upcoming budget sector more transparent but will uncertainty due to Brexit, US Pune, this number is in single digits could provide the much needed also help in attracting institutional elections and slowdown in IT/ at 6% and 8% respectively. ITeS spending by Europe and fillip to the ailing sector. participation. • During H2 2016, transactions have USA. The year 2016 closed with fallen by 12% to 20.4 mn sq ft from • Finally, strict implementation of • We believe that by the end of 2017, total transactions of 40.6 mn sq ft, 23.2 mn sq ft in H2 2015. Such a the Real Estate (Regulation and when most of these factors would which is marginally lower than 41.1 drop in transaction can be largely mn sq ft of space transacted in attributed to the shortage of good RE 2015. quality office space rather than a COMPARISON OF CITY-WISE PRICE INDEX WITH CONSUMER PRICE INDEX (CPI) • The potential demand for office slowdown in demand. New supply

MUMBAI BENGALURU CHENNAI KOLKATA CPI space was much higher in 2016, has reduced by 46% in H2 2016 to NCR PUNE HYDERABAD AHMEDABAD but due to shortage of good quality 10.1 mn sq ft from more than 18.7 130 office space in prime locations of mn sq ft in H2 2015. cities such as Bengaluru, Pune and 125 • The IT/ITeS sector continues to be Chennai, many occupiers had to the largest driver of office space 120 either delay or curtail their leasable in India with the sector accounting area. Additionally, the new supply 115 for nearly half of the transactions that entered these six cities during during H2 2016. This was followed 110 the year was just 29 mn sq ft, down by other services, which includes from 35 mn sq ft in 2015. 105 sectors such as consulting, media, Index value ( Q1 2013=100) 100 • The shortage of office space can telecom and infrastructure, at 21%. be further explained by studying However, in Mumbai, it was the 95 the vacancy trend over the last six BFSI sector that accounted for years. The vacancy level, which a lion’s share at 31% during this Q3-2016 Q4-2015 Q1-2016 Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Q2-2015 Q3-2015 Q4-2016 Q2-2014 Q3-2014 Q2-2016 Q4-2014 Q1-2015 peaked at 20% in 2012, has been period.

Source R

RE YEARLY NEW COMPLETION, TRANSACTIONS AND VACANCY LEVEL (TOP SIX CITIES)

NEW COMPLETION TRANSACTIONS VACANCY (RHS)

50 22% The vacancy level, which 45 peaked at 20% in 2012, 40 20% 35 has been falling gradually 30 18% 25 with each passing year 20 16% mn sq ft 15 and is currently at one of 10 14% its lowest levels in recent 5 0 12% history at 13% 2010 2011 2012 2013 2014 2015 2016

Source R

Note: The top six cities are Mumbai, NCR, Bengaluru, Pune, Chennai and Hyderabad

12 13 INDIA REAL ESTATE RESEARCH

RE RE HALF-YEARLY NEW COMPLETION, TRANSACTIONS AND VACANCY LEVEL SECTOR-WISE TRANSACTION SPLIT DURING H2 2016 (TOP SIX CITIES) IT/ITeS BFSI ( Including support services) MANUFACTURING OTHER SERVICES

NEW COMPLETION TRANSACTIONS VACANCY (RHS) 100%

25 20% 80% 20 18% 60% 15

16% 40% 10 mn sq ft 20% 14% 5 0 MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD 0 12% H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 Source R

Source R

Note: The top six cities are Mumbai, NCR, Bengaluru, Pune, Chennai and Hyderabad RE DEAL SIZE ANALYSIS

RE H2 2015 H2 2016 OFFICE SPACE STOCK AND OCCUPIED STOCK AS ON DECEMBER 2016 80,000

STOCK OCCUPIED STOCK 160 60,000 140 sq ft 120 40,000 100

80 20,000 mn sq ft 60

40 0 MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD 20 0 MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD Source R

Source R • In terms of deal size, Bengaluru • Average rental values across recorded the largest deals with these six cities have risen at RE CITY-WISE NEW COMPLETION, TRANSACTIONS AND VACANCY the average deal size in the city their sharpest level since 2013 at The potential demand for LEVELS DURING H2 2016 amounting to more than 62,400 sq 11% YOY during H2 2016. While ft in H2 2016. NCR and Mumbai Mumbai led this upsurge in rental office space was much NEW COMPLETION TRANSACTIONS VACANCY (RHS) 6 25% witnessed the smallest average values with a 16% YOY jump, higher in 2016, but due deal sizes at 20,000 sq ft and cities such as NCR and Bengaluru The IT/ITeS sector 5 20% to shortage of good 18,450 sq ft, respectively. followed closely at 14% and 12%, continues to be the 4 15% respectively

quality office space in largest driver of office 3

prime locations of cities 10%

mn sq ft space in India with 2

such as Bengaluru, Pune 5% the sector accounting 1 and Chennai, many for nearly half of the 0 0% occupiers had to either MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD transactions during H2

delay or curtail their Source R 2016 leasable area

14 15 Hetal Bachkaniwala Vice President Research

AHMEDABAD INDIA REAL ESTATE RESEARCH

worse at just 1,200 units in Q4 the festive season. 2016, which is not even one-tenth RESIDENTIAL MARKET • We believe that the year 2016 of its peak level of 14,000 units would have been marginally better achieved in Q1 2011. AHMEDABAD RESIDENTIAL MARKET LAUNCHES, than 2015 had it not been for the SALES AND PRICE TRENDS • The only solace in the Q4 2016 demonetization move, as the sales number was from the month of number for the first nine months

FIGURE 1 October, which was just before the were showing positive trend. AHMEDABAD MARKET TREND - ANNUAL demonetization move, when the sales volume were showing some ACHES SAES positive traction due to the start of 50,000

40,000 FIGURE 2 AHMEDABAD MARKET TREND - HALF-YEARLY 30,000 LAUNCHES SALES WT. AVG. PRICE (RHS)

20,000 12,000 3,000 No. of units

10,000 10,000 2,800

8,000 2,600 2010 2011 2012 2013 2014 2015 2016 6,000

2,400 Rs/sq ft Source R No. of units 4,000 2,200 2,000 • The Ahmedabad residential an onset of a positive trend in the market has been on a continuous market. 2,000 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 downslide over the last five years • Subsequently, the Indian after peaking in 2011. While the Source R Government’s demonetization city observed more than 45,000 move on 8th November brought units in new launches and 30,000 the market to a complete standstill. RE units in sales during 2011, these Developers refrained from IMPACT OF DEMONETISATION: QUARTERLY LAUNCHES AND SALES TREND numbers have fallen by 69% and announcing any new launches and LAUNCHES SALES 46% respectively since then. buyers turned extremely cautious 7,000 The fourth quarter • Taking cues from the market in before committing on purchases. terms of falling sales volume, 6,000 numbers are a testament • The fourth quarter numbers are developers truncated their new a testament to the effect that the 5,000 to the effect that the launches with each passing year demonetization move has had 4,000 demonetization move

and this helped in rebalancing the No. of units on the real estate market of the market to a great extent as the 3,000 has had on the real The only solace in the Q4 city that was barely recovering unsold inventory level dropped to estate market of the 2016 number was from from its earlier indolence. Sales 2,000 its lowest in the last six years to volume dropped by 43% YoY in Q4 1,000 city that was barely the month of October, 37,800 units in H2 2016, which was 2016 and new launched fell by a recovering from its which was just before at its peak of 48,200 units in 2012. 0 massive 69% YoY during the same earlier indolence. Sales the demonetization • Since H2 2015, the city witnessed period. Q3-2016 Q4-2015 Q1-2016 Q1-2014 Q2-2015 Q3-2015 Q4-2016 Q2-2014 Q3-2014 Q2-2016 a considerable recovery in sales Q4-2014 Q1-2015 volume dropped by 43% move, when the sales • At 2,800 units, the Q4 2016 sales volume at 13% YoY and this trend Source R YoY in Q4 2016 and volume were showing volume are at their lowest quarterly continued in the first half of 2016 level since 2010 and down by more new launches fell by a some positive traction as well with a 10% YoY growth. than two-third since the quarterly massive 69% YoY during due to the start of the Although these numbers weren’t peak of 8,300 units in Q1 2011. The very encouraging when compared the same period festive season new launches number are much to the peak of 2011, it did indicate

18 19 INDIA REAL ESTATE RESEARCH

MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES FIGURE 6 TICKET SIZE SPLIT OF LAUNCHES IN H2 2016

CENTRAL EAST NORTH SOUTH WEST FIGURE 4 MICRO-MARKET SPLIT OF LAUNCHED UNITS 100% 90% H2 2015 H1 2016 H2 2016 80% 70% 50% 60% 50% 40% 40% 30% 30% 20% 10%

20% 0% <2.5 mn 2.5-5 mn 5-7.5 mn 7.5-10 mn 10-20 mn > 20 mn

10% Source R 0% CERA EAS RH SH ES MICRO-MARKET-WISE RESIDENTIAL SALES Source R MICRO-MARKET LOCATIONS

Central Paldi, Vasna, Navrangpura, Maninagar, Dudheshwar, Ambawadi

East Naroda, Vastral, Nikol, Kathwada Road, Odhav 7,4 9 0 8,810 5,200 North Gota, New Ranip, Tragad, Chandkheda, Motera UNITS UNITS UNITS South Narol, Vatva, Vinzol, Hathijan H2 2015 H1 2016 H2 2016 West S. G. Highway, Prahlad Nagar, Bopal, Thaltej, Science City Road

• The micro-market split of sales FIGURE 5 has not witnessed any significant MICRO-MARKET SPLIT OF SALES change in the last six months. • North Ahmedabad has taken the the total unsold inventory available H2 2015 H1 2016 H2 2016 While the shares of west and lead in terms of new launches with here is below the ticket size of 35% central Ahmedabad have increased locations such as Chandkheda, `2.5 mn, homebuyers seem to be The fourth quarter 30% marginally, the shares of the Ognaj and Gota witnessing a staying away from this market. 25% remaining micro-markets have numbers are a testament slew of new project launches Factors like poor connectivity to 20% reduced slightly. to the effect that the during the last six months. With the city centre, the presence of

15% • Central Ahmedabad’s share has demonetization move prices in West and Central multiple manufacturing units and Ahmedabad breaching the the lack of social infrastructure 10% been steady over the last 12 has had on the real homebuyers’ affordability level, have limited this market’s 5% months. Better connectivity with estate market of the North Ahmedabad has emerged as attractiveness. 0% the city centre, proximity to the city that was barely the most preferred destination for Central East North South West central business district (CBD) and Source R the presence of a well-developed recovering from its mid-segment housing. During H2 2016, more than 80% of the new retail market continues to attract earlier indolence. Sales launches in this market were below homebuyers to this micro-market volume dropped by 43% the ticket size of `5 mn. despite its higher pricing YoY in Q4 2016 and • However, the new launches 9,075 8,550 7,4 0 0 new launches fell by a in South Ahmedabad have UNITS UNITS UNITS fallen drastically in H2 2016, massive 69% YoY during as developers are still trying to H2 2015 H1 2016 H2 2016 the same period offload apartments in their existing projects. While more than 80% of

20 21 INDIA REAL ESTATE RESEARCH

AHMEDABAD CITY MAP MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS AS OF DECEMBER 2016

FIGURE 7 C MICRO-MARKET SPLIT OF UNDER CONSTRUCTION UNITS Adalaj AS OF DECEMBER 2016

CENTRAL EAST NORTH SOUTH WEST CENTRAL 7% 26% WEST EAST 22%

C 9% SOUTH NORTH 36%

Motera Stadium

D S G HIGHWAY Chandlodia A O H Source R R

G N I R L E T A Sola Villae P PREMIUM RESIDENTIAL MARKET LAUNCHES, SALES AND PRICE TRENDS R A D R A S Menaar

D A

Thaltej O

R MICRO-MARKETS PREMIUM LOCATIONS M A NaranurR H

S A Central Ambawadi, Navrangpura, Shahibaug, Nehru Nagar Bodade West Ambli, Bodakdev, Jodhpur, Prahlad Nagar, Satellite, Thaltej, Vastrapur

Prahlad Naar S • New launches in the premium FIGURE 8 markets, which are close to the city Vastral Gam PREMIUM MARKET TRENDS APMC centre and costs in excess of ` 15 LAUNCHES SALES WT. AVG. PRICE (RHS) mn, have dropped significantly in Sarkhej Gam 6,000 S 1,600 the last one year. With an unsold 1,400 5,500 inventory of nearly four years, AHMEDABAD - VADODARA EXPY 1,200 developers have been wary of 5,000 1,000 pushing new projects. LEGEND 800 4,500 D • The premium market includes

R R A Rs/sq ft O 600 R No. of units 4,000 R NG locations such as Ambawadi, RI 400 EL H R PAT RDAR 3,500 Bodakdev, Navrangpur, Prahlad S SA 200 RS - 3,000 Nagar, Satellite and Vastrapur, RS E H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 among others C RS Source R • In terms of sales volume, this Note: Premium markets include locations where the average ticket size of a residential unit is segment continues to witness a above `15 mn, are in proximity to the central business district of the city and have witnessed steady traction and has performed new project launches in the preceding three years relatively better than the rest of the city in the past one year, despite a slowdown in the overall sales volume of the city.

22 23 INDIA REAL ESTATE RESEARCH

AHMEDABAD MARKET HEALTH PRICE MOVEMENT IN H2 2016

• The price growth in the premium segment outperformed the city’s average price growth. While the weighted average FIGURE 9 price in the city grew by 1.5% YOY in H2 2016, it grew by 7% in the premium segment QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS • Since 2010, premium segment prices have gone up by more than 57%, whereas the city’s average price has moved up AHMEDABAD CITY PREMIUM MARKET by only 28%. Steady demand and a limited supply have helped prices in the premium segment to move in this manner. 24

20 WEIGHTED AVERAGE PRICE MOVEMENT IN AHMEDABAD

16 PRICE RANGE IN H2 2016 LOCATION 12 MONTH CHANGE 6 MONTH CHANGE 12 (`/SQ FT) 8

No. of Quarters Ahmedabad 2,770 1.5% 0% 4

0 Premium markets 5,700 7% 2% SEP 15 SEP 14 SEP 16 JUN 15 JUN 14 JUN 16 DEC 15 DEC 14 DEC 16 MAR 15 MAR 14 PRICE MOVEMENT IN SELECT LOCATIONS Source R PRICE RANGE IN 12 MONTH 6 MONTH LOCATION MICRO-MARKET H2 2016 (`/SQ FT) CHANGE CHANGE

FIGURE 10 Ambawadi Central 5,500 - 7,500 0% 0% MICRO-MARKET-WISE QTS VS AGE OF INVENTORY Navrangpura Central 5,500 - 7,500 1% 0% CENTRAL EAST NORTH SOUTH WEST Mani Nagar Central 3,500 - 6,000 3% 1% 14 Paldi Central 4,500 - 6,200 3% 1%

11 Naroda East 2,000 - 3,000 2% 0%

Vastral East 1,800 - 2,500 1% 0% 8 Nikol East 1,800 - 2,500 0% 0%

Prahlad Nagar West 5,000 - 6,500 1% 1% Age of unsold inventory in quarters 5 5 8 11 14 QTS Satellite West 5,500 - 7,200 0% 0% Source R Thaltej West 5,000 - 6,000 0% 0% Note: The size of the bubble indicates the quantum of unsold inventory Vastrapur West 5,000 - 6,200 0% 0% • The number of quarters to sell the to the major employment hubs existing unsold inventory currently and integrated development have Bopal West 3,500 - 4,800 0% 0% We believe that the year stands at 8.6, which has remained helped these markets in attracting Chandkheda North 2,500 - 3,200 1% 0% 2016 would have been range bound in the last three homebuyers over the last few marginally better than years. At present, the city has years. Motera North 2,800 - 3,600 0% 0% more than 37,800 units in various 2015 had it not been • The performance of south Gota North 2,800 - 3,600 0% 0% stages of construction that remain Ahmedabad continues to worsen for the demonetization unsold. Source: Knight Frank Research with each passing quarter. From move, as the sales • East Ahmedabad remains the best less than 8.5 quarters of unsold number for the first nine performing market in the city with inventory at beginning of 2015, it months were showing the lowest level of quarters to sell has worsened to more than 11.5 positive trend unsold inventory and this is closely quarters in H2 2016. followed by North Ahmedabad. Affordable pricing, easy access

24 25 Sangeeta Sharma Dutta Assistant Vice President Research

BENGALURU INDIA REAL ESTATE RESEARCH

• The second half of the year 2015 accounting for a natural slowdown the past had risen to a stronger RESIDENTIAL MARKET (H2 2015) had seen the new in launches, other factors that position than the new launches, launches improve reasonably from played key roles in bringing down struggled to maintain its resilience BENGALURU RESIDENTIAL MARKET LAUNCHES, the setback that it had suffered in new launches include - the RERA against the recent economic and H1 2015, and the trend continued policy, demonetisation, as well as policy developments and fell by a SALES AND PRICE TRENDS on to H1 2016 as well. However, the Bruhat Bengaluru Mahanagara considerable 27% in H2 2016 as the momentum in new launches Palike (BBMP) initiative to free compared to its corresponding RE could not be sustained in H2 2016 lakes beds and storm water drains period in 2015. BENGALURU MARKET TREND- ANNUAL and the period witnessed a drastic of encroachment. This initiative • Meanwhile, weighted average LAUNCHES SALES decline of 45% on a Year-Over-Year by BBMP also resulted in delays prices held on steadfast and (YOY) basis. in getting necessary approvals 80,000 remained stagnant, witnessing a from government departments for 70,000 • While this is partly attributable to nominal increase of 1% in H2 2016 project construction. 60,000 the quantum of unsold inventory compared to H2 2015. 50,000 build-up in the market, hence • The city’s sales volume, which in 40,000

Number of units 30,000 20,000 RE 10,000 BENGALURU MARKET TREND- HALF-YEARLY

0 LAUNCHES SALES WT. AVG. PRICE (RHS) 2010 2011 2012 2013 2014 2015 2016 40,000 4,900

Source R 35,000 4,800 30,000 • Bengaluru, till recently touted to be • On the other hand, the decline in 4,700 25,000 one of the most resilient real estate sales has been gradual, primarily 4,600 20,000 ` / sq ft markets of the country, has come due to the fact that Bengaluru 4,500 Number of units 15,000 under considerable pressure in the is an end-user driven market. In 10,000 4,400 last two years, after observing a 2016, the dip in sales has been 7% 5,000 4,300 peak in 2013. compared to the sales figure in 0 4,200 2015. H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 • The residential market has observed significant tightening • Presently, the implementation Source R While launches were of new launches, particularly of RERA and the recent already on a decline, in 2015 when it had witnessed demonetisation drive has put an Bengaluru, till recently RE owing to factors such a decline of 33% over the new interesting spin to the city’s real IMPACT OF DEMONETISATION: QUARTERLY LAUNCHES AND SALES TREND touted to be one of launches in 2014. In early 2016, estate market. as the increasing unsold LAUNCHES SALES the most resilient real it recovered sufficiently and was inventory in the city, expected to perform well when the 25,000 BBMP’s drive to confront estate markets of the announcement of demonetisation country, has come under impacted the market and the 20,000 the encroachment of lake considerable pressure year ended with the number of beds and other issues launches declining by 17% over 15,000 like the momentary civil in the last two years. No. of units the launches number in 2015. While the number of new 10,000 turbulence over the • Thus, this state of market launches dipped by 17% Cauvery water dispute, constriction, which was expected 5,000 in 2016 on a YOY basis, to be a temporary blip on the radar, the announcement of the city’s sales volume has manifested itself as a longer 0 demonetization in Q4 phase owing to several factors and saw a more restrained 2016 further led to Q3-2016 Q4-2015 Q1-2016 Q1-2014 Q2-2015 Q3-2015 Q4-2016 Q2-2014 Q3-2014

will take some time to pass. Q2-2016 Q4-2014 Q1-2015 decline, at 7% curbing of new launches Source R

28 29 INDIA REAL ESTATE RESEARCH

• Demonetisation impacted the • Consequently, the new launches period in 2015. • The southern zone of the city in H2 2015 to 18% in H2 2016. city’s real estate market quite in Q4 2016 saw a remarkable accounted for a whopping 47% Locations such as Kannamangala • Significantly, the number of substantially in the fourth quarter decline of 65% over the number share in the total number of new and KR Puram witnessed a enquiries during the period Q4 (Q4 2016). While launches were of launches in Q4 2015, the lowest launches in H2 2016. This could number of new launches. 2016 increased by 10%-12% on already on a decline, owing to number of launches during the be attributed to the number of a YOY basis, though conversions • West Bengaluru, too, saw its share aforementioned factors such as period in recent years. In Q3 2016, residential projects that were have been low. This signifies that of new launches reduce in H2 the increasing unsold inventory the drop was 28% over the figure launched in the peripheral most buyers are keeping their 2016. The region accounted for just in the city, BBMP’s drive to in Q3 2015. locations, such as Electronics buying decisions on hold until 4% share of the total new launches confront the encroachment of lake City, Jigani, Mylasandra and off- • Meanwhile, sales had a good run clarity emerges on demonetisation. in H2 2016, witnessing a dip from beds and other issues like the Sarjapur Road. in Q3 2016. It was almost on par . its share of 11% in H2 2015. momentary civil turbulence over with the sales figure in Q3 2015. • North Bengaluru, which has been the Cauvery water dispute, the • The southern zone of the city However, with demonetisation characterised by factors such announcement of demonetization had the majority of the new coming into effect in Q4 2016, as high land cost, low social in Q4 2016 further led to curbing of launches below the `5 mn ticket sales dropped by 45% when infrastructure and relatively new launches. size in H2 2016, accounting for compared to the corresponding expensive property prices, saw its almost 50% of its total number share of new launches increase in of launches during the period, H2 2016. It increased from 25% while, in contrast, North Bengaluru in H2 2015 to a sizable 31% in H2 witnessed the launch of the 2016. Major new launches were MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES most number of residential units observed in Hebbal, Jakkur and priced above the ticket size of Devanahalli. With office projects RE `10 mn – to the tune of around MICRO-MARKET SPLIT OF UNITS LAUNCHED IN H2 2016 becoming operational along the 40% of its new launches. Notably, international airport road, creating H2 2015 H1 2016 H2 2016 northern locations such as Kogilu

new employment hubs, the region 55% and Hebbal saw a number of 45%

is striving to bounce back on the residential units in the premium 40% prospective buyers’ radar. 35% housing segment whereas Jigani, 30% • East Bengaluru’s share in the total Kammasandra, Mylasandra, Hosa South Bengaluru 25% number of new launches, which Road and Electronics City had a accounted for a 20% 15% has been observed to rise steadily number of budget housing units.

whopping 47% share in 10% in the past year, saw a setback

5% the total number of new

with its share declining from 27% 0 CENTRAL EAST NORTH SOUTH WEST launches in H2 2016.

Source R RE North Bengaluru, which TICKET SIZE SPLIT OF LAUNCHES IN H2 2016 has been characterised CENTRAL EAST NORTH SOUTH WEST by factors such as Expectations such as 100% 90% high land cost, low further home loan rate 24,19 0 24,281 13,395 80% social infrastructure cuts, announcement of UNITS UNITS UNITS 70% 60% and relatively expensive income tax sops in the H2 2015 H1 2016 H2 2016 50% property prices, saw its 40% budget next year and share of new launches 30% further correction in real 20% increase from 25% in H2 estate prices are keeping 10% 2015 to a sizable 31% in the buyers in a ‘wait and < `2.5 MN `2.5 - 5 MN `5 - 7.5 MN `7.5 - 10 MN `10-20 MN -20 MN H2 2016 watch’ mode Source R

30 31 INDIA REAL ESTATE RESEARCH

MICRO-MARKET-WISE RESIDENTIAL SALES BENGALURU METROPOLITAN REGION MAP

MICRO-MARKET LOCATIONS

Central M.G. Road, Lavelle Road, Langford Town, Vittal Mallya Road, Richmond Road

East Whitefield, Old Airport Road, Old Madras Road, K.R. Puram, Marathahalli

West Malleswaram, Rajajinagar, Yeshwanthpur, Tumkur Road, Vijayanagar Major Roads North Hebbal, Bellary Road, Hennur, Jakkur, Yelahanka, Banaswadi Railway Line Existing Metro Koramangala, Sarjapur Road, Jayanagar, J.P. Nagar, HSR Layout, Kanakapura Road, Bannerghatta South Under Construction Road Proposed Metro

• Similar to new launches scenario, the southern zone accounted for RE the major share on the sales front MICRO-MARKET SPLIT OF SALES IN H2 2016 as well. South Bengaluru saw its H2 2015 H1 2016 H2 2016 55%

share increase from 39% in H2 45%

2015 to 47% of the total sales in 40% H2 2016. This can be attributed to 35%

30% the large quantum of IT projects 25% in the region as well as the slew

20% of affordable projects available 15%

in its peripheral markets that 10% would soon be connected to the 5% 0 other parts of the city through CENTRAL EAST NORTH SOUTH WEST various infrastructure projects, the Source R foremost of them being the metro rail. Hebbal

• On the other hand, most other regions of the city saw a decline in their share of sales in H2 27,8 4 9 26,220 20,309 UNITS UNITS UNITS 2016. Although East Bengaluru Malleswaram KR Puram Old Madras Road witnessed a slight increase from Whitefield H2 2015 H1 2016 H2 2016 Rajajinagar Lavelle Road Indira Nagar 26% in H2 2015 to 27% in H2 MG Road Vittal Mallya Road 2016, the north and the west saw Richmond Road their shares reduce. Old Airport Road • North Bengaluru, in particular, observed its share of sales Koramangala decrease from 25% in H2 2015 to J. P. Nagar 18% in H2 2016. This decline is Sarjapur Road Kanakpura primarily on account of the dearth Road of adequate social infrastructure in place in the region, as well as Electronics City the increasing property increasing property price, amongst other factors.

32 33 INDIA REAL ESTATE RESEARCH

MICRO-MARKET SPLIT OF UNDER- BENGALURU METRO CONSTRUCTION UNITS AS OF DECEMBER 2016 RE MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS PHASE 2 – A SHOT IN AS OF DECEMBER 2016 8% WEST CENTRAL 0% THE ARM FOR CITY’S REALTY EAST 24%

ome April 2017 and if Mahadevapura and K.R. Puram. As Anjanapura, Mysore Road-Kengeri 46% SOUTH Bangalore Metro Rail per timeline set by BMRCL, phase 2 and Byappanahalli-Whitefield have NORTH 22% CCorporation (BMRC) is of metro is likely to be completed by made these real estate markets to be believed, we might just have December 2020. attractive for home buyers and Bengaluru Metro phase 1 up and investors. While the greater aim of The completion of the phase 2 metro running – completely. There have phase 2 is to allow metro connectivity lines would have a vast effect on the been a host of missed deadlines but towards the peripheral locations of Source R city’s dynamics. While transportation finally the end of the first phase of the city and unlock their potential, and connectivity is set to become • South Bengaluru accounts for the buyers due to its good social compared to the other micro- this colossal infrastructure project phase 2A along the ORR is expected major share of the total number infrastructure and the presence markets. easier, the impact on the realty market seems to be near. This impending to help ease the unsold inventory of units under construction, to the of employment hubs, leading would be even more prominent, • The northern and eastern markets tune of 46%, given that it has been developers to launch their projects completion leads us to sit up and take build-up situation in locations such as have fairly uniform shares of units leading to an increased demand witnessing large-scale residential there. Additionally, property notice of the next most important Mahadevapura, Bellandur, Sarjapur under construction, with West for both residential and commercial development in the past years. prices are relatively cheaper in the development – the second phase of Road and Marathahalli, by reviving Bengaluru gradually emerging on property in the region. On the The region is preferred by potential peripheral locations in the south, the residential market scene. the metro. sales in the regions. commercial front, micro-markets such Bengaluru Metro is India’s second as Whitefield in the east, Nagwara in At present, work along the Bengaluru PREMIUM RESIDENTIAL MARKET LAUNCHES, SALES AND PRICE TRENDS largest metro system in terms of the north, and Electronics City in the metro phase 2 has been rather tepid. both length and number of stations, south are expected to witness the However, with the infrastructure MICRO-MARKETS PREMIUM LOCATIONS after the Delhi Metro. Its phase 2 maximum impact. Meanwhile, phase project harbouring enormous Central M.G. Road, Lavelle Road, Langford Town, Vittal Mallya Road, Richmond Road spans a length of 72 km and is 2A is expected to sort out the issues advantages, both for the real estate expected to add 61 stations to the faced by office occupiers on the fraternity and the buyer, the wait is East Whitefield, Indiranagar

network. It includes the extension ORR. Improved public transportation expected to be worth the pain. West Malleswaram, Rajajinagar, Yeshwanthpur of the two phase 1 corridors, as in the form of metro line will help well as the construction of two new reduce traffic density and travelling North Hebbal, Bellary Road

lines. Further, a new 18 km long hours along this route, thereby aiding South Koramangala, Jayanagar, J.P. Nagar line connecting Silk Board with in retaining existing tenants as well as • The premium market of Bengaluru, H2 2016 as compared to H2 2015, • The weighted average price growth K.R. Puram has been included, attracting potential occupiers. which constitutes locations such with developers refraining from YOY in the premium segment categorized as phase 2A. The line will On the residential front, clusters as Lavelle Road, Richmond Road, launching premium projects in the remained relatively steady and saw be called the Outer Ring Road Metro with scheduled metro stations are Indiranagar and Malleswaram, face of a subdued market. a marginal increase in H2 2016, as and is proposed to have 13 stations among others, was affected by the compared to H2 2015. likely to record increased demand • Meanwhile, the sales situation encompassing major stations such overall slowdown in new launches, due to improved connectivity to strove to remain afloat. H2 2016 as Silk Board, HSR Layout, Bellandur, too. employment hubs. Presently, metro witnessed a dip of 3% in demand Kadubeesanahalli, Marathahalli, route extensions such as Puttenahalli- • It observed a substantial decrease for such properties, as against the of 12% in new launches during same period last year.

34 35 INDIA REAL ESTATE RESEARCH

RE RE PREMIUM MARKET TRENDS MICRO-MARKET-WISE QTS VS AGE OF INVENTORY

LAUNCHES SALES WT. AVG. PRICE (RHS) CENTRAL EAST NORTH SOUTH WEST 1,400 8,700 14 1,200 8,600 8,500 1,000 13 8,400 800 12 8,300 600 ` / sq ft 8,200 Number of units 11 400 8,100

200 8,000 10

0 7,900 Age of unsold inventory in quarters H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 9

Source R 8 Note: Premium markets include locations where the average ticket size of a residential unit 7 8 9 10 11 12 is above ` 20 mn, are in close proximity to the central business district of the city and have witnessed new project launches in the preceding three years QTS* Source R

BENGALURU MARKET HEALTH times. The presence of several • Meanwhile, West Bengaluru large employment hubs, good still does not have a sufficient RE social infrastructure, substantial inventory and sales volume QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS availability of housing in various compared to the other zones of the BENGALURU CITY PREMIUM MARKETS budget sizes and the recently city. It has a higher QTS than East 14 operational metro connectivity and North Bengaluru but holds a 12 with the central and western lower QTS and age of inventory parts of the city are some of the than its southern counterpart. 10 prime factors that facilitated this Despite its smaller size at present, 8 development. the region holds promise and the metro rail, operational since last 6 • On the other hand, South No. of Quarters year, is expected to be one of the Bengaluru is accountable for 4 prime factors for this potential. The presence of several the highest QTS after Central 2 Bengaluru, with the largest • The premium residential market of large employment quantum of unsold inventory in the Central Bengaluru does not have a 0 hubs, good social city. However, the sales velocity key role to play due to its minimal infrastructure, substantial of the region has improved in unsold inventory size. DEC-14 SEP-14 SEP-15 JUN-14 JUN-16 SEP-16 JUN-15 DEC-16 DEC-15 MAR-16 MAR-15 availability of housing in the past few quarters and with Source R infrastructure development in the various budget sizes and • The quarters to sell unsold the bubble indicates relative size – at 12 quarters currently. This is offing, the situation is expected to the recently operational inventory (QTS) is the number of unsold inventory in terms of mainly due to the relatively slow amend in the forthcoming periods. metro connectivity of quarters required to exhaust number of units. rate of sales observed in the • North Bengaluru has a lower QTS the existing unsold inventory in premium housing segment in the with the central and • The QTS for Bengaluru has but a higher age of inventory than the market. The existing unsold past. western parts of the city been increasing gradually since the South. We expect this market inventory is divided by the average September 2013, and currently • East Bengaluru is currently the to gain momentum once the office are some of the prime sales velocity of the preceding stands at nine quarters. The best performing market of the city, sector gains prominence in the eight quarters in order to arrive at factors that facilitated unsold inventory of the city is with the lowest QTS and the lowest near future. the QTS number for that particular the development of East recorded at around 121,000 units. age of inventory, signifying that quarter. A lower QTS indicates However, the QTS for the premium the market has been witnessing Bengaluru a healthier market. Also, size of markets in the city is much higher a substantial traction in recent

36 37 INDIA REAL ESTATE RESEARCH

PRICE MOVEMENT IN H2 2016 OFFICE MARKET • Price appreciation across most well as the demonetisation factor. price in the last 12 months, BENGALURU OFFICE MARKET STOCK, NEW COMPLETIONS, TRANSACTION locations in Bengaluru has The range of price appreciation compared to the growth in the been sluggish during the last 12 during the period has been within city’s overall price. While the city’s AND VACANCY TRENDS months, ranging between 1–5%. 1–3% in select markets. overall price growth was pegged RE The growth in price slowed down at 1.5%, the premium housing • The premium housing segment BENGALURU OFFICE NEW COMPLETION AND TRANSACTIONS – ANNUAL TREND further in the last six months, segment saw an increase of 1.1%. observed a slightly slower rate of primarily due to the huge unsold NEW COMPLETION TRANSACTION growth in its weighted average inventory present in the market as 14 WEIGHTED AVERAGE PRICE MOVEMENT IN BENGALURU 12 10 PRICE RANGE IN H2 2016 LOCATION 12 MONTH CHANGE 6 MONTH CHANGE 8 (`/SQ FT) mn sq ft 6 mn sq ft Bengaluru 4,850 1.5% 0.9% 4 2 Premium markets 8,609 1.1% 0.7% 0 2010 2011 2012 2013 2014 2015 2016 PRICE MOVEMENT IN SELECT LOCATIONS Source R PRICE RANGE IN 12 MONTH 6 MONTH LOCATION MICRO-MARKET • The Bengaluru office market • Meanwhile, new completion of H2 2016 (`/SQ FT) CHANGE CHANGE continued to go from strength office space has been striving to Langford Town Central 15,000–21,000 0% 0% to strength in 2016, recording a catch up with the transactions and transaction of 11.4 mn.sq.ft of 2016 observed an increase of 12% Lavelle Road Central 22,000–30,000 0% 0% office space – the highest in five over the new completion figure in K.R. Puram East 4,000–6,750 2% 0% years, standing at par with its peak 2015. level in 2011. Whitefield East 4,500–8,500 1% 0% • Thus, with the office market • The transactions in 2016 reflected staying positive in Bengaluru Marathahalli East 4,500–7,100 3% 1% a growth of 3% over the total despite the recent demonetization Indiranagar East 9,000–12,500 0% 0% transactions in 2015. While the drive, adroitly reflected by the growth appears to be tapering, steady growth in demand for prime Yeshwanthpur West 6,500–10,800 2% 0% at the same time it should also office space, the city continues to The Bengaluru office Malleshwaram West 9,000–13,300 0% 0% be noted that the IT/ITeS sector, be a key office destination among market continued to lead which is the key demand driver of global and domestic corporates. Rajajinagar West 8,500–14,000 0% 0% the way, with the highest the office market in Bengaluru, has Tumkur Road West 4,000–5,100 2% 0% matured and stands on a bigger office space transactions

Yelahanka North 4,500–7,500 4% 1% base today, thereby limiting the in the country. With a scope for outstanding growth total of 11.4 mn sq ft Hebbal North 5,000–9,800 1% 0% proportion. transacted in 2016, Hennur North 4,500–7,500 2% 0% • Moreover, stiff competition from which excludes pre- Thanisandra North 4,100–7,500 3% 0% other cities, primarily Hyderabad, has led the growth trend to remain committed deals, the Sarjapur Road South 4,500–7,500 1% 0% relatively constrained. period witnessed the Electronics City South 4,000–6,500 2% 1% • This growth in office sector is in highest transactions in Kanakapura Road South 4,300–6,000 2% 1% contrast to the city’s residential five years real estate where demand has Bannerghatta Road South 4,200–7,500 1% 0% declined substantially due to demonetisation, Source: Knight Frank Research

38 39 INDIA REAL ESTATE RESEARCH

• On a half yearly basis, the RE RE city’s office market recorded BENGALURU OFFICE SPACE STOCK AND VACANCY LEVEL SECTOR-WISE SPLIT OF TRANSACTIONS transactions of 5.3 mn sq ft during STOCK OCCUPIED STOCK VACANCY (RHS) H2 2015 H1 2016 H2 2016 the period July–December 2016 140 12% 80%

(H2 2016). 120 70% 10% 60% • Additionally, H2 2016 also 100 8% observed pre-committed deals 50% 80 of 3 mn sq ft. Thus, altogether, 6% 40%

60

including the pre-committed mn sq ft 30% 4% 40 20% deals, 2016 saw total office space 20 2% 10%

transactions of 14.3 mn sq ft 0 0% 0 • In contrast, the city witnessed H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 IT/ITeS BFSI MANUFACTURING OTHER SERVICE SECTORS the infusion of 3.5 mn.sq.ft in Source R Source R H2 2016, which is considerably lesser in proportion to the demand

observed, thereby leading RE potential occupiers to turn to pre- NEW COMPLETION AND TRANSACTION OF OFFICE SPACE committed deals for large space NEW COMPLETION TRANSACTION 5.0 6.1 5.3 requirements. 7.0 MN SQ FT MN SQ FT MN SQ FT

• The dearth of ready to occupy 6.0 H2 2015 H1 2016 H2 2016 space also resulted in lending a 5.0 downward pressure on vacancies 4.0

and an upward pressure on office 3.0 rents in key office markets of the mn sq ft 2.0 a multinational consulting firm • The BFSI sector accounted for a city in H2 2016. 1.0 took up around 134,000 sq ft on 9% share of the transactions in

• Vacancy rates, which had been 0 Intermediate Ring Road. H2 2016, reflecting an increase H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 declining steadily over the years over the share in H2 2015. Notable • Meanwhile, a few major owing to consistent transactions transactions in the sector include Source R transactions were recorded in and restrained new completions, Swiss Re taking up space at the manufacturing sector in H2 The IT/ITeS sector continued on its downward Embassy Golf Links Business Park 2016. The sector accounted for a accounted for 62% of movement and are presently at on Intermediate Ring Road. minimal share of 4% of the total the total transactions in 6%. office space transactions, showing H2 2016, as compared a decline over its share of 10% in H2 2015. to H2 2015, which had SECTOR ANALYSIS seen a whopping 70%

• Bengaluru continued to attract lack of ready large office space in fewer e-commerce transactions share. The decline in substantial occupier interest in H2 the market, consequently leading in H2 2016 and other services the sector’s share can 2016, the demand being driven them to opt for pre-committed sector companies like media be attributed to the lack primarily by the IT/ITeS sector, its space that would be ready in 18-24 houses, telecommunications growth and consolidation leading months’ time. and consulting firms accounted of ready large office to transactions for large office for substantial office demand space in the market, • The share of the other services spaces. The sector accounted for during the period. Some of the sector, of which the e-commerce consequently leading 62% of the total transactions in prominent transactions in the sector is a part, has increased them to opt for pre- H2 2016, as compared to H2 2015, other services sector include from 16% in H2 2015 to 25% which had seen a whopping 70% a key telecommunications committed space in H2 2016. While e-commerce share. The decline in the sector’s company inking an office space still holds potential, there were share can be attributed to the deal on Residency Road, while

40 41 INDIA REAL ESTATE RESEARCH

DEAL SIZE ANALYSIS BUSINESS DISTRICTS OF BENGALURU

• The average deal size remained RE somewhat consistent in H2 DEAL SIZE ANALYSIS 2016, coming close to 62,424 AVERAGE DEAL SIZE ( SQ.FT) NUMBER OF DEALS ( RHS ) sq ft, compared to 60,172 sq Major Roads 80,000 120 ft in H2 2015. The number of Railway Line 70,000 Existing Metro deals, however, reduced slightly 60,000 Under Construction 80 in H2 2106 as compared to the Proposed Metro 50,000 corresponding period in the 40,000 sq ft

NUMBER previous year. 30,000 40 20,000 10,000

0 0 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016

Source R

SELECT TRANSACTIONS

OCCUPIER BUILDING LOCATION APPROX. AREA (SQ FT)

Apple RMZ Galleria Airport Road 46,000

Infosys Bhartiya City - Block I Thanisandra Road 200,000

Swiss Re Embassy Golf Links Business Park Intermediate Ring 303,000 Road H RR Broad Ridge DivyaSree NR Enclave (Block A) Whitefield 157,000

Snapdeal Salarpuria Adonis Old Madras Road 35,000 CBD/off-CBD Source: Knight Frank Research SBD Cunningham Road KR Puram Infantry Road PBD EAST Old Madras Road Hoodi Whitefield Lavelle Road Indira Nagar MG Road Residency Road Brookefield BUSINESS DISTRICT ANALYSIS KR Puram ORR Richmond Road ORR BUSINESS DISTRICT CLASSIFICATION Airport Road Marathalli ORR BUSINESS DISTRICTS MICRO-MARKETS SBD M. G. Road, Residency Road, Cunningham Road, Lavelle Road, Central business district (CBD) and off-CBD Koramangala Richmond Road, Infantry Road Kanakpura Road Suburban business district (SBD) Indiranagar, Koramangala, Airport Road, Old Madras Road Hosur Road PBD SOUTH Peripheral business district (PBD) East Whitefield Electronics City Peripheral business district (PBD) South Electronics City, Bannerghatta Road

Peripheral business district (PBD) North Thanisandra, Yelahanka, Devanahalli

Outer Ring Road (ORR) Hebbal ORR, Marathahalli ORR, Sarjapur Road ORR

42 43 INDIA REAL ESTATE RESEARCH

RE RENTAL TREND BUSINESS DISTRICT-WISE TRANSACTIONS SPLIT

H2 2015 H2 2016 RE 35%

WEIGHTED AVERAGE RENTAL MOVEMENT (INR/SQ.FT./MONTH) 30%

25% 60

20% 55

15%

10% 50 5%

45 0 CBD & OFF SBD ORR PBD EAST PBD PBD PBD INR \ sq. ft.\month CBD SOUTH NORTH WEST 40

Source R 35

30 5.0 5.3 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 MN SQ FT MN SQ FT Source R

H2 2015 H2 2016 • While the steady increase in office space in the region, coupled observing in the past years is just transactions YOY in the city with declining new completions 5% per annum. • The Outer Ring Road (ORR) in the forthcoming months. is good news for office space and vacancies, particularly in the • Understandably, this rise in office market, which has been developers, it poses a challenge ORR. • With limited supply of vacant and rentals could be accredited to struggling in the past few for the office occupiers as in ready-to-occupy office space • The weighted average rental the anticipated demand for large quarters on account of dearth many cases they are faced with in the preferred markets, H2 values witnessed a significant spaces as well as the lack of of ready to occupy space, saw the prospect of higher rentals and 2016 saw the peripheral market increase of 12%, from `51.5 vacant office stock in the preferred its share further reduce in H2 fewer options to choose from in in the east, mainly comprising per sq ft per month in H2 2015 office markets, thereby pushing the 2016 compared to H2 2015. Its terms of ready space. Whitefield, step up to cater to to `57.8 per sq ft per month in weighted average rentals upwards share in the total transactions in The Outer Ring Road potential occupiers. The PBD • The SBD and ORR office markets H2 2016. This appreciation in in the Bengaluru office space H2 2016 was 29%, compared to East market observed its share in witnessed the maximum rise in rentals is particularly remarkable market. (ORR) office market, 33% in H2 2015. The ORR has the total number of transactions rentals in H2 2016, primarily due to given the fact that the average been progressively preferred by which has been increase to a significant 32% in the strong corporate demand for rental increase the city has been corporates due to factors such struggling in the past H2 2016 from a mere 6% in H2 as its proximity to the CBD and 2015. Factors such as a few office BUSINESS DISTRICT-WISE RENTAL MOVEMENT few quarters on account the major residential markets, projects becoming operational of dearth of ready to access to large talent pools, the RENTAL VALUE and relatively lower rentals as BUSINESS 12 MONTH 6 MONTH availability of contiguous land RANGE IN H2 2016 occupy space, saw its compared to the suburban and DISTRICT CHANGE CHANGE parcels, connectivity to the airport (`/SQ FT/MONTH) share further reduce ORR office markets have led the and the presence of hotel and PBD East market to dominate the CBD & off-CBD 75–110 8% 4% in H2 2016 compared retail projects. This has led the transactions scenario in H2 2016. to H2 2015.This has ready-to-occupy office space in SBD 51–100 12% 8% the region to shrink significantly, • The share of the SBD markets, resulted in the PBD PBD East 32–50 6% 4% leading vacancy to be in the range too, increased in H2 2016 over the East market, mainly of 2-5%, thereby resulting in a share in H2 2015. However, the PBD South 32–48 2% 2% northern peripheral office markets comprising Whitefield, decline in its transactions share in ORR 45–90 15% 10% step up to cater to H2 2016. However, the ORR still observed a slight decrease in its Source: Knight Frank Research accounts for a large quantum of share during H2 2016 as compared potential occupiers pre-committed space, which is to its corresponding period in scheduled to become operational 2015.

44 45 Yashwin Bangera Assistant Vice President Research

CHENNAI INDIA REAL ESTATE RESEARCH

RE RESIDENTIAL MARKET IMPACT OF DEMONETISATION: QUARTERLY LAUNCHES AND SALES TREND

CHENNAI RESIDENTIAL MARKET LAUNCHES, SALES AND PRICE TRENDS LAUNCHES SALES 7,000

RE 6,000 CHENNAI MARKET TREND- ANNUAL

LAUNCHES SALES 5,000

40,000

No. of Quarters 4,000 35,000

30,000 3,000 25,000 20,000 2,000

Number of units 15,000 1,000 10,000 5,000 Q3-2016 Q4-2015 Q1-2016 Q1-2014 Q2-2015 Q3-2015 Q4-2016 Q2-2014 Q3-2014 Q2-2016 0 Q4-2014 Q1-2015 2010 2011 2012 2013 2014 2015 2016 Source R

Source R interest has forced developers, quarterly level since 2010. The in turn, to ease the pace of their YoY decline in demand during RE launches in a bid to reduce H2 2016 would not have been as CHENNAI MARKET TREND- HALF-YEARLY unsold inventory pressure. Market pronounced, had this event not LAUNCHES SALES WT. AVG. PRICE (RHS) players did expect a stabilisation taken place. 12,000 4,800 in supply numbers during 2016 • Similarly, the month of October but the supply scenario has only 10,000 experienced a healthy number deteriorated, as this analysis 8,000 4,600 of apartment launches that period saw an 18% drop in supply pushed the fourth quarter supply 6,000 ` / sq ft to 4,800 units. numbers over the previous year’s Number of units 4,000 4,400 • However, this excessive reduction level. However, fewer launches 2,000 in supply, compared to the sales were observed in the last two

0 4,200 levels that have exceeded supply months of the Q4 2106 post the H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 over the past three periods, has announcement of demonetisation. also caused the unsold inventory Source R The announcement of the level to fall to a six-year low, at 30,926 units. demonetisation drive by • The Chennai residential market 29% and 9% respectively, YoY • The weighted average prices have the Central Government has been reeling from a series during 2016. of events ranging from political been growing, but at a steadily • Sales levels that averaged close on 8 November proved uncertainty due to changes in declining rate since H2 2012, when to 13,500 units every half-yearly particularly damaging to leadership, extreme weather they grew at 10.4%, and now stand period before H1 2014 now conditions to the recent at 1.5% YoY at the end of H2 2016. home buyer sentiments average approximately 9,100 units. demonetisation drive that haven’t as demand plummeted The drop in sales shows some • The announcement of the The supply scenario has allowed market volumes to signs of stemming, with H2 2016 demonetisation drive by the deteriorated further as H2 31% YoY in Q4 2016 to its improve, with the annual supply seeing a 12% drop YoY compared Central Government on 8 numbers now fallen below those of 2016 saw only 4,800 units lowest quarterly level since to the more pronounced 15% drop November proved particularly the Hyderabad residential market. launched in the current 2010 seen in the previous period. damaging to home buyer Significantly, the residential sentiments as demand plummeted period, an 18% drop YoY launches and sales have dropped • This receding homebuyer 31% YoY in Q4 2016 to its lowest

48 49 INDIA REAL ESTATE RESEARCH

MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES MICRO-MARKET WISE RESIDENTIAL SALES

• The south and west micro-markets RE MICRO-MARKET LOCATIONS saw the maximum residential MICRO-MARKET SPLIT OF LAUNCHED UNITS development interest during H2 T. Nagar, , , , Adyar, H2 2015 H1 2016 H2 2016 2016. Western locations saw West Chennai , , , Iyyappanthangal, a healthy recovery from the 70%

preceding period as developers 60% , Chrompet, , ,

such as Casa Grande and 50% , Kolathur, , Urbantree launched the largest

40% projects of the period in 30%

and respectively. 20% RE • The south Chennai micro-market 10% MICRO-MARKET SPLIT OF SALES 0 H2 2015 H1 2016 H2 2016 that was the hardest hit during the CENTRAL NORTH SOUTH WEST 2015 November torrential rains 70%

Source R has seen a healthy recovery in 60% the number of units launched in 50% the subsequent periods. South 40%

Chennai accounted for over half 30% of the units launched during the 5,854 5,815 4,800 20%

period and saw the bulk of these UNITS UNITS UNITS

10% launches take place in locations 0 such as Kelambakkam, Mahindra H2 2015 H1 2016 H2 2016 CENTRAL NORTH SOUTH WEST World City, Ottiambakkam and Source R Seruseri.

• Premium central Chennai locations such as , Gopalapuram and MRC Nagar that witnessed RE a large number of units launched TICKET SIZE SPLIT OF LAUNCHES IN H2 2016 8,792 8,450 7,737 UNITS UNITS during the preceding period saw CENTRAL NORTH SOUTH WEST UNITS little residential development 100% 90% H2 2015 H1 2016 H2 2016 interest in H2 2016 as developers 80% took cues from the deteriorating 70% health of the premium segment. 60% 50% • The buyer behaviour has been comparatively lower-priced market and remains the biggest 40% 30% largely consistent across the inventory and good connectivity draw for the Chennai home 20% last three periods with a steady with SBD locations such as buyer as both employment and 10% increase in buyer interest in central Mount– High Road social infrastructure drivers in Chennai locations as the latent and . The recent conjunction with reasonably < `2.5 MN `2.5 - 5 MN `5 - 7.5 MN `7.5 - 10 MN `10-20 MN -20 MN demand responded to the spike in revival of the -Chennai priced residential inventory keep

Source R supply of premium offerings during port elevated corridor will further improving its residential ethos. H1 2016. boost the residential market in this micro-market. • The western micro-markets such as Kolapakkam and Maduravoyal • The south micro-market contains continue to see traction due over half of the unsold inventory to an increased uptake of the in the Chennai residential

50 51 INDIA REAL ESTATE RESEARCH

MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS CHENNAI METROPOLITAN REGION MAP AS OF DECEMBER 2016

RE MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS AS OF DECEMBER 2016

7% CENTRAL NORTH 4%

Madhavaram

Tondiarpet Perambur Ambattur 28% WEST SOUTH 61% Greams Rd Porur Nungambakkam Mt. Poonamallee Rd T Nagar RK Salai Source R Taramani

• Nearly 90% of the under- industrial and port related activities construction units in Chennai are in the north. This has caused concentrated in the South and developers to focus their energy on GST Road West micro-markets of the city. more viable locations in west and OMR south Chennai. • Comparatively poor connectivity to office market locations and the • The shortage of developable land lack of social infrastructure has left and high prices prevent sizeable very little incentive for the average residential development activity Chennai homebuyer to look north in central Chennai, but it remains for new homes. It does continue the most sought-after residential to cater to a relatively select group micro-market of the city. of buyers that are employed in

PREMIUM RESIDENTIAL MARKET LAUNCHES, SALES AND PRICE TRENDS

MICRO-MARKETS PREMIUM LOCATIONS

Nungambakkam, R. A. Puram, , T. Nagar, , , Kilpauk, Anna Major Roads Central Chennai U/C Metro Corridor I Nagar, , Adyar U/C Metro Corridor II Railway Line West Chennai K. K. Nagar, Valasaravakkam

South Chennai , , Uthandi,

52 53 INDIA REAL ESTATE RESEARCH

RE CHENNAI MARKET HEALTH PREMIUM MARKET TRENDS • The quarters to sell unsold LAUNCHES SALES WT. AVG. PRICE (RHS) RE inventory (QTS) is the number 1200 13,000 QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS of quarters required to exhaust CHENNAI CITY PREMIUM SEGMENT 1,000 the existing unsold inventory in 18 800 12,000 the market. The existing unsold 16 inventory is divided by the average 600 ` / sq ft 14 sales velocity of the preceding

Number of units 400 11,000 eight quarters in order to arrive at 12 the QTS number for that particular 200 quarter. A lower QTS indicates a No. of Quarters 10 0 10,000 healthier market. H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 8 Source R • The Chennai residential market 6 Note: Premium markets include locations where the average ticket size of a residential unit is currently has a QTS of 7.3, with an above `15 mn, are in proximity to the central business district of the city and have witnessed 4 average age of inventory of 12.9 new project launches in the preceding three years quarters. The concerted focus of DEC-14 SEP-14 SEP-15 JUN-14 JUN-16 SEP-16 JUN-15 DEC-16 DEC-15 MAR-16 MAR-15 developers to reduce the unsold • The premium locations of the city • However, this segment inventory load before ramping Source R are concentrated largely in the experienced a slew of launches in up supply has paid dividends as central Chennai areas such as the beginning of 2016 and pushed the inventory load of the Chennai RE Nungambakkam, Adyar and R. the QTS level over that of the MICRO-MARKET-WISE QTS VS AGE OF INVENTORY residential market has not A. Puram, and in some locations Chennai residential market, and is exceeded eight quarters since the with a high aspirational value in now carrying nearly four years of CENTRAL NORTH SOUTH WEST past two years in spite of falling

south and west Chennai such inventory. 15 demand. as Palavakkam, Injambakkam, • Prices in this segment have 14 • Moreover, south and west Chennai Uthandi, Thiruvanmiyur and K. K. increased 32% since the beginning 13 contain the largest chunks of Nagar. of 2014, compared to the overall 12 unsold inventory in the Chennai • The premium market in Chennai residential market where prices 11 market and have a QTS of 7 and 8 has historically been better have only grown by 7% during 10 quarters, respectively. Relatively insulated against market vagaries the same period. The strong price 9 affordable residential prices,

compared to the city’s residential growth and low inventory levels 8 proximity to the employment hubs Age of unsold inventory in quarters market, as there was relatively little encouraged developers to increase 7 and improving social infrastructure

supply in the early years of this the supply in the market during the 6 continue to drive both these micro-

decade compared to the situation first half of 2016 but price growth 5 markets. today. in this segment also slowed down 4 6 8 12 The premium segment • North Chennai has seen a to 3% during H2 2106. QTS • The Chennai market had a significant reduction in the age that experienced a slew of Source R significantly higher appetite for of its unsold inventory that has launches in the beginning Note: The size of the bubble indicates the quantum of unsold inventory premium residential products fallen from 11 quarters in H2 2015 of 2016 and pushed the compared to the supply on offer. to 7 quarters in H2 2016 due to QTS level over that of The increasing redevelopment of a sustained decrease in supply, the Chennai residential bungalows in central locations, the although it continues to have the breakdown of joint families among highest QTS levels among all market, is now carrying the affluent and the dearth of micro-markets. nearly four years of unsold lifestyle residential products have inventory been strong drivers of the premium segment.

54 55 INDIA REAL ESTATE RESEARCH

PRICE MOVEMENT IN H2 2016

• The sharp decline in launches growth rate achieved in H2 2015. under pressure during the current and reducing unsold inventories period due to the spike in supply • Price growth in the premium PHASE II, in tandem with comparatively during H1 2106 rendering the segment has always been much steady sales levels have stemmed current period’s price growth at a stronger than that of the residential the decline in price growth. H2 nominal 3% compared to 9% in H2 market overall. However, the A BOON FOR THE OMR 2016 saw prices grow at a modest 2015. premium segment also came 1.5% YoY, approximately the same

hennai originated as a workforce across the city will continue corridor that will start at Madhavaram WEIGHTED AVERAGE PRICE MOVEMENT IN CHENNAI

port city and expanded to commute to these office hubs in Milk Colony and traverse through PRICE RANGE IN H2 2016 LOCATION 12 MONTH CHANGE 6 MONTH CHANGE Cits geographical footprint future as well. However, an already Padi, Valasaravakkam, (`/SQ FT) towards its southern and western stretched road infrastructure scenario and end at SIPCOT to the west of the Chennai 4,665 1.5% 0.5% boundaries along the OMR and GST will be further aggravated as this OMR line. Premium markets 14,900 3.0% 2.0% roads and the Bengaluru highway. length of road is bereft of MRTS or These two lines will provide The OMR especially has been the metro connectivity the way things comprehensive connectivity to the PRICE MOVEMENT IN SELECT LOCATIONS focus of development as the state stand now. OMR from the central and western PRICE RANGE IN 12 MONTH 6 MONTH government established an IT corridor LOCATION MICRO-MARKET There is a pressing need to provide locations of Chennai. In tandem H2 2016 (`/SQ FT) CHANGE CHANGE along the six lane highway to promote an alternate means of efficiently with the suburban railway line and Anna Nagar Central Chennai 10,700–11,900 2% 1% a progressive and IT friendly image commuting to and from the entire the six lane highway, the metro will Adyar Central Chennai 16,650–17,800 1% 1% of Tamil Nadu. The OMR stretch, length of this IT corridor. The OMR is be instrumental in further boosting consequently, has seen prodigious Kilpauk Central Chennai 14,800–16,000 3% 0% perpetually in a state of congestion the residential and commercial growth over the past decade, as especially during peak hours when attractiveness of the OMR. T. Nagar Central Chennai 18,250–19,350 3% 1% quality office spaces tailor-made for commuter traffic is at its height. Alandur Central Chennai 7,000–7,500 2% 2% the IT/ITeS and other services sectors To address this, a detailed plan have come up, and this stretch Porur West Chennai 5,200–5,500 2% 2% of Phase II of the metro has been currently houses over half of the office Ambattur West Chennai 4,100–4,600 2% 1% drawn up by the Chennai Metro Rail stock in the city. Ltd. and recently submitted to the Mogappair West Chennai 6,200–6,700 2% 2%

Residential development also followed state government. Currently, the Iyyappanthangal West Chennai 4,000–4,500 2% 2% growing employment opportunities on suburban rail network extends only till Sriperumbudur South Chennai 2,700–3,200 2% 1% the OMR as corporates progressively Perungudi on the OMR but the Phase set up shop there. The fact that II plan of the metro has envisaged a Perumbakkam South Chennai 4,100–4,500 1% 0%

2016 saw vacancy levels in the PBD route that will start at Madhavaram Chrompet South Chennai 4,200–4,700 1% 0% OMR and GST business district Milk Colony in the north and pass Sholinganallur South Chennai 4,500–5,500 2% 1% halve since a year ago from 50% to through dense residential catchments Guduvancheri South Chennai 3,200–3,700 1% 0% 26% currently bears testament to its of Perambur, Luz, Adyar and the East growing popularity among corporate Coast Road to end at Shollinganallur Kelambakkam South Chennai 3,500–3,900 0% 0% occupiers. As the government on the OMR. While this metro line Tondiarpet North Chennai 4,500–4,800 1% 0% continues to promote the OMR as an will run along the OMR and connect Kolathur North Chennai 4,800–5,500 2% 1% IT corridor, an estimated 80% of the it to central locations, the Phase II of IT/ITeS and other services sectors’ the metro also has plans of a metro Madhavaram North Chennai 4,500–5,000 2% 0%

Perambur North Chennai 6,200–6,500 2% 1%

Source: Knight Frank Research

56 57 INDIA REAL ESTATE RESEARCH

OFFICE MARKET RE NEW COMPLETION AND TRANSACTION OF OFFICE SPACE

CHENNAI OFFICE MARKET STOCK, NEW COMPLETIONS, TRANSACTIONS NEW COMPLETION TRANSACTION The SBD and PBD OMR AND VACANCY TRENDS 3.5 3.0 and GST business districts RE 2.5 have seen the most drastic CHENNAI OFFICE NEW COMPLETION AND TRANSACTIONS – ANNUAL TREND 2.0 fall in vacancy levels during NEW COMPLETION TRANSACTION 1.5

mn sq ft 2016. While the SBD 8 1.0 7 vacancy levels are now 0.5 6 under 5%, the latter has 0 5 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 seen vacancy levels nearly 4

Number of units 3 Source R halve during 2016 2 coupled with the drastic fall GST business districts have seen 1 in supply, have pushed down the most drastic fall in vacancy 0 2010 2011 2012 2013 2014 2015 2016 vacancy levels. The fact that the levels during 2016. While the SBD city saw just 2.7 mn sq ft of supply vacancy levels are now under 5%, Source R coming online since H1 2015, the latter has seen vacancy levels compared to the 10.3 mn sq ft of nearly halve during 2016. RE office space taken up, has caused • The total office space transaction CHENNAI OFFICE SPACE STOCK AND VACANCY LEVEL vacancy levels to plummet from volume in H2 2016 was 3.3 mn sq STOCK OCCUPIED STOCK VACANCY (RHS) 22.5% in H1 2015 to 12.2% H2 ft, while only 0.2 mn sq ft of new 80 30% 2016. office space came online. 70 25% • The SBD and PBD OMR and 60 20% 50 40 15% SECTOR ANALYSIS

mn sq ft 30 10% RE 20 5% SECTOR-WISE SPLIT OF TRANSACTIONS 10

0 0% H2 2015 H1 2016 H2 2016 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 50% Source R 40% H2 2016 experienced • The Chennai office space market period in the history of the Chennai 30% the highest transaction moved from strength to strength office space market on the back as demand rose for the fourth of big-ticket transactions by TCS, 20%

levels of any half-yearly

consecutive year despite the acute Accenture, General Electric and period in the history of 10% space crunch afflicting the market. IVTL Infoview among others. the Chennai office space 0 • Retaining the momentum gained • Conversely, supply numbers BFSI* IT/ITeS MANUFACTURING OTHER SERVICE SECTORS market on the back of last year when the office market hit historical lows as the supply Source R big-ticket transactions by achieved record transaction levels, crunch continues to hamstring Note: BFSI includes BFSI Support Services TCS, Accenture, General 2016 has exceeded the previous the market. 2016 witnessed just year’s heights by 4% and ended 0.5 mn sq ft of office space come Electric and IVTL Infoview the year at 5.3 mn sq ft online, compared to 2.1 mn sq ft in among others the previous year. • H2 2016 experienced the highest transaction levels of any half-yearly • Spiralling transaction numbers,

58 59 INDIA REAL ESTATE RESEARCH

SELECT TRANSACTIONS

OCCUPIER BUILDING LOCATION APPROX. AREA (SQ FT) 3.1 1.9 3.3 Divya Sree Point Accenture Sholinganallur 300,000 MN SQ FT MN SQ FT MN SQ FT Chennai One TCS Thoraipakkam 330,000

H2 2015 H1 2016 H2 2016 Prince Technopark IVTL Infoview Thoraipakkam 180,000

Ramanujan IT City GE Electric Taramani 174,000

Ramanujan IT City Astra Zenca Taramani 157,000 • The Chennai office market has share in recent times. The sector Over half of the space traditionally been anchored by accounted for 1.3 mn sq ft of office Chennai One Icon Clinic Thoraipakkam 126,000 taken up by the the IT/ITeS sector and recent space transactions in H2 2016. SP Infocity Fresh Desk Kandanchavadi 78,000 periods—especially the last Accenture, TCS and IVTL Infoview manufacturing sector 18 months—have seen the were among the most active IT/ Ramanujan IT City Society General Taramani 69,000 was accounted for by manufacturing sector also gaining ITeS companies during this period. Ramanujan IT City Philips Taramani 69,000 in market share. Ramanujan IT City in • The share of the manufacturing Source: Knight Frank Research Taramani on the SBD • The BFSI sector, that had built up sector has been on the rise, OMR some momentum in 2015, saw its as the bulk of the quality office share fall to 13%, as BFSI majors spaces available in recent times, BUSINESS DISTRICT ANALYSIS could not expand or set up new particularly in the SBD, conformed back office operations due to the to their requirements compared BUSINESS DISTRICT CLASSIFICATION lack of large format office spaces. to those of IT/ITeS companies BUSINESS DISTRICTS MICRO-MARKETS and BFSI back office operations. • The IT/ITeS sector continues to Companies from this sector such Central business district (CBD and off-CBD) Anna Salai, RK Salai, Nungambakkam, Greams Road, Egmore, T. Nagar be the largest consumer in the as General Electric, Astra Zeneca Chennai office space market Suburban business district (SBD) Mount–Poonamallee Road, Porur, Guindy, Nandanam and Philips took up significantly despite the manufacturing and large office spaces in the city. SBD – Old Mahabalipuram Road (OMR) Perungudi, Taramani other service sectors gaining Peripheral business district (PBD) – OMR and OMR beyond Perungudi Toll Plaza, GST Road DEAL SIZE ANALYSIS Grand Southern Trunk Road (GST)

• The dearth of fresh office space PBD – Ambattur Ambattur RE supply failed to deter occupier DEAL SIZE ANALYSIS • The OMR attracted over 75% has seen this number almost by the manufacturing sector was interest as H2 2016 saw the AVERAGE DEAL SIZE ( SQ.FT) NUMBER OF DEALS ( RHS ) of the demand during H2 2016 halve in H2 2016. Occupiers, accounted for by Ramanujan IT number transactions as well as 40,000 120 as occupiers took up space in especially from the IT/ITeS industry City in Taramani on the SBD OMR. the average deal size come close 35,000 the relatively lower priced SBD took up space in Thoraipakkam, 100 to H2 2015 levels. This bodes well • Just three locations— OMR and the PBD OMR and GST Sholinaganallur, and Navallur in 30,000 Thoraipakkam, Taramani and 80 for the market and depicts its 25,000 business districts. projects such as Chennai One, underlying strength. Kandanchavadi—accounted for 20,000 60 Prince Technopark and ETA mn sq ft • The PBD OMR and GST business over half of the total transacted 15,000 NUMBER Technopark. 40 district that had vacancy levels as volume in H2 2016. 10,000 20 high as 50% at the end of 2015, • Over half of the space taken up 5,000

0 0 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016

Source R

60 61 INDIA REAL ESTATE RESEARCH

RE CHENNAI BUSINESS DISTRICT MAP BUSINESS DISTRICT-WISE TRANSACTIONS SPLIT

H2 2015 H2 2016 45%

40% 35% 30% 25% The IT/ITeS sector

20% mn sq ft 15% continues to be the 10% largest consumer in the 5% 0 Chennai office space CBD SBD PBD SBD PBD OMR & PBD Ambattur AMBATTUR OMR GST market despite the Ambattur Source R manufacturing and other Egmore Greams Road service sectors gaining Porur Nungambakkam share in recent times. The Mt. Poonamallee T Nagar CBD & OFF-CBD Road Anna Salai RK Salai 3.1 3.3 sector accounted for 1.3 SBD MN SQ FT MN SQ FT Nandanam mn sq ft of office space Guindy Taramani H2 2015 H2 2016 transactions in H2 2016 SBD OMR Perungudi

GST Road OMR RENTAL TREND PBD GST PBD OMR RE WEIGHTED AVERAGE RENTAL MOVEMENT (INR/SQ.FT./MONTH)

56

54

52

50

48

INR \ sq. ft.\month 46

44

42 Major Roads U/C Metro Corridor I 40 U/C Metro Corridor II H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 Railway Line

Source R

62 63 INDIA REAL ESTATE RESEARCH

BUSINESS DISTRICT-WISE RENTAL MOVEMENT

RENTAL VALUE BUSINESS 12 MONTH 6 MONTH RANGE IN H2 2016 DISTRICT CHANGE CHANGE (`/SQ FT/MONTH)

CBD and off-CBD 60–95 4% 2%

Rental growth was PBD OMR and GST 25–35 6% 4% Road healthy across micro- markets, and SBD SBD OMR 45–80 6% 3% locations such as PBD Ambattur 28–35 3% 1% Perungudi, Guindy and SBD 50–65 4% 2%

Taramani continued to Source: Knight Frank Research witness above-average rental growth, particularly • Rental values have seen a • Rental growth was healthy across as vacancy levels sustained rise since 2013 on the micro-markets, and SBD locations back of steady demand and a such as Perungudi, Guindy and dropped to as low as 4% much more drastic reduction in Taramani continued to witness in the SBD and 12% on office space inventory coming above-average rental growth, the SBD OMR online during successive years. particularly as vacancy levels dropped to as low as 4% in the • The lack of vacant office stock, SBD and 12% on the SBD OMR. coupled with steady demand, has pushed weighted average rentals in the Chennai office space market to `55 per sq ft per month at the end of H2 2016 – a significant 5.4% growth YOY.

64 65 Ankita Nimbekar Lead Consultant Research

HYDERABAD INDIA REAL ESTATE RESEARCH

FIGURE 2 RESIDENTIAL MARKET HYDERABAD MARKET TREND - HALF YEARLY

HYDERABAD RESIDENTIAL MARKET LAUNCHES, STOCK OCCUPIED STOCK VACANCY SALES AND PRICE TRENDS 70 12% 60 10% 50 8% FIGURE 1 40 HYDERABAD MARKET TREND - ANNUAL 6% 30 Move to demonetise LAUNCHES SALES 4% 20 high value currency 25,000 10 2% notes on 8 November 20,000 0% H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 2016 disrupted market

15,000 Source R sentiment and accordingly

10,000 created a major dent on FIGURE 3 the residential market in 5,000 IMPACT OF DEMONETISATION: QUARTERLY LAUNCHES AND SALES TREND Q4 2016 which saw sales LAUNCHES SALES 2010 2011 2012 2013 2014 2015 2016 plunge by 40% to 3,034 6,000 Source R units 5,000 • The Hyderabad residential market • The buoyancy observed in the withered over the last five years Hyderabad office market has had 4,000 after peaking in 2012. While the a positive impact on the residential 3,000 city observed more than 22,700 launches and sales. New launches units in new launches and 19,000 witnessed a growth of 3% in H2 2,000 units in sales during 2012, these 2016 compared to H2 2015. On the 1,000 numbers have fallen by 49% and other hand sales have dropped by 21% respectively since then. 6% during H2 2016 compared to same period previous year. • Steady sales volume from 2010 to 2012 led to aggressive new • Hyderabad residential market Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 launches by developers during that observed substantial recovery in Source R period. However, developers soon Q3 2016, where in launches and MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES acknowledged piling-up of unsold sales witnessed a 37% and 56% inventory in the city and lowered increase compared to the same FIGURE 4 the number of new launches from quarter last year. MICRO-MARKET SPLIT OF LAUNCHED UNITS 2013 onwards. Although there is a Hyderabad residential • Move to demonetise high value substantial drop in the number of H2 2015 H1 2016 H2 2016 market observed currency notes on 8 November new launches, sales volume have 1 2016 disrupted market sentiment substantial recovery in Q3 remained more or less stable. and accordingly created a major 0.8 2016, where in launches • The reduction in new launches dent on the residential market 0.6 and sales witnessed a with each passing year and stable in Q4 2016 which saw sales 37% and 56% increase sales volume helped in rebalancing plunge by 40% to 3,034 units. 0.4 the market to a great extent as the We reckon that had not been the 0.2 compared to the same unsold inventory level dropped to demonetisation move, the H2 2016

quarter last year its lowest level in the last six years sales number would have been 0 to 28,088 units in H2 2016. much higher in comparison to H2 CENTRAL EAST NORTH SOUTH WEST

2015. Source R

68 69 INDIA REAL ESTATE RESEARCH

MICRO-MARKET-WISE RESIDENTIAL SALES 5,740 5,700 5,900 MICRO-MARKET LOCATIONS UNITS UNITS UNITS HMR – Central Begumpet, Banjara Hills, Jubilee Hills, Panjagutta, Somajiguda H2 2015 H1 2016 H2 2016 HMR – West Kukatpally, Madhapur, Kondapur, Gachibowli, Raidurgam HMR – East Uppal, Malkajgiri, L.B. Nagar

HMR – North Kompally, Medchal, Alwal, Quthbullapur • All the residential micro-markets sector hubs such as HITEC City HMR – South Rajendra Nagar, Shamshabad witnessed project launches in the and Gachibowli continue to attract `2.5–5mn ticket size range, with young IT employees that form the HYDERABAD CITY MAP basic amenities that are preferred bulk of the city’s workforce. Nearly by mid-segment buyers. 73% of the new launches occurred in mid to high end segment in West • The `5–7.5mn ticket sizes saw Hyderabad during H2 2016. the most launches concentrated largely in the West zone. The • Hitech city Manikonda and demand for homes with good Narsingi in West Hyderabad amenities is quite high in this zone, saw maximum project launches as most of the buyers work for IT/ during H2 2016 from prominent Kompally ITeS companies and have certain developers such as Aditya, lifestyle expectations from the Antriksh and Janpriya.

projects. Qutubullapur • Projects with average ticket sizes Kukatpally • West Hyderabad attracts most above `10 mn were launched Madinaguda of the development interest in largely in the western and central Serilingampally the city, as its residential ethos locations in H2 2016. Kondapur and proximity to IT/ITeS and BFSI Begumpet Hitec city Gachibowli Madhapur Ameerpet FIGURE 5 Jubilee hills Somajiguda Pocharam Nanakramguda TICKET SIZE SPLIT OF LAUNCHES IN H2 2016 Banjara hills Manikonda HMR - WEST HMR - SOUTH HMR - SOUTH HMR - EAST HMR - CENTRAL Uppal The `5–7.5mn ticket sizes Kokapet saw the most launches 100% 90% concentrated largely 80% 70% in the West zone. The 60% L B Nagar demand for homes with 50% 40% Rajendra Nagar good amenities is quite 30% 20% high in this zone, as 10% 0% most of the buyers work <2.5 mn 2.5-5 mn 5-7.5 mn 7.5-10 mn 10-20 mn > 20 mn Proposed Ring Road for IT/ITeS companies Major Road Source R Under Construction Metro Phase-1 and have certain lifestyle Shamshabad Corridor 1 Corridor 2 expectations from the Corridor 3 MMTS Phase I in Use MMTS Phase II in Use projects MMTS Phase II Proposed Railway Line with Station

70 71 INDIA REAL ESTATE RESEARCH

FIGURE 6 MICRO-MARKET SPLIT OF SALES • West Hyderabad remains the H2 2015 H1 2016 H2 2016 preferred market, largely because NARSINGI-PUPPALGUDA: buyers have a preference for ready 0.7 to move in properties closer to 0.6 AN UPCOMING RESIDENTIAL the office hubs. Nearly 60% of the 0.5

home sales took place in this zone. 0.4 • .While the relative shares of 0.3 DESTINATION the various residential zones in 0.2 Hyderabad have not deviated 0.1 much, the Central and North zones 0 oth Puppalguda and Narsingi is connected to HITEC City via the compared to Kondapur which has CENTRAL EAST NORTH SOUTH WEST witnessed an increase in their lie just south of HITEC city Lanco Hills road and HITEC City similar connectivity characteristics. shares of sales in H2 2016 due Source R and Gachiwbowli, which main road. An alternative route exists We expect that, as the demand- to a proportional increase in the B have seen the bulk of the office space via the ORR through the Narsingi- supply equation tightens further number of launches during the same period. development in Hyderabad during the Puppalguda main road, which is due to the reasons discussed 7,78 0 7,70 0 7, 2 9 0 last 15 years. During this period, both, highly congested and in a state of earlier, prices in the Puppalguda- UNITS UNITS UNITS HITEC City and Gachibowli have also disrepair, thus taking much more time Narsingi cluster will grow by 41% evolved as residential destinations, to traverse. However, this location will and reach approximately `4,100 per H2 2015 H1 2016 H2 2016 commanding prices in the range of be connected directly to the ORR via sq ft by 2020. Prices in this cluster `4,200-5,800 per sq ft. Proximity to the radial road no.5 which is a four will continue to lag behind those employment hubs and higher-priced lane road currently under construction in Kondapur but the discount will residential locations, along with and will cut the current road commute reduce from the existing 40% to 33% MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION infrastructure development, will be the to HITEC City from 25-30 minutes by 2020.The Puppalguda- Narsingi primary drivers for price growth in the to approximately 15 minutes. These cluster, however, is expected to see UNITS AS OF DECEMBER 2016 Puppalguda-Narsingi cluster. locations are also well supported far greater traction in average prices • The growth of the IT corridor by adequate social infrastructure, on the back of increased demand Close to 50 mn sq ft (approximately FIGURE 7 and financial district together MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS such as major malls, hospitals and due to improved connectivity, supply with the growth of an organised 625,000 employees) or nearly 80% of AS OF DECEMBER 2016 educational institutions - all within constraints and the fact that this will retail market, has enhanced the existing office stock in Hyderabad a 30-minute drive. The international be arguably the only location within a 5% CENTRAL the residential appeal of West situated in locations such as HITEC EAST 4% airport is also just a 30-minute drive 20-minute commute from HITEC City Hyderabad. This zone accounts City, Gachibowli, Nanakramguda, away. Also under construction is a and Gachibowli at such a low price for the largest share of the under- Raidurgam, Kondapur and Kothaguda construction inventory, followed by flyover that will connect the cluster base. NORTH 16% can be accessed within 30 minutes the North, South, Central and East to the Old Mumbai Highway close from the Puppalguda-Narsingi cluster WEST SOUTH markets respectively. to Toli Chowki, further improving its 60% 15% via road. Additionally, approximately • The buyers’ preference for connectivity to the city centre. We 10 mn sq ft of office space is locations in the West zone is also believe that all these factors will prove expected to attain completion within reinforced by the fact that it has to be strong demand drivers for the the lowest proportion of unsold this catchment over the next five Source R Puppalguda-Narsingi cluster, going inventory in relation to under- years. This translates into incremental forward. construction units. employment for an additional 125,000

• Conversely, the East and South employees. Currently, average prices in this cluster are at `2,900 per sq ft and zones have the highest proportion Currently, a large portion of of unsold inventory of under- trade at a significant 40% discount, Puppalguda that lies east of the ORR construction units.

72 73 INDIA REAL ESTATE RESEARCH

PREMIUM RESIDENTIAL MARKET LAUNCHES, SALES HYDERABAD MARKET HEALTH

AND PRICE TRENDS FIGURE 9 QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS MICRO-MARKETS PREMIUM LOCATIONS HYDERABAD MARKET PREMIUM MARKET

HMR – Central Banjara Hills, Begumpet, Jubilee Hills, Srinagar Colony, Somajiguda 12.00

HMR – West Madhapur 10.00 8.00

6.00 FIGURE 8 PREMIUM MARKET LAUNCHES AND SALES 4.00 2.00 LAUNCHES SALES WT. AVG. PRICE (RHS) 800 6200 We believe that the year 700 6100 FEB 15 FEB 16 JUN 14 JUN 15 JUN 16 APR 15 APR 16 DEC 14 DEC 15 DEC 16 OCT 14 OCT 15 OCT 16 AUG 14 AUG 15 AUG 16 2016 would have been 600 6000 Source R 500 5900 marginally better than 400 5800 FIGURE 10 2015 had it not been for 300 5700 MICRO-MARKET-WISE QTS VS AGE OF INVENTORY 200 5600 the demonetization move, 100 5500 HMR - CENTRAL HMR - EAST HMR - NORTH HMR - SOUTH HMR - WEST as the sales number for 0 5400 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 22 the first nine months were 20 showing positive trend Source R 18 16 Note: Premium markets include locations where the average ticket size of a residential unit is 14 above `15 mn, are in proximity to the central business district of the city and have witnessed 12 new project launches in the preceding three years 10 8 • Hyderabad’s premium market • Despite unsold inventory 6 constituting locations such pressures, developers continue

Age of unsold inventory in quarters 4 0 5 10 15 20 as Banjara Hills, Jubilee Hills, to be bullish about the premium QTS

Madhapur, Somajiguda and segment. The weighted average Source R Srinagar Colony, among others, price moved up 4% in H2 2016 YoY has experienced a substantial 56% and stands at `6,085 per sq ft. • The quarters to sell unsold helped the QTS level stay range- 2016, while demand remained YoY de-growth in launches in H2 inventory (QTS) is the number bound; improving sales volume constricted. of quarters required to exhaust has helped in unwinding the unsold 2016. • It is clear from the market health the existing unsold inventory in inventory levels. The consistently- • Sales volume also witnessed a chart that the central zone is the the market. The existing unsold declining unsold inventory levels significant decline of 45% in H2 healthiest market today, as it has The Hyderabad market inventory is divided by the and strong demand should help 2016 compared to the same period the lowest QTS, and comparatively, average sales velocity of the eight the market health further, going QTS has been range- last year. Increased new launches the youngest unsold inventory preceding quarters in order to forward. and constricted demand have among all the residential markets bound between 8–9 arrive at the QTS number for that led to an inventory pile-up in this • Moving from a QTS level of just 9.3 of Hyderabad. This could be quarters. Now at 8 particular quarter. A lower QTS segment, where the quarters to in H2 2015 to 10.21 in H2 2016, the attributed to the limited inventory indicates a healthier market. quarters, the QTS is at a sell (QTS) has gone up to 10. premium segment has deteriorated and inherent supply constraints in very healthy level and is at • The Hyderabad market QTS has much more rapidly compared to this zone. been range-bound between 8–9 the overall Hyderabad residential its lowest in the last four • West Hyderabad follows closely on quarters. Now at 8 quarters, the market, as the supply of projects the same parameters. Its relative years QTS is at a very healthy level and is with average ticket sizes over health can be gauged quite clearly at its lowest in the last four years. `15 mn increased dramatically, from the fact that it has a lower especially in the second half of • The steady fall in launches has QTS (6.7 )and that its inventory

74 75 INDIA REAL ESTATE RESEARCH

also gets liquidated much quicker proportion of unsold inventory to inventory, while South Hyderabad than the other markets despite under-construction stock is also will take the most time to liquidate OFFICE MARKET it having the largest block of the lowest among all the zones. its existing unsold inventory. unsold inventory. Incidentally, its HYDERABAD OFFICE MARKET STOCK, NEW COMPLETIONS, TRANSACTION • East Hyderabad holds the oldest AND VACANCY TRENDS PRICE MOVEMENT IN H2 2016

FIGURE 1 • The weighted average asking comparison shows a 2% growth across locations in central and HYDERABAD OFFICE SPACE STOCK AND VACANCY LEVELS prices for the Hyderabad in prices for the market owing to west Hyderabad due to a limited residential market grew marginally stable demand. inventory and launches at higher NEW COMPLETIONS TRANSACTION by 3.0% YoY to `3,710 psf price ranges respectively. 8 • Prices continued to firm up during H2 2016. A six monthly 7 6 WEIGHTED AVERAGE PRICE MOVEMENT IN HYDERABAD 5 4 PRICE RANGE IN H2 2016

LOCATION 12 MONTH CHANGE 6 MONTH CHANGE mn sq ft 3 (`/SQ FT) 2 Hyderabad 3,710 3.0% 2.0% 1 0 Premium markets 6,085 4.0% 2.0% 2011 2012 2013 2014 2015 2016

Source R PRICE MOVEMENT IN SELECT LOCATIONS

PRICE RANGE IN 12 MONTH 6 MONTH LOCATION MICRO-MARKET FIGURE 3 H2 2016 (`/SQ FT) CHANGE CHANGE HYDERABAD MARKET TREND - HALF YEARLY

Begumpet Central 4,500–6,000 2% 1% STOCK OCCUPIED STOCK VACANCY

Banjara Hills Central 7,000–9,000 3% 0% 70 12% 60 10% Jubilee Hills Central 4,500–6,200 2% 0% 50 8% Madhapur Central 5,800–7,800 3% 1% 40 6% Uppal East 2,600–2,800 4% 0% 30 4% 20 L. B. Nagar East 2,500–2,900 3% 2% 10 2% Nacharam East 2,200–2,800 3% 1% 0% H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 Kompally North 2,200–3,100 2% 1% Source R Quthbullapur North 2,100–2,600 1% 0% • The Hyderabad office market • The vacancy ranges between witnessed its highest yearly office 9–10% on a stock of 57.3 mn sq The Hyderabad office Shamirpet North 2,000–2,400 1% 0% space transaction in 2016. Nearly ft in the Hyderabad market. This market witnessed its Shamshabad South 2,300–3,000 0% 0% 6 mn sq ft of office space was implies that a meager 5.6 mn sq highest yearly office space transacted during the year, which ft of office space is available in Bandlaguda South 2,200–3,100 0% 0% transaction in 2016. Nearly was 31% higher than the 4.6 mn sq the market across all business Rajendranagar South 2,100–3,100 2% 0% ft mark achieved in 2015. districts. Such low vacancy is one 6 mn sq ft of office space of the biggest challenges for the Kondapur West 4,000–5,200 2% 1% • In terms of new completions, was transacted during Hyderabad market as occupier approximately 6 mn sq ft of office the year, which was 31% Gachibowli West 3,800–4,750 4% 1% interest continues and quality space was delivered during the office space is not available. It also higher than the 4.6 mn sq Manikonda West 3,400–4,500 3% 1% year, mostly in SBD and PBD West. includes office stock in locations ft mark achieved in 2015 This was higher by 54% from the Kukatpally West 2,800–4,000 4% 1% that are not much preferred by 3.9 mn sq ft delivered during 2015. Madinaguda West 2,600–3,350 3% 1% occupiers. Moreover, vacancy

Source: Knight Frank Research 76 77 INDIA REAL ESTATE RESEARCH

levels in the most sought-after transactions for the Hyderabad locations like HITECH City, office market. Gachibowli and Nanakramguda • On the other hand, new are as low is 2–4%. completions have remained 3.1 2.8 3.2 Nearly 2.7 mn sq ft of • H2 2016 recorded one of the tepid at 2.2 mn sq ft in H2 2016; MN SQ FT MN SQ FT MN SQ FT office space, including highest transaction volumes at a large share of this was already pre-commitments, was 3.2 mn sq ft. This was 3% higher pre-committed in the previous H2 2015 H1 2016 H2 2016 than H2 2015, when 3.1 mn sq ft quarters. transacted by IT/ITeS of space was absorbed, which companies in H2 2016. H2 2016 recorded one was the highest ever half-yearly Google, FactSet and of the highest transaction • Although the IT/ITeS sector • The share of the other services has traditionally dominated the sector dropped drastically, to as Genpact were some of the volumes at 3.2 mn sq RE NEW COMPLETION AND TRANSACTION OF OFFICE SPACE transaction pie in the Hyderabad low as 3%, in H2 2016 compared prominent occupiers in the ft. This was 3% higher office space market, its share to 39% during the same period in NEW COMPLETION TRANSACTION IT/ITeS category, taking up than H2 2015, when 3.1 7 soared further to 87% during 2015. Approximately 130,000 sq ft large office spaces during mn sq ft of space was 6 H2 2016. Nearly 2.7 mn sq ft of space taken up by Red Bricks of office space, including pre- in Nanakramguda is the biggest 5 H2 2016 absorbed, which was commitments, was transacted by transaction in this sector. 4 the highest ever half- IT/ITeS companies in H2 2016. 3

mn sq ft Google, FactSet and Genpact were yearly transactions for the 2 some of the prominent occupiers Hyderabad office market 1 in the IT/ITeS category, taking 0 up large office spaces during H2 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 2016.

Source R DEAL SIZE ANALYSIS

FIGURE 5 SECTOR ANALYSIS DEAL SIZE ANALYSIS AVERAGE DEAL SIZE (SQ FT) NUMBER OF DEALS (RHS)

FIGURE 4 70000 120 SECTOR-WISE SPLIT OF TRANSACTIONS 60000 100 H2 2015 H1 2016 H2 2016 50000 80 1 40000 60 7 0.9 sq ft 30000 0.8

40 No. of deals 0.7 20000 61 0.6 10000 20 0.5

0 0 0.4 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 0.3 20

0.2 1 7 Source R 10 7 0.1 1 0 BFSI IT/ITES OTHER SERVICES MANUFACTURING • The average deal size in H2 2016 • The sequential increase in the SECTOR was reported to be 40,600 sq ft, number of deals, coupled with Source R which is 24% more than the H2 decent transaction size, also 2015 level. The IT/ITeS sector led indicates greater confidence in terms of big-ticket transactions, among occupiers to take up office majority of them being in the range space in the market. of 100,000 sq ft and above.

78 79 INDIA REAL ESTATE RESEARCH

SELECT TRANSACTIONS

OCCUPIER BUILDING LOCATION APPROX. AREA (SQ FT) 3.1 3.2 MN SQ FT MN SQ FT Google Meenakshi Technova Nanakramguda 500,000 H2 2015 H2 2016 FactSet DivyaSree Orion Raidurg 430,000

Genpact Phoenix Hafeezpet 350,000 • The business district that to the SBD in terms of quality of format office spaces left, pushed Synchrony Financial Knowledge City Madhapur 220,000 experienced the maximum office development for the IT/ITeS occupiers to take up spaces in CTS Avance (H3) Madhapur 200,000 increase in market share during sector, and contributed nearly 20% PBD West. H2 2016 was SBD, due to the of the transacted space during H2 Red Bricks Phoenix Nanakramguda 130,000 • Just three locations—Gachibowli, comparatively greater availability 2016. Madhapur and Nanakramguda— ZF Group Palanadu Aster Nanakramguda 112,000 of good quality office spaces in • The spill-over demand from the accounted for almost 75% of the locations such as Gachibowli and Cigniti Ascendas Nanakramguda 108,000 SBD’s IT/ITeS hotspots, such as space transacted during H2 2016. Nanakramguda. Madhapur and Kondapur, which Source: Knight Frank Research • The PBD West is second only have almost no viable large- BUSINESS DISTRICT ANALYSIS HYDERABAD BUSINESS DISTRICT MAP BUSINESS DISTRICT CLASSIFICATION

BUSINESS DISTRICTS MICRO-MARKETS

Banjara Hills, Jubilee Hills, Begumpet, Ameerpet, Somajiguda, Himayat CBD and off-CBD Nagar, Raj Bhavan Road, Punjagutta

SBD Madhapur, Manikonda, Kukatpally, Raidurg

PBD West Gachibowli, Kokapet, Madinaguda, Nanakramguda, Serilingampally

PBD East Uppal, Pocharam Kukatpally Madinaguda

Serilingampally FIGURE 6 SBD PBD WEST Kondapur CBD & OFF-CBD BUSINESS DISTRICT-WISE SPLIT OF TRANSACTION Hitec city Begumpet Ameerpet Gachibowli Madhapur H2 2015 H2 2016 Jubilee hills Somajiguda Pocharam Nanakramguda PBD EAST 0.9 Banjara hills Manikonda 0.8 76 Uppal Kokapet

0.7 6 The spill-over demand 0.6 from the SBD’s IT/ 0.5 0.4 ITeS hotspots, such as 0.3 20

0.2 1 12 Madhapur and Kondapur, 11

0.1 1 which have almost no 0 SBD PBD WEST CBD & Off CBD PBD EAST Proposed Ring Road Major Road viable large-format office Under Construction Metro Phase-1 Source R Corridor 1 spaces left, pushed Corridor 2 Corridor 3 MMTS Phase I in Use occupiers to take up MMTS Phase II in Use MMTS Phase II Proposed spaces in PBD West Railway Line with Station

80 81 INDIA REAL ESTATE RESEARCH

RENTAL TREND

FIGURE 7 WEIGHTED AVERAGE RENTAL MOVEMENT

RENTS

50 47 43 45 42 39 40 40 37 37 35 30 25 20

` /sq ft/month 15 10 5 0 BUSINESS H2 2013 DISTRICT-WISE H1 2014 H2 2014 H1RENTAL 2015 H2 2015MOVEMENTH1 2016 H2 2016

Source R

RENTAL VALUE BUSINESS 12 MONTH 6 MONTH RANGE IN H2 2016 DISTRICT CHANGE CHANGE (`/SQ FT/MONTH)

CBD and off-CBD 42–48 3% 2%

SBD 43–55 16% 7%

PBD West 35–40 6% 4%

PBD East 27–32 1.5% 1%

SBD 50–65 4% 2%

Source: Knight Frank Research

• Rentals in the Hyderabad office • H2 2016 saw rental levels grow market, which had stagnated across locations, compared to till 2013, have seen a sustained the same period in the previous growth since 2014 due to year. The SBD locations, such as The lack of vacant office an improvement in business HITEC City and Kondapur, have sentiments, leading to strong witnessed the strongest rent stock, coupled with steady transaction volumes. growth in the market, particularly demand, has pushed the due to the absence of preferred • The lack of vacant office stock, space in this business district. weighted average rentals coupled with steady demand, in the Hyderabad office has pushed the weighted average • The PBD West experienced the space market to just over rentals in the Hyderabad office next highest growth in rentals on space market to just over `47 per the back of big-ticket deals by the `47 per sq ft per month sq ft per month at the end of H2 IT/ITeS and other services sectors. at the end of H2 2016, a 2016, a 12% growth YoY. 12% growth YoY

82 83 Sangeeta Sharma Dutta Assistant Vice President Research

KOLKATA INDIA REAL ESTATE RESEARCH

by 15% in H2 2016 vis-à-vis the RE corresponding period in 2015 (H2 RESIDENTIAL MARKET KOLKATA HALF-YEARLY LAUNCHES, SALES AND PRICE TREND 2015). In Q4 2016, the decline in LAUNCHES SALES WT. AVG. PRICE (RHS) KOLKATA RESIDENTIAL MARKET LAUNCHES, ABSORPTION launches was more pronounced at AND PRICE TRENDS 18,000 4,000 25%, as compared to the number 16,000 of launches in Q4 2015. 14,000 RE 12,000 • Similarly, the city’s sales volume, KOLKATA MARKET TREND - ANNUAL 10,000 3,500 driven largely by end users, saw 8,000 LAUNCHES SALES ` /sq ft a decline of 20% in H2 2016 as No. of units 6,000 35,000 4,000 compared to the sales in H2 2015. 2,000 The period Q4 2016, that was 30,000 - 3,000 instrumental in bringing down the 25,000 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 sales volume, also observed a dip 20,000 Source R of 20%, as compared to the sales 15,000 number in Q4 2015. No. of units 10,000 RE • The weighted average price 5,000 IMPACT OF DEMONETISATION: QUARTERLY LAUNCHES AND SALES TREND remained stagnant in H2 2016, 0 2010 2011 2012 2013 2014 2015 2016 LAUNCHES SALES depicting the fact that the market

12000 is almost at a standstill, despite Source R the decrease in new launches and 10000 • The Kolkata residential market, • The decline in sales volume was sales, waiting for clarity on factors such as RERA compliance, GST which had seen a peak in new primarily brought about in the 8000 launches in 2014, has been on a second half of the year (H2 2016) and demonetisation. continuous decline since then. by the uncertainty and lack of 6000 While the city observed almost clarity in the market post the No. of units 4000 30,000 units in new launches announcement of demonetisation during 2014, the numbers have of high value currency notes. 2000 fallen by 30% in 2016. However, • With most buyers preoccupied in 0 on a Year-Over-Year (YOY) settling down their own financial comparison between 2015 and

matters, purchasing of properties Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 2016, the city’s residential market in the short term has taken a observed a more restrained Source: R backseat, thereby reflecting in the decline in new launches, to the The decline in sales reduced sales volume in H2 2016. tune of 8% in 2016, over the MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES volume was primarily launches in 2015. • Kolkata residential market had brought about in the remained relatively stable in • In the last few years, Rajarhat has expected to maintain positivity launches in H2 2016, as compared • On the other hand, the end-user H1 2016 on YOY basis, with accounted for the largest share in regarding the housing demand in to 27% share in H2 2015. The second half of the year driven sentiments of the city led expectations of improvement in H2 the total number of new launches the forthcoming years, considering region has been a conventionally- the annual sales volume to remain (H2 2016) post the 2016. However, the announcement in the city owing to persistent the quantum of office-sector preferred residential destination mostly steady, from 2011 to 2013, announcement of the of the demonetisation initiative on interest from the developer development and infrastructure of the city, and in recent years a before reaching its peak last year demonetisation initiative. 8th November changed the market community. It emerged as the underway in the region. The road number of southern peripheral in 2015. scenario in the last quarter of the region with the highest number infrastructure is well-planned in the locations such as Narendrapur, On a half yearly basis, the • However, in 2016 on a YOY basis, year (Q4 2016) and led developers of residential units launched region with upcoming metro rail Sonarpur Road and Diamond decline in new launches in the city’s residential market saw and buyers alike to refrain from in Kolkata in H2 2016 as well, connectivity. Harbour Road have come up on sales undergo a steeper fall, making any property related accounting for a 40% share of the the developers’ radar as having H2 2016 was 15% while • South Kolkata observed a to the tune of 14%, as compared decisions. total number of new launches, growth potential for residential sales saw a dip of 20%, as substantial increase its share to 2015. although there was a decrease development, particularly for • Consequently, new launches fell of new launches in H2 2016. It compared to H2 2015 in the share compared to H2 budget housing. accounted for 34% of the total new 2015. Nevertheless, Rajarhat is

86 87 INDIA REAL ESTATE RESEARCH

RE FIGURE 5 MICRO-MARKET SPLIT OF UNITS LAUNCHED IN H2 2016 MICRO-MARKET WISE TICKET SIZE SPLIT OF LAUNCHED UNITS DURING H2 2016 H H H CENTRAL EAST NORTH RAJARHAT SOUTH

100% 90%

80% 70% 60% 50%

40% 30% 20% 10% CERA EAS RH RAARHA SH 0% <2.5 mn 2.5-5 mn 5-7.5 mn 7.5-10 mn > 10 mn S R Source R

MICRO-MARKET-WISE RESIDENTIAL SALES 10,680 11,891 9,093 UNITS UNITS UNITS MICRO-MARKET LOCATIONS

H2 2015 H1 2016 H2 2016 Central Park Street, Rawdon Street, A.J.C. Bose Road, Minto Park, Elgin Road East Kankurgachi, Beliaghata, Salt Lake, Narkeldanga, Keshtopur, E.M. Bypass (eastern parts)

North Baguiati, Ultadanga, Jessore Road, Shyambazar, Lake Town, B.T. Road, VIP Road

• North Kolkata’s share, which has remained almost constant Rajarhat Rajarhat New Town had seen a significant number of over the past months, at 10% South Ballygunge, Alipore, Tollygunge, Narendrapur, Behala, Garia, Maheshtala, E.M. Bypass (southern parts) new launches in 2015, has been during both H2 2015 and H2 2016. reducing gradually in the recent • On the ticket size front, both FIGURE 6 months, primarily owing to the Rajarhat and South Kolkata were MICRO-MARKET SPLIT OF SALES IN H2 2016 dearth of large, contiguous land responsible for a number of parcels in preferred residential H2 2015 H1 2016 H2 2016 affordable and mid-end projects in 50% markets close to the city centre.

H2 2016. South Kolkata observed 45% While its share of residential around 65% of its total launches 40% launches was at 20% in H2 2015, 35% North Kolkata’s share, below the ticket size of `5 mn it reduced to 15% in H2 2016. 30% while Rajarhat saw almost 60% of 25% which had seen a However, North Kolkata still its launches in the same category. 20% holds potential in the forthcoming significant number of new Although both the regions 15%

Rajarhat is expected

periods, owing to the existing and 10% launches in 2015, has dominated the number of launches 5% to maintain positivity upcoming phases of the metro in the high-end segment as well, been reducing gradually rail, impending infrastructure in 0% regarding the housing the total number of units launched CENTRAL EAST NORTH RAJARHAT SOUTH in the recent months, and around VIP Road and Jessore in the ticket size of over `10 mn demand in the forthcoming Road, and its proximity to Rajarhat S R primarily owing to the were limited and accounted for a years, considering the as well as the international airport. dearth of large, contiguous much smaller share in their total quantum of office- land parcels in preferred • The East zone, comprising launches in H2 2016. 9,170 10,339 7, 3 0 8 locations such as Salt Lake and UNITS UNITS UNITS sector development and residential markets close Kankurgachi, also observed a infrastructure underway in H2 2015 H1 2016 H2 2016 to the city centre limited number of new launches the region due to land constraints. Its share

88 89 INDIA REAL ESTATE RESEARCH

• Rajarhat witnessed the largest share reduce to 18% in H2 2016, share of the absorption in H2 from 21% in H2 2015. However, KOLKATA CITY MAP 2016, accounting for 35% share we expect this region to perform of the total sales volume during better in the forthcoming periods the period. However, this was a due to the abundance of mid-end Dankuni Agarpara considerable decrease, compared and affordable housing here. Uttarpara Michael Nagar to a higher share of 46% in H2 Belangara Nimta • East Kolkata accounted for 11% 2015. Dakshineshwar of the total number of sales in H2

NH Baluhati 2 North • On the other hand, South 2016, an improvement from H2 PWD Rd Belgharia Dumdum Jagadishpur Dunlop Babughat Mini Bus Terminus Netaji Subhas Kolkata observed a substantial 2015 when it had secured a mere The increase in sales Bally Chandra Bose Bonhoogly International Rajbari Airport improvement in its share of total 7% share. The eastern region in South Kolkata is rjee Rd ukh e Debirpara Baranagar A K M

NH sales. It followed Rajarhat closely is a much preferred domicile, Grand Trunk Rd Trunk Grand 34

Kashipur Rd Subhas Nagar Belur Math Belur Math attributable to the host Bus Terminus and accounted for a 34% share especially of the affluent class. It Belur Sinthi Motijheel of the sales volume in H2 2016, boasts of key commercial areas, of affordable and mid- Varanasi Rd Kashipur Dum Dum Rd Nazrul Islam Ave. Rajarhat which increased significantly from such as Salt Lake Sector V, and end housing that has Salap Liluah Gopalpur Chitpur its 25% share of the total sales the road infrastructure is well- Jessore Rd. Baguiati Belgachia come up in the peripheral Makarda Rd. Lake volume in H2 2015. The increase planned. Various flyovers provide Town Bankra Bagbazar Belgachia in sales is attributable to the host easy connectivity with the CBD, locations such as Baruipur, Jagachha Ultadanga Santragachhi Belilios Rd. Nazrul Islam Ave.Salt Lake City of affordable and mid-end housing thereby making it a sought-after Narendrapur and Garia, E a N s NH RS eta t ji e that has come up in the southern residential destination. S Maniktala r Central Park 117 ub Bantra n attracting the price hash Jorasanko Rd M M e Thakdari Rd peripheral locations such as t r o • Central Kolkata accounted for MG Rd. p conscious buyer GPO o l i t Baksara a Baruipur, Narendrapur and Garia, n Salt Lake B Bus Terminus marginal shares in the total sales Naora y p a Panchpara Dalhousie Square C hit aranjan Ave. s attracting the price conscious Grand Trunk Rd Grand Trunk Rd Bus Terminus Beliaghata Shibpur Nabanna volume in the primary market Bus Terminus buyer. Esplanade Shalimar Bus Terminus of the city, owing to a relatively smaller inventory size. NH 117 Tangra Race Course Beniapukur • Meanwhile, North Kolkata saw its Park Circus Karl Marx Sarani Garden Reach Dhapa Khidirpur Bhawanipur Bantala Rd Ballygunje Tiljala MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION Jud Alipore ge's Court Rd. Hazra Rd Kasba Chetla UNITS AS OF DECEMBER 2016 New Kalighat Alipore Dhakuria Southern Market Taratala Goalbati Orissa Trunk Rd RE Charu Market Santoshpur LEGEND MICRO-MARKET SPLIT OF UNDER CONSTRUCTION UNITS AS ON DEC 2016 Tallygunge Major Landmark Behala Tollygunge CTC Mukundapur Hospital Bus Terminus Jadavpur CERA EAS RH SH RAARHA Biren Hotel Ray Rd Kheyadah West Bagha Jatin Rd Village Cinema Baghajatin 1% CENTRAL Educational Institute Diamond Harbour Rd Sodepur EAST Paschim 12% Airport Putiary Bus Stand Naktala NH Railway Station 117 City Boundary 36% SOUTH National Highway Thakurpukur Garia NORTH 26% Major Road Srikhanda Rail Line Mandirtala Metro Joka Metro Elevated Rajpur Sonarpur Metro Underground Ghasiara RAJARHAT River Sankharipota 25% Map not to Scale Lakes/Ponds Vegetation Daulatpur Copyright © 2015 www.mapsofindia.com

Source R

90 91 INDIA REAL ESTATE RESEARCH

• South Kolkata accounts for a major Kolkata, recognised primarily as an under construction. This zone, share of the total number of units industrial area till recently. With a comprising several Action Areas, KOLKATA MARKET HEALTH under construction, to the tune of share of 26% of the total number has witnessed frenetic residential • The quarters to sell unsold 36%, given the fact that the region of units under construction, North activity in the last decade and FIGURE 9 inventory (QTS) is the number MICRO-MARKET-WISE QUARTERS TO SELL (QTS) VS AGE OF INVENTORY has been witnessing large-scale Kolkata observed the launch of a boasts the presence of most key of quarters required to exhaust residential development in the last number of large scale residential real estate developers. KOLKATA CITY PREMIUM MARKET the existing unsold inventory in few years. This region is preferred projects in the past two years in 14 • The central market has fairly the market. The existing unsold by potential buyers, chiefly due areas such as Sodepur, B.T. Road, 13 marginal share of units under inventory is divided by the average 12 to its good social infrastructure, Madhyamgram and Jessore Road, 11 construction, to the tune of sales velocity of the preceding causing developers to launch their led by reputed developers. 10 approximately 1%, while the eight quarters in order to arrive at 9 projects here. • Rajarhat has a 25% share of the eastern region accounted for 12% the QTS number for that particular 8 7 No. of Quarters • South Kolkata is followed by North total number of residential units share. quarter. A lower QTS indicates 6 a healthier market. Also, size of 5 4 PREMIUM RESIDENTIAL MARKET LAUNCHES, SALES the bubble indicates relative size of unsold inventory in terms of AR AR SE EC SE EC AND PRICE TRENDS SE EC

number of units. Source R MICRO-MARKETS PREMIUM LOCATIONS • The QTS for Kolkata currently FIGURE 10 Central Park Street, Rawdon Street, Shakespeare Sarani, Chowringhee Road stands at a little over eight quarters. The unsold inventory MICRO-MARKET-WISE QTS VS AGE OF INVENTORY

East Kankurgachi, Topsia of the city is recorded at 37,400 CENTRAL EAST NORTH SOUTH RAJARHAT units. Significantly, the QTS for 15 Rajarhat New Town the city’s premium markets, is 14 13 currently at 10.5 quarters. This is South Ballygunge, Alipore, Tollygunge, Bhowanipore, Jodhpur Park 12 largely attributable to the relatively 11 slow rate of sales observed in the 10

FIGURE 8 Note: Premium markets include locations premium housing segment in the 9 PREMIUM MARKET TRENDS where the average ticket size of a residential past. 8 unit is above `15 mn, are in close proximity 7 LAUNCHES SALES WT. AVG. PRICE (RHS) to the central business district of the city and • Among the various zones, Rajarhat Age of unsold inventory in quarters 6 15 have witnessed new project launches in the 5 900 9850 has the lowest QTS in H2 2016. 5 7 9 11 13 preceding three years 800 9800 Factors such as presence of office QTS 9750 700 S R 9700 projects, well-planned existing 600 9650 500 and upcoming road networks, the earlier as a residential destination, 9600 400 proposed metro connectivity within and it remains to be seen if the 9550 ` /sq ft No. of units 300 9500 Rajarhat and with other locations region will be able to hold on to the 200 9450 of the city, and proximity to the low QTS level in the forthcoming 100 9400 international airport as well as the periods. 0 9350 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 employment hub of Sector V have • With a QTS of 9.2, North Kolkata helped this micro-market perform Source R succeeded South Kolkata in the well in recent months. • Kolkata’s premium market, similar number of launches in H2 • On a similar vein, H2 2016 saw a QTS category. We expect this comprising locations such as 2016 as in H2 2015, the figure decline of 28% in sales compared • We infer South Kolkata as the market to pick up momentum once Chowringhee, Rawdon Street, is considerably lesser than the to the corresponding period in second best performing market in the infrastructure projects are Ballygunge and Jodhpur Park, number of launches six months 2015. H2 2016, after Rajarhat, owing to completed. among others, witnessed the previously in H1 2016. This is its low QTS. This is on account of • Meanwhile, the weighted average • East Kolkata emerged as the launch of a limited number of largely owing to the curbing of the steady rate of sales in the past price growth has remained region with the highest QTS in residential units in the segment premium projects in the wake of quarters. However, the region still stagnant in the premium segment the city, but with a lower age of in H2 2016. While the premium the demonetisation drive. accounts for the largest unsold in H2 2016. inventory. housing segment observed a inventory, having evolved much

92 93 INDIA REAL ESTATE RESEARCH

PRICE MOVEMENT IN H2 2016

CAN RAJARHAT HOLD Price appreciation across most locations in Kolkata during the last 12 months remained almost constant. Slight movement in prices was observed in select micro-markets in H2 2016, leading the weighted average prices to increase nominally by 1.1%. This movement in prices can be attributed to better sales in these locations. On the other hand, premium markets remained ON TO ITS POTENTIAL? almost stagnant.

sweeping drive across social infrastructure, amongst others. on metro railway is in progress that WEIGHTED AVERAGE PRICE MOVEMENT IN KOLKATA the north-eastern part of Another setback came with the would connect Rajarhat to the airport Kolkata takes one through Global Financial Crisis bringing about as well as to the southern part of city. PRICE RANGE IN H2 2016 A LOCATION 12 MONTH CHANGE 6 MONTH CHANGE a veritable panorama of swank an overall real estate slowdown. Further, the region was enabled with (`/SQ FT)

condominiums, glitzy shopping Soon, the residential and commercial 10.5 km of Wi-Fi Zone connecting the Kolkata 3,575 1.1% 0.1% mall and glass façade-clad tech projects that were ready for operation Main Arterial Road to the airport and Premium markets 9,780 0.8% 0.1% parks. These would come under could not find adequate occupancy to Salt lake Sector V, making it India’s Rajarhat, a vast area located in and Rajarhat, for a time, appeared to first Wi-Fi road connectivity. PRICE MOVEMENT IN SELECT LOCATIONS North 24 Parganas district in the have been losing its promised luster. Thus, while Rajarhat is gradually neighbourhood of Kolkata, that PRICE RANGE IN 12 MONTH 6 MONTH Circa 2016, things have changed in observing a good momentum on the LOCATION MICRO-MARKET was carved out of farmlands in the H2 2016 (`/SQ FT) CHANGE CHANGE Rajarhat. From being known largely residential front, it is imperative to late 1990s and marked for new as a mid-segment and premium note that a sustained growth requires Park Street Central 12,000–20,000 0% 0% age commercial and residential market, Rajarhat has emerged as a the contribution of the office sector Rowdon Street Central 10,000–19,500 0% 0% development. Ambitiously planned destination that caters to the need as well. Kolkata needs a demand out, the master plan envisioned a Ballygunge South 8,500–18,000 0% 0% of affordable housing as well. This driver in the form of the productive IT/ township within the region, called Tollygunge South 6,500–16,500 0% 0% has attracted a large number of ITeS sector that has been responsible New Town, which was at least three buyers into the region. In the last for creating a paradigm shift in Behala South 3,300–4,800 0% 0% times bigger than the adjacent few years, Rajarhat has consistently the economy and lead the growth Narendrapur South 2,600–4,350 1% 0% planned micro-market of Salt Lake been accounting for the largest share story of several other cities such as City. Kankurgachi East 6,000–9,150 0% 0% of new launches in the city. It has Hyderabad and Pune. These growth With the advent of several large also witnessed the largest share of stories have been backed by strong, Salt Lake East 5,000–8,000 0% 0%

national level developers into the sales on a Year-Over-Year basis. This proactive policies of the respective New Town Rajarhat Rajarhat 4,300–7,000 0% 0% Rajarhat market in the mid-2000s, demand-supply dynamics has been state governments, enabling the Madhyamgram North 2,550–3,300 1% 0% expectations rose exponentially catalyzed by improved infrastructure, industry to set up and expand with regarding the potential of the region. such as the well-planned existing ease. At present, the infrastructure BT Road North 3,200–4,500 1% 0% IT SEZs and tech parks dotted the and upcoming road network, the in Rajarhat is substantial enough to Jessore Road North 4,320–5,600 1% 0% landscape, turning the region to proposed metro connectivity within support the IT/ITeS sector and is Source: Knight Frank Research an impending second IT hub after Rajarhat and with other locations capable of offering equal opportunity Salt Lake Sector V. Residential of the city and its proximity to the to the sector as has been offered by projects were launched at prices international airport as well as Salt cities like Hyderabad. It remains to be that were considered premium for Lake Sector V. Rajarhat also enjoys seen if adequate government policies such peripheral locations. However, good road connectivity with Eastern are formulated that would improve the the development of this region took Metropolitan Bypass and Belgharia employment scenario in the region more time than was anticipated. The Expressway, each connecting it to and lead Rajarhat to fulfil the purpose journey was met by snags, primarily the southern and northern parts of for which it was created. accounted for by lack of physical and the city respectively. Currently, work

94 95 Vivek Rathi Vice President Research

MUMBAI INDIA REAL ESTATE RESEARCH

RE RESIDENTIAL MARKET IMPACT OF DEMONETISATION: QUARTERLY LAUNCHES AND SALES TREND

MMR RESIDENTIAL MARKET LAUNCHES, SALES AND PRICE TRENDS LAUNCHES SALES

25,000 • Early last year in H1 2016, the RE Mumbai Metropolitan Region MMR MARKET TREND- ANNUAL 20,000 (MMR) residential market LAUNCHES SALES witnessed its best growth 160,000 15,000 momentum after the 2008 global 140,000 No. of units financial crisis. Residential 120,000 10,000 launches and sales grew by 100,000

29% and 23%, respectively, over 80,000 5,000

the same period last year. The Number of units 60,000 signals were optimistic even for 40,000 0 the remaining part of the year 20,000 0 Q3-2016 Q4-2015 Q1-2016 Q1-2014 Q2-2015 Q3-2015 Q4-2016 Q2-2014 Q3-2014 thereby raising hopes that the Q2-2016 2010 2011 2012 2013 2014 2015 2016 Q4-2014 Q1-2015 MMR residential market that has Source R been on a downward spiral since Source R 2010 would see a growth in sales in 2016. RE MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES MMR MARKET TREND- HALF-YEARLY • However, in H2 2016, market LAUNCHES SALES WT. AVG. PRICE (RHS) RE suffered a big blow with both 40,000 8,500 MICRO-MARKET SPLIT OF LAUNCHED UNITS launches and sales plummeting 35,000 H2 2015 H1 2016 H2 2016 by 53% and 26% respectively. 30,000 45%

Housing sales of 25,403 units 25,000 40% and launches of 9,740 units were 35%

20,000 8,000 ` / sq ft recorded in H2 2016 – lowest in the 30% Number of units 15,000 post GFC period. 25%

10,000 20%

• The announcement of 5,000

15% 0 demonetisation of high value 7,500 10% H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 currency notes on 8 November 5% 0 2016 disrupted market sentiment Source R CENTRAL CENTRAL NAVI PERIPHERAL PERIPHERAL SOUTH THANE WESTERN and accordingly a major dent on MUMBAI SUBURBS MUMBAI CENTRAL WESTERN MUMBAI SUBURBS SUBURBS SUBURBS The new landscape of the residential market came in Q4 landscape. The new landscape this interest rate cycle or the tax Source R transparency, efficiency 2016, which saw sales plunge by of transparency, efficiency and incentives for housing offered in 50% to 8,617 units. The magnitude and governance brought governance brought collectively the 2016 budget. of decline in launches was larger at collectively by the by the demonetisation scheme, 77% to 2,617 units. • All these factors translated benami property law and the real demonetisation scheme, in aweakest half yearly and • The segments of the economy estate regulation will challenge annual performance of the MMR benami property law that thrived on illicit money have the status quo of real estate residential market in at least seven 20,776 24,450 9,740 and the real estate come under tremendous pressure. investment and transactions. UNITS UNITS UNITS years. The investment premise of high regulation will challenge • On the other hand, from the returns from residential property, H2 2015 H1 2016 H2 2016 the status quo of real perspective of end users, the which had already weakened cause of affordability is not served estate investment and with stagnating property price enough either by the decline in over the last two years, is under transactions home loan rates brought by policy stress with the changing market rate cut of 175 basis point in

98 99 INDIA REAL ESTATE RESEARCH

• With the backdrop of an RE MUMBAI METROPOLITAN REGION MAP uncomfortable unsold inventory TICKET SIZE SPLIT OF LAUNCHES IN H2 2016

level coupled with investor CENTRAL MUMBAI CENTRAL SUBURBS NAVI MUMBAI PERIPHERAL CENTRAL SUBURBS apartments that are also coming WESTERN SUBURBS SOUTH MUMBAI THANE PERIPHERAL WESTERN SUBURBS to the market, the drop in launches 100% was more severe compared to the 90% Virar drop in sales during H2 2016. 80% 70% • Amongst all the micro-markets, 60% Asangaon the premium markets of South 50% Mumbai and Central Mumbai took 40% the biggest hit whereas Thane and 30% Peripheral Central Suburbs were 20% 10% Vasai relatively better off. < `2.5 MN `2.5 - 5 MN `5 - 7.5 MN `7.5 - 10 MN `10-20 MN -20 MN

Source R Mira Road

MICRO-MARKET-WISE RESIDENTIAL SALES Bhiwandi

Borivali MICRO-MARKET LOCATIONS Kalyan

Central Mumbai Dadar, Lower Parel, Mahalakshmi, Worli, Prabhadevi Thane Dombivli Central Suburbs Sion, Chembur, Wadala, Kurla, Ghatkopar, Vikhroli, Bhandup, Mulund Malad

Navi Mumbai Vashi, Nerul, Belapur, Kharghar, Airoli, Panvel, Ulwe, Sanpada Goregoan Airoli Bhandup Peripheral Central Jogeshwari Rabale Kalyan, Kalwa, Dombivli, Ambernath, Bhiwandi, Mumbra, Karjat Suburbs Kanjurmarg Andheri Powai Vikhroli Ghansoli Peripheral Western Vasai, Virar, Boisar, Palghar, Bhayandar, Nalasopara Suburbs Ghatkopar Kalina South Mumbai Malabar, Hill, Napean Sea Road, Walkeshwar, Altamount Road, Colaba Kurla Bandra BKC Vashi Thane Naupada, Ghodbunder Road, Pokhran Road, Majiwada, Khopat, Panchpakhadi Dadar Western Suburbs Bandra, Andheri, Goregaon, Kandivali, Borivali, Santacruz, Vile Parle Chembur Belapur Worli Proposed Lower Parel International Airport Major Roads Railway Line Mahalaxmi Under Construction Rail Line Metro Rail Monorail

Nariman Point Cuffe Parade

Uran

100 101 INDIA REAL ESTATE RESEARCH

• While the incidences of cash RE PREMIUM RESIDENTIAL MARKET LAUNCHES, SALES AND PRICE TRENDS MICRO-MARKET SPLIT OF SALES transactions vary across micro- markets, demonetisation took a toll H2 2015 H1 2016 H2 2016 on sales in all the micro-markets. MICRO-MARKETS PREMIUM LOCATIONS 45% 40% • The premium markets of South South Mumbai Malabar Hill, Tardeo, Mahalakshmi, Mumbai Central, Walkeshwar

35% Mumbai and Central Mumbai

30% were the worst hit with sales Central Mumbai Worli, Prabhadevi, Parel, Lower Parel, Dadar 25%

recorded lower by 54% and 41%

20%

Western Suburbs Bandra West, Santacruz, Juhu respectively in H2 2016 compared

15% 10% to H2 2015. 5%

RE • With an average house price of 0 CENTRAL CENTRAL NAVI PERIPHERAL PERIPHERAL SOUTH THANE WESTERN PREMIUM MARKET TRENDS `50 mn and above, the premium MUMBAI SUBURBS MUMBAI CENTRAL WESTERN MUMBAI SUBURBS markets are select localities SUBURBS SUBURBS LAUNCHES SALES WT. AVG. PRICE (RHS) 1600 35,000 spread across the micro-markets Source R 34,000 1400 of South Mumbai, Central Mumbai 33,000 1200 and the Western Suburbs. 32,000 1000 31,000 • New launches in this segment saw 800 30,000 a 69% decline even as sales were ` / sq ft 34,135 34,971 25,403 600 29,000 slow by 16% in H2 2016 compared UNITS UNITS Number of units 28,000 UNITS 400 to H2 2015. 27,000 200 H2 2015 H1 2016 H2 2016 26,000 0 25,000 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016

Source R Note: Premium markets include locations where the average ticket size of a residential unit is above `50 mn, are in proximity to the central business district of the city and have witnessed MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS AS OF new project launches in the preceding three years DECEMBER 2016

RE MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS MMR MARKET HEALTH AS OF DECEMBER 2016

3% CENTRAL MUMBAI SOUTH MUMBAI 1% RE 8% THANE QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS

PERIPHERAL CENTRAL SUBURBS30% MMR PREMIUM MARKETS 11%CENTRAL SUBURBS 18

15% WESTERN SUBURBS 16

PERIPHERAL WESTERN SUBURBS 18% 14% NAVI MUMBAI 14 The unsold inventory level has come down steadily No. of Quarters 12 from a peak of 213,742

Source R 10 units in H1 2014 to • With a 30% share, the Peripheral maintained for a long period of construction housing units, with an 154,699 units in H2 2016 Central Suburbs is the largest time. 18% share. 8 market in the MMR in terms of the • The Peripheral Western Suburbs JUN-14 JUN-16 SEP-16 MAR-16 SEP-14 DEC-14 MAR-15 JUN-15 SEP-15 DEC-15

quantum of under-construction DEC-16 ranks second in terms of under- housing units. This lead has been Source R

102 103 INDIA REAL ESTATE RESEARCH

RE PRICE MOVEMENT IN SELECT LOCATIONS MICRO-MARKET-WISE QTS VS AGE OF INVENTORY PRICE RANGE IN 12 MONTH 6 MONTH CENTRAL MUMBAI CENTRAL SUBURBS NAVI MUMBAI PERIPHERAL CENTRAL SUBURBS LOCATION MICRO-MARKET H2 2016 (`/SQ FT) CHANGE CHANGE WESTERN SUBURBS SOUTH MUMBAI THANE PERIPHERAL WESTERN SUBURBS

20 Lower Parel Central Mumbai 25,000-36,000 1% 0%

Worli Central Mumbai 31,000-55,000 2% 0% 17 Ghatkopar Central Suburbs 12,000-22,000 2% 1% 14 Mulund Central Suburbs 10,700-14,000 2% 2% 11 Powai Central Suburbs 14,500-20,000 2% 2% Instance of free gifts in 8 the form of gold and Panvel Navi Mumbai 4,000-6,500 -2% 0% Age of unsold inventory in quarters consumer appliances 5 Kharghar Navi Mumbai 6,700-9,000 0% 3% or liberal financing plan, Vashi Navi Mumbai 10,000-15,000 2% 1% 2 2 5 8 11 14 17 20 where a buyer pays only Badlapur Peripheral Central Suburbs 2,700-3,500 -3% 0% 5% upfront and remaining QTS Source R Dombivali Peripheral Central Suburbs 4,500-6,000 3% 0% on possession, have • The quarters to sell unsold reduction of launches and the Mira Road Peripheral Western Suburbs 5,500-7,300 0% -3% become a widespread inventory (QTS) is the number market continues to shrink. Virar Peripheral Western Suburbs 4,500-5,500 -2% -2% of quarters required to exhaust phenomenon • In the latest period - Q4 2016, the existing unsold inventory in Tardeo South Mumbai 40,000-60,000 2% 0% albeit marginally, even the QTS the market. The existing unsold inched up from 9.5 in Q3 2016 to Ghodbunder Road Thane 6,000-10,000 -1% -1% inventory is divided by the average 10.1 in Q4 2016. This deceleration sales velocity of the preceding Naupada Thane 14,000-18,000 1% 0% came because of a sharp decline eight quarters in order to arrive at in sales in the latest period. If the Andheri Western Suburbs 15,000-22,000 3% 0% the QTS number for that particular sales slump prolongs, market quarter. A lower QTS indicates a Bandra(W) Western Suburbs 40,000-60,000 0% -1% would find no solace in the healthier market. unwinding unsold inventory level Borivali Western Suburbs 11,000-15,000 1% -1% • The unsold inventory level has and increase market stress. Dahisar Western Suburbs 9,000-11,000 2% 1% come down steadily from a peak of • Even while the premium markets 213,742 units in H1 2014 to 154,699 Goregaon Western Suburbs 13,000-15,000 -1% -1% of South Mumbai and Central units in H2 2016. Consequently, Mumbai contribute to just about Source: Knight Frank Research the QTS has also come down 4% of the unsold inventory, they from 11.7 quarter to a 10.1 quarter. • Residential property prices in equation with existing buyers and widespread phenomenon. Price face the worst QTS of 15 and 17 However, this isn’t a desirable Mumbai are witnessing a time investors. Hence, most cases have protection plan is offered to respectively. Similarly, their age of phenomenon considering that the correction since the last two years. reported to offer indirect discounts prospective consumers to assuage inventory at around 16 quarters is decline came on account of sharp The demonetisation decision by waiving stamp duties and concerns in the event of a price also the highest across the city. has further fuelled consumer registration charges. Instance of decline. PRICE MOVEMENT IN H2 2016 expectation of price cuts. However, free gifts in the form of gold and no across the board price cuts consumer appliances or liberal WEIGHTED AVERAGE PRICE MOVEMENT IN MMR have been recorded in the market. financing plan, where a buyer pays only 5% upfront and remaining • In case of an under-construction PRICE RANGE IN H2 2016 on possession, have become a LOCATION 12 MONTH CHANGE 6 MONTH CHANGE project, price reduction disturbs (`/SQ FT)

MMR 8,120 1.6% 0.3%

Premium markets 33,600 1.5% 0.0%

104 105 INDIA REAL ESTATE RESEARCH

• The second half of the year saw office transactions considering quality office building for large OFFICE MARKET occupiers grappling with the contracts are negotiated long requirements in short supply, uncertainty posed by Brexit, US before deals are signed. Hence, occupiers are looking for built to MMR OFFICE MARKET STOCK, NEW COMPLETIONS, TRANSACTIONS AND Presidential election and Fed contracts were honoured even suit options. Prime office markets VACANCY TRENDS rate hike. In case of occupiers while the sentiments were like BKC and Central Mumbai have mainly from the IT sector that disturbed. high occupier interest but embrace RE count US and Europe as their vacancy level of less than 2%. • Over the past few years, MMR OFFICE NEW COMPLETION AND TRANSACTIONS – ANNUAL TREND biggest markets, the developments developers shunned office • For 2016, new completions were NEW COMPLETION TRANSACTION posed business uncertainty and developments plans in favour of marginally higher by 2% even 16 curtailment of expansion plans. residential developments, which as transactions dipped by 6% 14 Back home, the demonetisation is now reflecting on the decline - putting brakes on the growth 12 decision rattled consumer facing in new completion. Vacancy level momentum of last three years. 10 businesses. However, it was too has come down from 21.6% in H2 8 short a period to impact on-going 2015 to 19.6% in H2 2016. With mn sq ft 6 4 RE 2 NEW COMPLETION AND TRANSACTION OF OFFICE SPACE 0 2010 2011 2012 2013 2014 2015 2016 NEW COMPLETION TRANSACTION 7.0 Source R 6.0

5.0 RE MMR OFFICE SPACE STOCK AND VACANCY LEVEL 4.0 3.0 STOCK OCCUPIED STOCK VACANCY (RHS) mn sq ft 140 23% 2.0

120 1.0 22% 100 0 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 80 21%

Source R 60 20% mn sq ft 40 19% 20 SECTOR ANALYSIS

0 18% H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 RE SECTOR-WISE SPLIT OF TRANSACTIONS Source R H2 2015 H1 2016 H2 2016 • For the latest half year i.e. H2 a 34% decline in transactions is 50% 2016, Mumbai’s office market primarily on account of the base 40% saw a decline in both the critical effect. H2 2015 had witnessed a indicators viz. new completion single 1.8 mn sq ft deal from the 30%

While H2 2016 remained

and transactions. While new country’s largest IT exporter. Such

20%

an eventful period from completion at 1 mn sq ft was lower transactions are an exception global and domestic by 73%, transactions dipped by rather than a rule in case of 10% 34% to 3.3 mn sq ft in H2 2016 MMR which has a diversified economic perspective, 0 compared to same period last set of occupiers unlike other BFSI IT/ITeS MANUFACTURING OTHER a 34% decline in year. top cities that thrive on the IT SERVICE SECTORS sector. Excluding this deal, the Source R transactions is primarily on • While H2 2016 remained an transactions would be marginally account of the base effect eventful period from global and higher at 3%. domestic economic perspective,

106 107 INDIA REAL ESTATE RESEARCH

5.0 3.8 3.3 THE CHANGING LANDSCAPE OF MN SQ FT MN SQ FT MN SQ FT

H2 2015 H1 2016 H2 2016 THE INDIAN IT/ITES INDUSTRY AND THE OFFICE MARKET • While developments in India have • BFSI and the manufacturing sector a limited impact on the Indian IT led the office demand, taking up ndoubtedly, the Indian long-term impact on the sector. see more than 50% office space industry, global developments large office spaces in PBD and technology sector has demand coming from the IT/ITeS particularly Americas and the SBD West. Further, the changing business been the crown jewel of the sector, in case of Mumbai it has been Europe, have a wide ranging U landscape on account of automation • Other services sector represented impact on the Indian IT industry. Indian growth story. The stupendous much lower at around 25%. Mumbai by media, consulting and and new technologies has made it Coupled with absence of any large growth of the Indian technology enjoys a well-diversified occupier infrastructure development firms rethink about its largest resource – deals in this half yearly period, sector has benefitted the Indian base with a handsome presence of improved its transaction share manpower. Furthermore, even if there IT sector demand share dipped economy in general and real estate other occupier segments like BFSI, from 17% in H2 2015 to 20% in H2 is an addition to manpower, there is a from 46% in H2 2015 to 16% in H2 2016 taking up office space in BKC sector in particular. Considering manufacturing, consulting, media 2016. gap between the required skillset as and SBD Central markets. demand for real estate is a derived and telecom. For instance, in 2016, compared to the present. A tectonic demand, the rise of the technology BFSI and manufacturing sectors DEAL SIZE ANALYSIS shift implies that even while revenue sector translates in to direct demand contributed to 27% of the demand will grow, employee addition per unit for office space. Earning revenue of each. Other services segment, RE of revenue will decline. Considering USD 143 bn in FY16, it has placed which includes media, consulting, DEAL SIZE ANALYSIS employee additions directly result the country as the world’s no. 1 e-commerce, etc. contributed 28%. AVERAGE DEAL SIZE ( SQ.FT) NUMBER OF DEALS ( RHS ) into office space demand, real estate 40,000 280 outsourcing location with a 56% The share of the IT/ITeS industry demand projections will suffer. 240 share in the global outsourcing arena. was just 19%. This reduces the 30,000 All these factors will have a varying 200 This sector, over the past decade, dependence on just one sector and degree of impact on IT office 160 has propelled the fortunes of office provides a cushion against vagaries of The second half of the 20,000 sq ft 120 geographies in the country. The year saw occupiers NUMBER markets in cities like Bengaluru, just one sector in the uncertain future preferred geographies for the IT 10,000 80 NCR, Pune, Chennai, Mumbai and that the sector is embracing. grappling with the sector have been the National Capital 40 Hyderabad. uncertainty posed by 0 0 Region (NCR), Bengaluru, Mumbai, H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 The operating environment of the Brexit, US Presidential Hyderabad, Chennai and Pune. These Indian IT/ITeS sector is undergoing election and Fed rate Source R cities have become employment rapid change. With a staggering magnets predominantly driven by hike. In case of occupiers • With absence of any comparable from the IT sector and in favour 75% revenue coming from exports in large deal in H2 2016 as was the of manufacturing and the BFSI the IT sector. Of the 41 mn sq ft of mainly from the IT sector FY16, rising protectionism and anti- case in H2 2015, average deal size sector. office space demand in these cities in that count US and Europe globalisation trends in the developed has shrunk by 50% in H2 2016 2015, 44% came from the technology as their biggest markets, part of the world adversely affects the even as the number of transactions sector, excluding the e-commerce jumped by 38%. Indian IT industry. The developments the developments posed segment. business uncertainty and • The change in the deal scenario of Brexit and change in US President While cities like Bengaluru and NCR curtailment of expansion is driven by the industry are expected to have a significant representation – which is lower plans

108 109 INDIA REAL ESTATE RESEARCH

SELECT TRANSACTIONS BUSINESS DISTRICT CLASSIFICATION

OCCUPIER BUILDING LOCATION APPROX. AREA (SQ FT) BUSINESS DISTRICTS MICRO-MARKETS CBD & off-CBD Nariman Point, Cuffe Parade, Ballard Estate, Fort, Mahalaxmi, Worli Hexaware Technologies Loma IT Park Navi Mumbai 250,000 Bandra Kurla Complex & off-Bandra Kurla UBS Gigaplex Navi Mumbai 200,000 BKC, Bandra (E), Kalina and Kalanagar Complex (BKC & off-BKC) Idea Cellular Century Greenspan Worli 160,000 Central Mumbai Parel, Lower Parel, Dadar, Prabhadevi Rising Star Foxconn Raheja International Corporate City - I Navi Mumbai 150,000 SBD West Andheri, Jogeshwari, Goregaon, Malad Teva Pharmaceutical Commerz II Goregaon East 125,000 SBD Central Kurla, Ghatkopar, Vikhroli, Kanjurmarg, Powai, Bhandup, Chembur Deloitte Lotus Corporate Park Jogeshwari East 100,000 PBD Thane, Airoli, Vashi, Ghansoli, Rabale, Belapur Gilbarco Veeder Rood Art Guild House Kurla 100,000

TIAA Financial Services Company Godrej One Vikhroli 95,000 MMR BUSINESS DISTRICT MAP

TCS Tiffany & Lexington Thane 88,500

ViaCom Shiv Building Andheri East 85,000

Source: Knight Frank Research

BUSINESS DISTRICT ANALYSIS

• Office rent consciousness coupled RE with the changing profile of BUSINESS DISTRICT-WISE TRANSACTIONS SPLIT residential catchments across the H2 2015 H2 2016 metropolitan region is translating in PBD 70% to movement of office demand to Thane 60% the north of the city. Malad 50%

• SBD West, PBD and SBD Central 40% Goregoan Airoli

saw the largest contribution to the Jogeshwari Bhandup 30% office demand during H2 2016. Rabale mn sq ft SBD WESTKanjurmarg 20% Central Mumbai and BKC are Powai Ghansoli Andheri Vikhroli 10% facing a supply shortage leading to SBD CENTRAL PBD 0 dip in their transaction share. KALINA GHATKOPAR BKC & OFF CBD & OFF CENTRAL PBD SBD SBD KURLA BKC CBD MUMBAI CENTRAL NORTH BKC & OFF-BKC Bandra (E) Vashi BKC Source R Dadar Prabhadevi Chembur Worli CENTRAL MUMBAI BELAPUR Proposed Lower parel International Airport Major Roads Railway Line 5.0 3.3 Mahalaxmi Under Construction Rail Line MN SQ FT MN SQ FT CBD & OFF-CBD Metro Rail Monorail H2 2015 H2 2016 Ballard estate Nariman Point Fort Cuffe Parade

110 111 INDIA REAL ESTATE RESEARCH

RENTAL TREND

RE WEIGHTED AVERAGE RENTAL MOVEMENT (INR/SQ.FT./MONTH)

125

120

115

110

105

100 INR \ sq. ft.\month 95

90 85 80 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016

Source R

• In line with the city’s transaction • Overall, taking cues from shrinking composition, where the share of new completions and lower the relatively cheaper PBD has vacancy level, office rents are come down, the weighted average inching upwards. BKC and Central rental has witnessed a jump of Mumbai have rental level higher 16% from `104 per sq ft per month by 6% in H2 2016 over H2 2015 in H2 2015 to `121 per sq ft per followed by SBD West at 5%. month in H2 2016.

BUSINESS DISTRICT-WISE RENTAL MOVEMENT

RENTAL VALUE BUSINESS 12 MONTH 6 MONTH RANGE IN H2 2016 DISTRICT CHANGE CHANGE (`/SQ FT/MONTH)

BKC & Off-BKC 220-330 6% 5%

CBD & Off-CBD 160-250 0% 2%

Central Mumbai 170-200 6% 4% Office rent consciousness PBD 50-90 3% 1% coupled with the changing SBD Central 80-150 4% 1% profile of residential catchments across the SBD West 80-140 5% 2% metropolitan region is Source: Knight Frank Research translating in to movement of office demand to the north of the city

112 113 Ankita Sood Consultant Research

NCR INDIA REAL ESTATE RESEARCH

RE RESIDENTIAL MARKET IMPACT OF DEMONETISATION: QUARTERLY LAUNCHES AND SALES TREND

NCR RESIDENTIAL MARKET LAUNCHES, SALES AND PRICE TRENDS LAUNCHES SALES

30,000 RE NCR MARKET TREND- ANNUAL 26,000

LAUNCHES SALES 22,000

200,000 18,000

180,000 No. of Quarters 160,000 14,000 140,000 120,000 10,000 100,000 6,000

Number of units 80,000 60,000 2,000 40,000 20,000 0 Q3-2016 Q4-2015 Q1-2016 Q1-2014 Q2-2015 Q3-2015 Q4-2016 Q2-2014 Q3-2014 Q2-2016 2010 2011 2012 2013 2014 2015 2016 Q4-2014 Q1-2015

Source R Source R property attracts the buyer. The NCR were not very encouraging 31,990 units in Q4 2010. The new largest urban agglomeration of the when compared to the peak of launches number is much worse at RE NCR MARKET TREND- HALF-YEARLY country has the highest unsold 2012, some prominent developers, just 3,710 units in Q4 2016, which inventory under different stages of especially in Noida and Greater is 91% lower than the peak of LAUNCHES SALES WT. AVG. PRICE (RHS) construction, but is still struggling Noida, registered a slight increase 40,136 units witnessed in Q4 2010. 45,000 5,000 to find buyers. If this was not in their sales in Q3 2016 as 40,000 • As the sales number for the 4,800 enough, the partial implementation compared to the same period in 35,000 first nine months had shown an of the Real Estate (Regulation and 2015, thereby indicating improving 30,000 optimistic trend, we believe that 4,600 Development) Act, 2016 in the market sentiments. Instances 25,000 ` / sq ft 2016 would have been at par first half of 2016 set the sluggish like sale of over `3 billion on the 20,000 4,400 with 2015 had it not been for the Number of units market in a twirl again. first day of the launch of a 100- 15,000 demonetisation move. 4,200 acre township in Greater Noida 10,000 • New launches came to a standstill was a testament to the improving 5,000 4,000 with developers rushing to H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 sentiments. In the present day, complete their pending projects. Source R The rush stems from the fact • However, the most recent move by developers want to that if a project is not completed the government on 8th November • The NCR residential market has 26,735 units in 2016 registering a concentrate on project before the full implementation of to clamp down on black money been under pressure and 2016 was YoY 58% drop from 2015, festive the Act, the promoter will need nipped this market sentiment in the completion to be able no different. The market has been season failed to infuse any life in to get the project registered with bud and has brought the NCR real to sell a unit and get in a downward slide, since 2010, the dull market and sales further the authority and then complete it estate market on its knees. with every passing year hitting a fell to 40,005 units in 2016 from some liquidity. Apart from within the stipulated time. new low. In H1 2016, other major 48,800 units in 2016, registering a • The fourth quarter numbers are the waning demand, cities in the country fared well but YoY drop of 18%. • However, as per our survey, the evidence to the impact of the provisions of RERA have NCR was the worst performing market did start giving indications demonetisation. Sales volume • Piling up inventory, lack of market. In H2 2016, the market of marginal recovery in Q3 2016 dropped by 53% YoY in Q4 also forced the developers consumer confidence due to witnessed a degrowth in demand owing to developments like project 2016 and new launches fell by a to complete their ongoing litigations and infrastructure and supply by 29% and 73%, deliveries, reduction in prices massive 73% during the same delays were some of the major projects instead of respectively, compared to the and improving infrastructure in period. At only 6,765 units, the Q4 factors that have decelerated new launching new ones same period in 2015. places like Noida Extension and 2016 sales volume is at its lowest launches in NCR. The market Noida–Greater Noida Expressway. quarterly level since 2010, down • On a yearly comparison, new dynamics have become such that Although the Q3 numbers for by 79% since the quarterly peak of launches in NCR dwindled to today only a ready-to-move-in

116 117 INDIA REAL ESTATE RESEARCH

MARKET SPLIT OF RESIDENTIAL LAUNCHES MARKET-WISE RESIDENTIAL SALES

• The new launches in NCR have RE RE MARKET-WISE RESIDENTIAL SALES come down to a staggering 9,273 MARKET SPLIT OF RESIDENTIAL LAUNCHES units in H2 2016 registering a H2 2015 H1 2016 H2 2016 H2 2015 H1 2016 H2 2016 50% YoY drop of 73%. Many factors 50% 45% 45% have contributed to this drop like 40% 40% increase in the land allotment 35% 35%

30% 30%

rates by 14.19% by the New

25% 25% Okhla Industrial Development 20% 20%

Authority (NOIDA) and the looming 15% 15% 10% uncertainty over RERA that pushed 10% 5% 5% developers to complete projects in 0 0 hand. DELHI FARIDABAD GHAZIABAD GRETER GURUGRAM NOIDA DELHI FARIDABAD GHAZIABAD GRETER GURUGRAM NOIDA NOIDA NOIDA

• However, NCR also saw the Source R Source R launch of some major projects by a select group of developers that were lapped up by homebuyers in Q3 2016. Where new launches on a YoY basis have declined 34,000 17,4 6 2 9,273 23,800 23,092 16,913 considerably across all micro- UNITS UNITS UNITS UNITS UNITS UNITS markets, of the few launches that happened in H2 2016, Noida and H2 2015 H1 2016 H2 2016 H2 2015 H1 2016 H2 2016 Greater Noida garnered the lions share.

• More than half of the units • Approximately 16,900 units were Noida an edge over the other RE launched in Noida in H2 2016 were sold in the second half of 2016, markets and it witnessed an TICKET SIZE SPLIT OF LAUNCHES IN H2 2016 priced between `7.5 mn – 12.5 compared to 23,800 units in H2 increased interest from buyers. DELHI GHAZIABAD GREATER NOIDA GURUGRAM NOIDA mn. These new launches along the 2015, thus registering a drop of 100% • Affordability drove sales in Noida–Greater Noida Expressway 29%. 90% Ghaziabad as it registered a 47% largely catered to the mid segment. 80% • Buyers eluded the market due to increase in sales in H2 2016 over The progress of infrastructure 70% lack of confidence and ambiguity H1 2016. As a result, there was a and movement of offices along 60% on the Real Estate (Regulation and marked increase in the percentage Even falling prices this corridor has improved the 50% Development) Act, 2016. share of Ghaziabad, which moved buyer sentiments in the area. In 40% could also not cushion from 11% in H1 2016 to 23% in contrast, there were few launches 30% • Our survey suggests that ideally the absence of buyer H2 2016. However, keeping in line in Gurugram in the same price 20% where a fall in prices should with the overall market sentiments, confidence from the bracket. 10% have kicked in sales, the buyers demand in this market has also preferred to be in a wait-and-watch market in NCR and < `2.5 MN `2.5-5 MN `5-7.5 MN `7.5-10 MN `10-12.5 MN `40-80 MN `80-150 MN witnessed a decline of 20% in H2 mode and were expecting prices to demand failed to pick up 2016 compared to the same period Source R correct further. in 2015. in 2016 with approximately • All micro-markets were seen to 40,000 units being sold in be in the same boat in terms of 2016, registering an 18% demand in H2 2016 and registered a YoY decline in share of sales. drop from 2015 However, improving connectivity and well-laid infrastructure gave

118 119 INDIA REAL ESTATE RESEARCH

NCR MAP THE SETTLING DUST – GREATER NOIDA WEST

reater Noida West (formerly choose from, price attractiveness and The upcoming Noida–Greater Noida Noida Extension) is a its improving connectivity with job metro link and the proposed 15- Gpart of Greater Noida – a centres of Noida and Noida–Greater km metro that will connect Noida’s planned town in the Gautam Budh Noida Expressway. Sector 71 with Greater Noida’s Nagar district of Uttar Pradesh. Knowledge Park V will further add to Greater Noida West offers ready- Conceptualised as a self-sustaining the connectivity options of Greater to-move-in properties of different micro-market in the master plan, the Noida West. configurations. The bulk of the area was plagued by incidents such apartments in this region range Today the area today has come a as the 2010–2011 land acquisition row from 700 – 1,500 sq ft, thus long way from a corridor of dust, that stalled construction and alarmed complementing the established broken roads and under-construction the buyers. However, all that is market of Noida where apartments projects to a promising residential hub behind us and the issue was resolved are in the range of 1,200 – 2,500 sq for the middle income and affordable in 2015, with the Supreme Court ft. The small size of the units reduces segment. The developers in the area upholding the land acquisitions by the the ticket size and therefore, has are trying to send good vibes to the Greater Noida Industrial Development made this micro-market attractive for buyers by speeding up work on softer Authority (GNIDA) in Noida Extension the buyers looking for options in the elements like landscaping and adding between 2006 and 2009. under `5 mn price bracket. a fresh coat of paint to make the The master plan for the area had projects look livable. However, how On the connectivity front, the major room for office, retail, IT spaces, much of this translates into actual drawback of this area was the entertainment hubs, educational sales is yet to be seen as the market absence of a wide metaled road and institutions and other allied social absorbs the shock of the Real Estate MARKET SPLIT OF UNDER-CONSTRUCTION UNITS IN H1 2016 the non-existent social and physical and physical infrastructure. However, (Regulation and Development) Act, infrastructure. Things are seen to litigations and delayed projects put 2016 and demonetisation. RE be slowly changing and today, the a hook on the pace of development MARKET SPLIT OF UNDER-CONSTRUCTION UNITS IN H2 2016 area is drivable and connected with of this area, but things have slowly Noida, via the Noida–Greater Noida started to look up and the area 1% DELHI FARIDABAD 6% Expressway. A number of sector is taking shape into a promising roads also connect the region with residential cluster. Off late, this area 21% NOIDA Dadri and the nearby residential hub GHAZIABAD 18% has been garnering interest from of Crossings Republik in Ghaziabad. institutional investors. Some of the On the other side, the Yamuna factors that are paving the way for GURUGRAM Expressway further links Greater 27% GREATER NOIDA 27% the development of this area are a Noida West with Mathura and Agra. wide range of property options to

Source R

120 121 INDIA REAL ESTATE RESEARCH

PREMIUM RESIDENTIAL MARKET LAUNCHES, SALES AND PRICE TRENDS NCR MARKET HEALTH

• The quarters to sell unsold MICRO-MARKETS PREMIUM LOCATIONS RE inventory (QTS) is the number QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS Gurugram Sectors 42, 53, 54, 58, 59, 65, Gurugram–Faridabad Road of quarters required to exhaust NCR PREMIUM MARKET the existing unsold inventory Noida Sectors 16 B, 100 35 in the market. The existing 30 unsold inventory is divided by RE 25 the average sales velocity of PREMIUM MARKET TRENDS the preceding eight quarters LAUNCHES SALES WT. AVG. PRICE (RHS) 20 in order to arrive at the QTS 600 17,400 15 number for that particular No. of Quarters 500 17,000 quarter. A lower QTS indicates 10 a healthier market. 400 16,600 5 • The QTS of NCR has remained 300 16,200 ` / sq ft 0 unchanged since the past

Number of units 200 15,800 six quarters and stands at DEC-14 SEP-14 SEP-15 JUN-14 JUN-16

SEP-16 17 quarters at the end of JUN-15 DEC-16 DEC-15 MAR-16 100 15,400 MAR-15 December 2016, which is Source R 0 15,000 extremely high. Ghaziabad H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 RE and Greater Noida still remain Source R MARKET-WISE QTS VS AGE OF INVENTORY NCR’s comparatively better

Note: Premium markets include locations where the average ticket size of a residential unit DELHI FARIDABAD GHAZIABAD GREATER NOIDA NOIDA performing markets, with a is above `30 mn, are in close proximity to the central business district of the city and have QTS of 16 and 15, respectively. witnessed new project launches in the preceding three years. 18 Affordability options add to the 17 attractiveness of these markets,

• The NCR agglomeration comprises for investment or as a second 16 which has helped sales trickle five micro-markets, namely Delhi, home. in. 15 Gurugram, Noida, Greater Noida, • Reflecting the overall market • Though the market saw its Faridabad and Ghaziabad, of 14 sentiment, the weighted average thinnest-ever new launches which Gurugram and Noida are 13 price growth in the premium in H2 2016, it has had little regarded as the premium markets.

segment remained muted in H2 Age of unsold inventory in quarters 12 impact on the unsold inventory due to the slow sales velocity, • New launches in the premium 2016, compared to the same 11 segment have been giving NCR a period in 2015. which has come down to 10 pass since H1 2015. 11,000 units in H2 2016. The 12 14 16 18 20 22 24 26 28 30 32 34 36 The premium segment unsold inventory stands at • On the other hand, sales in the QTS* approximately 192,758 units as in NCR is attracting premium market have trickled in, Source R of December 2016. NRIs from countries like with approximately 70 units being the United States of sold in H2 2016. As per our survey, PRICE MOVEMENT IN H2 2016 the premium segment in NCR is America, United Kingdom, attracting NRIs from countries like WEIGHTED AVERAGE PRICE MOVEMENT IN NCR Singapore and Dubai, United States of America, United who are buying these Kingdom, Singapore and Dubai, PRICE RANGE IN H2 2016 LOCATION 12 MONTH CHANGE 6 MONTH CHANGE who are buying these properties properties as investments (`/SQ FT) or second homes NCR 4,250 -7% -2% Premium markets 16,245 -1% -0%

122 123 INDIA REAL ESTATE RESEARCH

PRICE MOVEMENT IN SELECT LOCATIONS OFFICE MARKET PRICE RANGE IN 12 MONTH 6 MONTH LOCATION MICRO-MARKET H2 2016 (`/SQ FT) CHANGE CHANGE NCR OFFICE MARKET STOCK, NEW COMPLETIONS,

Yamuna Greater Noida 3,295 – 3,557 0% 0% TRANSACTION AND VACANCY TRENDS Expressway • The NCR office market maintains RE its annual appetite and clocks Sector Chi V Greater Noida 3,474 – 3,514 3% 3% NCR OFFICE NEW COMPLETIONS AND TRANSACTIONS – ANNUAL TREND 7.3 mn sq ft at the end of 2016, Sector 16 B Greater Noida 3,100 – 3,400 -6% -6% NEW COMPLETIONS TRANSACTION making it at par with 2015. The 14 overall slump in the real estate Sector 16 C Greater Noida 2,668 – 3,866 -3% -3% 12 sector plagued the office market Sector 78 Noida 5,500 – 5,627 -1% -5% 10 as well and as a result of this, new Sector 70 Noida 4,100 – 4,283 2% 2% 8 completions in NCR have dropped 6 to an all-time low. A mere of 4.6 mn Sector 117 Noida 4,800 – 4,880 -1% 0% mn sq ft 4 sq ft of new completions entered

Sector 143 B Noida 3,970 – 5,200 -5% -3% 2 the office market in 2016 as opposed to 11.5 mn sq ft in 2015. 0 Sector 37 Gurugram 4,200 – 5,600 -12% -2% 2010 2011 2012 2013 2014 2015 2016 • In terms of half-yearly trends, Sector 49 Gurugram 7,700 – 10,200 -1% 0% Source R leasing saw a total of 3.8 mn sq ft Sector 67 Gurugram 9,100 – 9,200 -1% 0% of office space transactions in H2 RE 2016, registering a marginal uptick NCR OFFICE SPACE STOCK AND VACANCY LEVEL Sector 79 Gurugram 4,200 – 6,300 -2% 0% compared to the same period in STOCK OCCUPIED STOCK VACANCY (RHS) Sector 82 Gurugram 3,700 – 5,900 0% 0% 2015. Only 1.8 mn sq ft of new 160 22% completions hit the NCR market in NH-24 Bypass Ghaziabad 2,842 – 3,000 5% 2% 140 21% H2 2016 registering a striking 70% 120 Raj Nagar Ghaziabad 2,884 – 2,900 -1% 2% 20% decline from the same period in 100 Extension 19% 2015. 80 18% • Steady leasing and negligible new Crossings NH-24 Ghaziabad 3,200 – 3,300 2% 0% mn sq ft 60 40 17% completions have nudged the Sector 37 Faridabad 4,904 – 7,642 -4% 0% 20 16% overall vacancy levels from 21.5%

Sector 75 Faridabad 3,550 – 3,700 -1% 1% 0 15% in H2 2015 to 19% in H2 2016. H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 However, vacancy in the micro- Sector 76 Faridabad 2,720 – 2,890 -6% 0% markets of Gurugram, such as DLF Source R Goregaon Western Suburbs 13,000-15,000 -1% -1% Cyber City and Golf Course Road have reached single digit. Source: Knight Frank Research RE NEW COMPLETION AND TRANSACTION OF OFFICE SPACE

• Prices in the NCR residential market, speculations fuelled the by the end of 2012, the prices were NEW COMPLETION TRANSACTION market have dropped by 7% in overnight increase in prices during up to `6,500 per sq 7 2016 compared to 2015. The prices that time. • The fact that there has been no 6 corrected for the first time in H1 • The spike in prices was such that price increase in NCR since 2013, 5 2016 and registered a 4% YOY some projects on the Dwarka clearly shows a time correction. 4 drop. Expressway in Gurugram saw a 3 mn sq ft • The primary reason for this dip three times jump in prices from 2

is that prices in NCR shot up 2008 – 2012. Launched in 2008 at 1 unrealistically from 2008 to 2012. 2,350 per sq ft, the price spiked ` 0 Being a heavily investor-driven to `5,000 at the start of 2012 and H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016

Source R

124 125 INDIA REAL ESTATE RESEARCH

SECTOR ANALYSIS DEAL SIZE ANALYSIS

RE RE SECTOR-WISE SPLIT OF TRANSACTIONS DEAL SIZE ANALYSIS H2 2015 H1 2016 H2 2016 AVERAGE DEAL SIZE ( SQ.FT) NUMBER OF DEALS ( RHS ) 50% 40,000 200

40% 30,000 150

30%

20,000 100 sq ft

20% No of deals

10% 10,000 50

0 BFSI IT/ITeS MANUFACTURING OTHER 0 0 SERVICES SECTORS H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016

Source R Source R

OCCUPIER BUILDING LOCATION APPROX. AREA (SQ FT) 3.7 3.5 3.8 Genpact Unitech SEZ Sec-69, Gurugram 500,000 MN SQ FT MN SQ FT MN SQ FT TCS C-30/7A Sector-62, Noida 278,192 H2 2015 H1 2016 H2 2016 Ciena Plot No. 13 Sec-32, Gurugram 180,000 MakeMyTrip Building 5 DLF - CyberCity, Gurugram 150,000

XL Catlin DLF World Tech Park Silokhera, Gurugram 150,000

• IT/ITeS makes a comeback in to increase its market share. Dell Oxygen SEZ Sector-144, Noida 100,000 NCR in H2 2016. The share of IT/ Demand from the sector saw an Adidas Independent building Sector-32, Gurugram 93,000 ITeS was on a decline for the past increase post the Make in India one year but robust leasing from campaign. Some of the prominent Sony India A-30 Mohan Co-operative, SBD Delhi 90,000 occupiers like IBM, Genpact and transactions in the manufacturing Amazon Ambience Corporate Tower NH-8, Gurugram 87,766 TCS in the second half of 2016 sector include Nokia in Gurugram bucked the trend for the sector. and Dell in Noida. Data Telesis Brookfield Infospace Tikri SEZ, Gurugram 80,000

• Though the other services sector • Though the BFSI sector accounted IBM Infinity Towers DLF - CyberCity, Gurugram 58,960 took up 36% of the total NCR for a minimal share of 8% of the NSDC Worldmark Aerocity, SBD Delhi 50,000 office space demand in H2 2016, total office space demand in NCR, The other services sector the sector registered a YoY large-size transactions such as XL Mott Macdonald Logix Technopark Sector-62, Noida 45,000 yet again drove the office degrowth of 13% in the transacted Catlin, Religare and City Bank led Indian Health Plot No. 213 Okhla Phase-3, SBD Delhi 45,000 space. Some of the large to a massive 61% increase in the space demand in H2 2016 Organisation transactions in this sector include transacted space in H2 2016 over and garnered a 36% share Amazon, and MakeMyTrip. the same period in 2015. City Bank Logix Cyber Park Sector-127, Noida 30,000 of the total space take • The manufacturing sector is seen Quikr Espire Mohan Co-operative, SBD Delhi 7,500 up in NCR, with leasing to be making a steady run in H2 from companies such as 2016 as well, and takes up a share Source: Knight Frank Research Amazon, MakeMyTrip and of 28% from the total transaction pie. The 29% uptick in space take XL Catlin up in H2 2016 helped the sector

126 127 INDIA REAL ESTATE RESEARCH

• Large-size transactions • Gurugram yet again led the tally in Noida and Mohan Cooperative However, the percentage share of Metro Rail Corporation (NMRC) to establish campuses are looking characterise the NCR market in of the number of deals, with 57% and Aerocity in SBD Delhi were Noida in the total office space take has already put into place 15 km of at Noida with a keen eye. H2 2016. The average transacted of the total 107 deals in H2 2016, among the most preferred up remains unchanged at 23% in the viaduct out of the total 29.7 km • SBD Delhi registered a YoY 21% space, which had come down followed by SBD Delhi and Noida locations for occupiers in this half. H2 2016 as compared to the same of the corridor. jump in transacted space nudging significantly to 19,850 sq ft in H1 with 21 and 20 deal conversions, period in 2015. • Office space take up along the it’s share from 10% to 11% in H2 2016 has moved to 35,100 sq ft in respectively. Locations such as • The increase in the leasing activity Noida–Greater Noida Expressway 2016 compared to the same period H2 2016. Noida Expressway and Sector-62 and improving sentiments around and Sector-62 have significantly in 2015. Some of the notable Noida, stems from factors like improved over the last few quarters transactions in this business good infrastructure and lower with companies such as Dell, district involve Quikr, SBI, Sony BUSINESS DISTRICT ANALYSIS rentals compared to Gurugram. City Bank, TCS, Canon and NEC India, Philip Morris and NSBC. The progress of work on the Technologies taking up space in Leasing activity in CBD Delhi was RE Noida–Greater Noida metro route H2 2016. As per our survey, owing concentrated around Connaught BUSINESS DISTRICT-WISE TRANSACTIONS SPLIT is attracting occupiers and the to the lower rentals and availability Place with no major , while H2 2015 H2 2016 workforce alike. So far, the Noida of large floor plates, firms looking 70% 60% NCR BUSINESS DISTRICT MAP 50%

40%

30% mn sq ft 20%

10% 0 CBD FARIDABAD GURUGRAM NOIDA SBD GREATER DELHI DELHI NOIDA

Source R

CBD DELHI NOIDA 3.7 3.8 Connaught Place Sec 62 Sec 63 MN SQ FT MN SQ FT Barakhamba KG Marg Road H2 2015 H2 2016 SBD DELHI Sec 16 Bikaji Cama Nehru Sec 18 Place Place Saket Jasola

Greater Noida Expressway • Gurugram took up 63% of the total by consulting and e-commerce GURGAON transaction pie of 3.8 mn sq ft in companies. Following the trend, Udyog Vihar GREATER NOIDA Cyber City Sector Gamma H2 2016 and yet again emerged 41% of the demand for office MG Road Sector Beta as the most preferred business space in Gurugram came from the NH-8 Golf Course Road Sector Alpha The increase in the leasing GURGAON ZONE- A district. Some of the locations other services sector followed by Tech Zone activity and improving that witnessed major traction in 27% share from the IT/eS sector. Golf Course Road Extension Road sentiments around Noida Gurugram in H2 2016 are Golf Some of the prominent occupiers Course Road and Sector-44. who leased space in Gurugram in stems from factors like GURGAON ZONE-C East Zone Major Roads Approximately 46% of the total H2 2016 are Genpact, XL Catlin, North Zone good infrastructure and Railway Line transacted space of 2.4 mn sq ft IBM, Amazon and Adidas. PriceExisting Contours Metro (`/ sq.ft) lower rentals as compared was in these micro-markets. Under Construction Metro • Noida registered a whopping 30% to Gurugram • Now an established corporate hub, increase in the total transacted leasing in Gurugram was driven space in 2016 compared to 2015.

128 129 INDIA REAL ESTATE RESEARCH

RENTAL TREND

RE WEIGHTED AVERAGE RENTAL MOVEMENT (INR/SQ FT /MONTH)

76 74 72 70 68 66 64 62

INR \ sq. ft.\month 60 58 56 54 52 50 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016

Source R BUSINESS DISTRICT-WISE RENTAL MOVEMENT

RENTAL VALUE BUSINESS 12 MONTH 6 MONTH RANGE IN H2 2016 DISTRICT CHANGE CHANGE (`/SQ FT/MONTH)

CBD Delhi 214 – 350 3% 0%

SBD Delhi 93 – 163 7% 0%

Gurugram Zone A 106 – 165 10% 6%

Gurugram Zone B 72 – 134 10% 6%

Gurugram Zone C 25 – 35 1% 0%

Noida 44 – 70 14% 3%

Faridabad 45 – 55 0% 0% Micro-markets of Source: Knight Frank Research Gurugram, such DLF • As mentioned earlier, the new • Quality office space in the micro- Cyber City and Golf completions in NCR have markets of Gurugram, such as DLF plummeted to 1.8 mn sq ft in H2 Cyber City and Golf Course Road, Course Road, and Noida, 2016 and this has put a huge and Noida, such as Noida–Greater such as Noida–Greater pressure on the weighted average Noida Expressway and Sector- 62, Noida Expressway and rental values. The lack of quality are expected to witness significant office space has pushed the upward pressure on price. Sector-62, are expected to weighted average rental values witness significant upward from `64 per sq ft per month in H2 pressure on price 2015 to `73 per sq ft per month in H2 2016, registering a sharp YoY increase of 14%.

130 131 Hetal Bachkaniwala Vice President Research

PUNE INDIA REAL ESTATE RESEARCH

RE RESIDENTIAL MARKET PUNE MARKET TREND- HALF-YEARLY PUNE RESIDENTIAL MARKET LAUNCHES, SALES AND PRICE TRENDS LAUNCHES SALES WT. AVG. PRICE (RHS) 25,000 5,000 RE PUNE MARKET TREND- ANNUAL 20,000 4,900

LAUNCHES SALES 15,000 4,800 ` / sq ft 60,000 10,000 Number of units 4,700 The fourth quarter 50,000 5,000 4,600 numbers are a testament 40,000 0 4,500 to the effect that the 30,000 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016

Number of units demonetization move has 20,000 Source R 10,000 had on the real estate market of the city that was 0 RE 2010 2011 2012 2013 2014 2015 2016 IMPACT OF DEMONETISATION: QUARTERLY LAUNCHES AND SALES TREND barely recovering from

Source R LAUNCHES SALES its earlier sloth with sales

• The Pune residential market has lowest in comparison to the last six and new launches fell by a massive 12,000 volume dropping by 35% been on a continuous downslide years. 64% YoY during the same period. YoY in Q4 2016 over the last five years after 10,000 • In 2015 the city witnessed a • At 6,300 units, the Q4 2016 sales peaking in 2012. While the city marginal recovery in sales volume volume are at their lowest quarterly 8,000 observed more than 55,000 units

at 4% and this trend continued level since 2010 and down by more No. of Quarters in new launches and 48,000 in the first half of 2016 as well than 54% since the quarterly peak 6,000 units in sales during 2012, these with a 1% YoY growth. Although of 13,660 units in Q3 2012. The numbers have fallen by 64% and these numbers were not very new launches number is much 4,000 32% respectively since then. encouraging when compared to worse at just 3,400 units in Q4 • Steady sales volume from the peak of 2012, the falling trend 2016, which is not even one-fourth 2,000 2010–2012 led to aggressive new had been captured to a certain of its peak level of 16,000 units Q3-2016 Q4-2015 Q1-2016 Q1-2014 Q2-2015 Q3-2015 Q4-2016 Q2-2014 Q3-2014 Q2-2016 launches by developers during extent. witnessed in Q4 2010. Q4-2014 Q1-2015 this period. However, with rising • Subsequently, the Indian • The only solace in the Q4 2016 Source R unaffordability and worsening of Government’s demonetization number was from the month of sentiment among homebuyers, move on 8 November brought the October, which was just before MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES sales volume started to decline market to a complete standstill. the demonetization move, when post 2013. This caused a piling Against this backdrop, developers the sales volume showed some RE up of unsold inventory in the city, MICRO-MARKET SPLIT OF LAUNCHED UNITS refrained from announcing positive traction due to the start of which peaked at 68,840 units in any new launches and buyers the festive season. H2 2015 H1 2016 H2 2016 2013. turned extremely cautious before 35%

• We believe that 2016 would • Taking cues from the market in committing on purchases. have been marginally better 30% terms of falling sales volume, 25% • The fourth quarter numbers are than 2015 had it not been for the developers truncated their new a testament to the effect that the demonetization move, as the sales 20% launches with each passing year demonetization move has had on number for the first nine months 15% and this helped in rebalancing the the real estate market of the city exhibited a positive trend. 10%

market to a great extent. While the that was barely recovering from 5% unsold inventory level standing at its earlier sloth. Sales volume 0 49,700 units in H2 2016 is at the CENTRAL EAST WEST NORTH SOUTH dropped by 35% YoY in Q4 2016

Source R

134 135 INDIA REAL ESTATE RESEARCH

PUNE METROPOLITAN REGION MAP

A B C D E F G H I J

Dehu o Shiroli T

T 18,135 8,710 11,30 0 o Khandala 1 T 1 o Khandala

UNITS UNITS Pune - Nashik Road UNITS Chimbhali

NH 4

H2 2015 H1 2016 H2 2016 Chincholi

M u Chikhali m

b 0 a Mumbai Pune Bypass Road i 5 - P y u a

n w e h

E g x i

p H

re l

s a

sw n o

a i y t

a 2 MoshiN 2 Nigdi Chinchwad RE Ravet Akurdi Slowing sales volume TICKET SIZE SPLIT OF LAUNCHES IN H2 2016 Pimpri National Highway 4 Bosari

and poor response to CENTRAL EAST WEST NORTH SOUTH

Tathawade 0 5

Aundh Road y a 100% Pimpri w h

g 3 i Dighi 3 H

l NH 4 premium projects in the a n i o 90% Pimpri Nat Chinchwad past few years are some 80% Rahatani Dighi 70% Wakad of the major reasons for Hinjewadi 60%

Pimple Pune developers staying away Kalas International 50% Pimple Dapodi Dhanori Airport Gurav 4 Nilakh To Koregaon 4 Bhima from high ticket-sized 40% Viman Wagholi Mahalunge Khadki Nagar 30% Mumbai Pune Bypass Road

Road projects 20% Nagar Nande Baner Aundh Ganeshkhind Chande N Yerwada a Kharadi t i Sus o n 10% a l H i g h

w

Ashok a y Kalyani

4

G a Nagar ne Nagar s d < 2.5 MN 2.5 - 5 MN 5 - 7.5 MN 7.5 - 10 MN 10-20 MN h a ` ` ` ` ` k hi o 5 n R 5 Pashan d R a o Sangamvadi ad w h

d n Mundhwa u Gokhalenagar Bund Garden Road Kavadewadi KoregaonM Source R

Park Annexed Lavale a

o

R

s

s

a

Bavdhan p

y B

JM Road i d

Ghorpadi a

Pirangut r Pune a h K

• North Pune, which witnessed a with locations such as Sinhagad market trend since there have Paud Road Kothrud M.G. Road Sadashiv Solapur Road

slew of new launches during the Road, Undri and Mohammadwadi been no new launches above the Paud Road Peth Hadapsar 6 Wanowri National Highway 9 6

National Highway 4 Highway National Pune first half of the year, has seen observing strong traction. ticket size of 20 mn in H2 2016. Contonment To Uruli Kanchan ` Parvati Bibvewadi Warje Darshan lesser projects being launched in Slowing sales volume and poor • New project launches in National Highway 4 H2 2016 as developers are trying response to premium projects in Vadgaon Phursungi Budruk Sopanbaug have helped in Shivane KondhwaMohamadwadi d a Khurd o to exhaust the current inventory the past few years are some of R d a Undri w s increasing the share of Central a S Dhankawadi Katraj before committing to investing in the major reasons for developers 7 7 Pune in H2 2016 compared to the Narhe Kondhwa Dhayari Budrukh new projects. staying away from high ticket-sized Phata previous periods. Wadaki projects. Pisoli Gaon • South Pune continues to lead in Dive Ghat Road

• The developer community seems M

u Jambhulwadim b terms of new project launches a i P u n to have responded to the changing e B

y

p

a

s s

R T

8 o o Dive Gaon 8

a d

N

a t i o n a l MICRO-MARKET WISE RESIDENTIAL SALES H ig h w a y 4

Kondhwa Road

Aatekar MICRO-MARKET LOCATIONS Vasti Gogalwadi Patharwadi

y Vasvewadi a 9 w 9 h g i

H Chambhali To Satara

Central Koregaon Park, Boat Club Road, Erandwane, Deccan, Kothrud, Model Colony e

r

o

l

a

g

n

a

B o Satara o

e T

n

u East Viman Nagar, Kharadi, Wagholi, Hadapsar, Dhanori P A B C D E F G H I J West Aundh, Baner, Wakad, Hinjewadi, Bavdhan, Pashan

North Pimpri, Chinchwad, Moshi, Chikhali, Chakan, Talegaon

South Kondhwa, Ambegaon, Undri, Dhayari, Warje, Sinhgad Road

136 137 INDIA REAL ESTATE RESEARCH

• North Pune has observed a steady RE PREMIUM RESIDENTIAL MARKET LAUNCHES, SALES AND PRICE TRENDS rise of its share in total sales volume MICRO-MARKET SPLIT OF SALES as homebuyers have shown a very H2 2015 H1 2016 H2 2016 strong preference for this zone when it MICRO-MARKETS PREMIUM LOCATIONS comes to buying an affordable home. 35% Bhosale Nagar, Boat Club Road, Erandwane, Koregaon Park, Model Colony, Prabhat

Central

30%

Close to 60% of the new launches in Road, Uday Baug this zone over the past one year have 25%

East Kalyani Nagar, Viman Nagar

been below the ticket size of ` 2.5 mn. 20%

• The share of West Pune has been 15% South Salisbury Park falling with each passing year as 10% 5% • New launches in the premium majority of the products available in RE 0 markets that are close to the city this market are above the ticket size of CENTRAL EAST WEST NORTH SOUTH PREMIUM MARKET TRENDS centre and costs in excess of ` 20 ` 5 mn, which is marginally higher than LAUNCHES SALES WT. AVG. PRICE (RHS) Source R mn have dropped to zero since the affordability of the workforce part 350 13,000 January 2016. With an unsold of the vicinity. 300 inventory of nearly two years, 250 developers have been wary of 12,000 200 pushing new projects.

20,740 15,690 16,800 150 ` / sq ft • In terms of sales volume, the UNITS UNITS UNITS

Number of units 11,000 100 premium segment held steady since 2015 but the demonetization H2 2015 H1 2016 H2 2016 50 move seems to have curtailed the 0 10,000 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 momentum in the last quarter of 2016. Sales volume dropped by Source R nearly 60% YoY in H2 2016. Note: Premium markets include locations where the average ticket size of a residential unit is above `20 mn, are in proximity to the central business district of the city and have witnessed new MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION project launches in the preceding three years UNITS AS OF DECEMBER 2016 PUNE MARKET HEALTH

RE MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS RE AS OF DECEMBER 2016 QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS

CENTRAL 2% PUNE CITY PREMIUM SEGMENT 13 20% SOUTH 12

EAST 27% 11 10 NORTH 24% 9

8 WEST 27% No. of Quarters 7

6

5

4 Source R DEC-14 SEP-14 SEP-15 JUN-14 JUN-16 SEP-16 JUN-15 DEC-16 DEC-15 MAR-16 MAR-15

Source R

138 139 INDIA REAL ESTATE RESEARCH

RE PRICE MOVEMENT IN SELECT LOCATIONS MICRO-MARKET-WISE QTS VS AGE OF INVENTORY PRICE RANGE IN 12 MONTH 6 MONTH LOCATION MICRO-MARKET CENTRAL EAST WEST NORTH SOUTH H2 2016 (`/SQ FT) CHANGE CHANGE

12 Koregaon Park Central 13,000 - 17,000 0% 0%

Kothrud Central 7,500 - 13,000 0% 0%

11 Erandwane Central 13,500 - 18,000 0% 0%

Boat Club Road Central 14,500 - 19,500 0% 0% 10 Kharadi East 5,300 - 6,300 0% 0% We believe that 2016 Wagholi East 3,500 - 4,600 1% 0%

would have been Age of unsold inventory in quarters 9 Dhanori East 3,900 - 4,800 2% 0% marginally better than 2015 had it not been for 8 Hadapsar East 4,600 - 6,000 0% 0% 4 5 6 7 8 9 10 Aundh West 7,800 - 9,500 2% 0% the demonetization move, QTS* as the sales number for Source R Baner West 5,600 - 8,000 0% 0% Note: The size of the bubble indicates the quantum of unsold inventory the first nine months Hinjewadi West 4,800 - 5,900 3% 0% • South Pune has taken over West • Among the various micro- exhibited a positive trend Wakad West 5,400 - 6,200 0% 0% Pune as the best performing markets of the city, Central Pune market in the city with lowest is the worst performing market Moshi North 3,700 - 4,300 0% 0% quarter to sell unsold inventory. registering the highest quarter to Chikhali North 3,500 - 4,100 0% 0% While West Pune used to sell unsold inventory. The age of command the lowest quarter unsold inventory is also among Chakan North 3,000 - 3,400 1% 0% to sell unsold inventory in 2015, the highest in the city, indicating Ambegaon South 4,400 - 5,500 0% 0% unaffordable prices and relatively that a large number of previously large-sized apartments have launched projects are still unsold Undri South 3,900 - 4,800 0% 0% slowed down the traction in the in this micro-market. Kondhwa South 4,600 - 5,700 0% 0% recent years. Source: Knight Frank Research PRICE MOVEMENT IN H2 2016

WEIGHTED AVERAGE PRICE MOVEMENT IN PUNE

PRICE RANGE IN H2 2016 LOCATION 12 MONTH CHANGE 6 MONTH CHANGE (`/SQ FT)

Pune 4,860 0.5% 0%

Premium markets 12,650 1.0% 0%

• The price growth across most were prevailing at the beginning of the growth in the city’s overall locations in Pune during the last 12 2016. price. However, even here it has months has been tepid. Moreover, come down to zero in the last six • The weighted average price there has been absolutely no price months. growth has been marginally higher rise in the last six months and in the premium segment in the most of the new projects are being last 12 months in comparison to launched at the same rates that

140 141 INDIA REAL ESTATE RESEARCH

RE OFFICE MARKET PUNE OFFICE SPACE STOCK AND VACANCY LEVELS

PUNE OFFICE MARKET STOCK, NEW COMPLETIONS, TRANSACTION AND STOCK OCCUPIED STOCK VACANCY (RHS) VACANCY TRENDS 70 25% 60 20% FIGURE 6 50 PUNE OFFICE NEW COMPLETION AND TRANSACTIONS – ANNUAL TREND 40 15%

NEW COMPLETION TRANSACTIONS 30 10% mn sq ft 6 20 5% 5 10

4 0% H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 3 Source R mn sq ft 2

FIGURE 2 1 NEW COMPLETION AND TRANSACTIONS OF OFFICE SPACE

2010 2011 2012 2013 2014 2015 2016 NEW COMPLETION TRANSACTIONS

Source R 4

• The trend of double-digit growth was transacted during that period. 3 in transactions since 2013 seems • Such a scenario of excess demand to have finally come to an end with over supply has accentuated the 2

2016 reporting a 31% YoY fall in the mn sq ft problem of availability of leasable volume of transactions at 3.8 mn 1 office space in the city. This trend sq ft. Such a drop in transaction has continued in H2 2016 too, with can be largely attributed to the - transaction volume reported at H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 shortage of good quality office 1.8 mn sq ft against a new supply space in the city rather than a Source R of 1.2 mn sq ft. The transaction slowdown in demand. volume is lower by 46% in H2 2016 • Currently, the vacancy levels as compared to the same period of SECTOR ANALYSIS stands at just 8.2%, which is at the previous year. its historic low for the Pune office FIGURE 3 • Going forward, we expect 2017 SECTOR-WISE SPLIT OF TRANSACTIONS market. However, vacancy level to be in a similar situation as no in locations such as Kharadi, H2 2015 H1 2016 H2 2016 major new supply has been lined Viman Nagar, Yerwada and Nagar 70% up at present. Such a scenario 64% Road, which are highly preferred could further push occupiers 60%

by occupiers, is even lower with 50% 47%

The trend of double-digit towards other office markets such 44% Vacancy level in locations absolutely no availability of good as Mumbai, Noida and Hyderabad 40%

growth in transactions 33% such as Kharadi, Viman quality office space. where the shortage of office space 30% since 2013 seems to have 23% Nagar, Yerwada and Nagar

• Against the transacted volume is not so severe. 20% 18% 14% 14% 13% 12%

finally come to an end 9% Road, which are highly of 3.8 mn sq ft in 2016, the new 10% 9%

with 2016 reporting supply that entered the market 0% preferred by occupiers, is IT/ITES BFSI* MANUFACTURING OTHER SERVICES a 31% YoY fall in the was just 2.5 mn sq ft during the even lower with absolutely year. This was even worse in the volume of transactions at Source R no availability of good previous year when only 2.7 mn Note: BFSI includes BFSI support services 3.8 mn sq ft sq ft of new supply entered the quality office space market against 5.5 mn sq ft that

142 143 INDIA REAL ESTATE RESEARCH

SELECT TRANSACTIONS

OCCUPIER BUILDING LOCATION APPROX. AREA (SQ FT) 3.3 2 1.8 Xoriant Amar Apex Baner Road 23,200 MN SQ FT MN SQ FT MN SQ FT Smartworks Magarpatta SummerCourt Magarpatta 36,000

H2 2015 H1 2016 H2 2016 Credence E Park Kharadi 22,000

Nitor Infotech Embassy Techzone Hinjewadi 44,000

AXA Suzlon One Earth Hadapsar 40,000 • The share of IT/ITeS sector in • The demand for office space from the total transaction has fallen the BFSI sector in Pune is largely JCI Commerzone Yerwada 70,000 Currently, the vacancy significantly during H2 2016, from the Fintech companies and Schlumberger Commerzone Yerwada 56,000 levels stands at just 8.2%, largely due to the slowdown in new IT enabled support service from which is at its historic low orders from the key export markets the BFSI sector. Banking majors Source: Knight Frank Research for the Pune office market of Europe and the USA. However, such as HSBC and Deutsche Bank the BFSI sector reported a strong were some of the largest occupiers BUSINESS DISTRICT ANALYSIS comeback with its share jumping of office space during the last six from 14% in H1 2016 to more than months. FIGURE 5 33% in H2 2016. BUSINESS DISTRICT-WISE TRANSACTIONS SPLIT

H2 2015 H2 2016

6

DEAL SIZE ANALYSIS 5

4 FIGURE 4 DEAL SIZE ANALYSIS 3

mn sq ft 2

AVERAGE DEAL SIZE (SQ FT) NUMBER OF DEALS (RHS)

1 60,000 120

50,000 CBD & Off-CBD SBD East SBD West PBD East PBD West 40,000 80 Source R 30,000 mn sq ft 20,000 40 SBD East, which includes 10,000 3.3 1.8 locations such as Kalyani 0 MN SQ FT MN SQ FT H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 Nagar, Yerwada, Nagar Road and Hadapsar, Source R H2 2015 H2 2016 witnessed a sharp jump • The average deal size in H2 2016 • The BFSI back support services was reported to be 32,000 sq ft, led in terms of big-ticket deals, in its share of the total which is lower than the H2 2015 with certain banks leasing more • SBD East, which includes • The limited supply of vacant transaction volume, as locations such as Kalyani Nagar, office space has restricted the level. This is primarily due to the than 80,000 sq ft of space in East most of the big-ticket non-availability of large sized office Pune during this period. Yerwada, Nagar Road and transaction volume in the rest of deals took place in this space in the city. Hadapsar, witnessed a sharp jump the markets, with their share either in its share of the total transaction falling from the previous year’s micro-market in H2 2016 volume, as most of the big-ticket level or remaining constant. deals took place in this micro- market in H2 2016

145 INDIA REAL ESTATE RESEARCH

BUSINESS DISTRICT CLASSIFICATION

BUSINESS DISTRICTS MICRO-MARKETS

Bund Garden Road, S. B. Road, Camp, Deccan, University Road, Shankar OFFICE SPACE SHORTAGE- CBD and off-CBD Sheth Road SBD East Kalyani Nagar, Yerwada, Nagar Road, Vishrantwadi, Hadapsar PUNE’S LOSS TO BE PBD East Kharadi, Phursungi, Wanowrie

SBD West Wakdewadi, Aundh, Baner, Kothrud, Balewadi MUMBAI’S GAIN

PBD West Hinjewadi, Bavdhan, Wakad acancy levels in Pune have With developers unable to earn zero vacancy level. This undersupply PUNE BUSINESS DISTRICT MAP been falling consistently any income on such assets and situation is expected to worsen in Vsince 2012, from 23.4% the residential market witnessing a 2017, as very few new projects are to 8.3% currently. With demand steady recovery post 2010, their focus expected to be delivered. outstripping new supply for the fifth shifted from the commercial to the Bhosari We anticipate that the demand for consecutive year, the situation has residential segment. space will far exceed the supply in only worsened for occupiers, who Pimpri Since 2012, 20.7 mn sq ft of space 2017, and this will lead to a situation Chinchwad are unable to find leasable space in has been transacted in Pune, in wherein occupiers will have to look for SBD NORTH their preferred locations. The genesis Hinjewadi Wakad contrast to the 13.5 mn sq ft of space in other cities. With Bengaluru, of the current predicament lies in PBD WEST new space delivered. The shift in Hyderabad and Gurgaon in a similar BALEWADI the heydays of the pre-2008 period, developers focus towards residential state of affairs, we believe that when strong demand from the IT/ SBD EAST housing led to a limited number of occupiers will be pushed towards Vishrantwadi Nagar Road Baner Yerwada ITeS sector encouraged developers Aundh Kharadi new project launches in the office cities such as Chennai and Noida. SBD WEST Kalyani to aggressively build new office CBD & OFF-CBDNagar space segment post 2010, and the Additionally, some occupiers may space. However, the Global Financial SB Road Bund Garden Road result is seen in the current situation, also prefer moving to Navi Mumbai, Crisis (GFC) of 2008 resulted in an Deccan wherein there are no major completed which offers a similar occupancy Bavdhan Kothrud CAMP oversupply situation, with a huge projects available for lease. Even the cost. While such a scenario would PBD EAST amount of ready-to-occupy space existing 8.3% vacancy is largely in the be a loss to the Pune market, it will remaining vacant from 2008 to 2010 Satara Road Hadapsar peripheral business districts (PBD), give a significant boost to the already Wanowrie due to a lack of occupier demand. SBD SOUTH with the prime areas having a near thriving office market of Mumbai. Bibwewadi Phursungi

Major Roads Railway Line Proposed Metro Corridor I Proposed Metro Corridor II

146 147 INDIA REAL ESTATE RESEARCH

RENTAL TREND

FIGURE 7 • Rental values have been rising WEIGHTED AVERAGE RENTAL MOVEMENT (INR/SQ.FT./MONTH) steadily since 2013, as demand continues to surpass new supply. Currently, the weighted average 60 rent in Pune is around `60 per sq ft

55 per month – 7% higher than in H2 2015. 50 • The severe shortage of good 45 quality office space in prime areas Rs/sq ft/month has rendered the market in favour 40 of the landlords, who are asking for 35 higher rents from tenants with each H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 passing quarter Source R

BUSINESS DISTRICT-WISE RENTAL MOVEMENT

RENTAL VALUE BUSINESS 12 MONTH 6 MONTH RANGE IN H2 2016 DISTRICT CHANGE CHANGE (`/SQ FT/MONTH)

CBD and Off-CBD 70 - 100 3% 1%

SBD East 50 - 85 13% 3%

SBD West 50 - 75 10% 2%

PBD East 45 - 75 11% 3%

PBD West 35 - 48 5% 1%

Source: Knight Frank Research

148 149 KEY CONTACTS

ADVISORY, RETAIL & HOSPITALITY INDUSTRIAL & ASSET SERVICES AHMEDABAD GULAM ZIA BALBIRSINGH KHALSA Balbirsingh Khalsa Executive Director - Advisory, National Director National Director Retail & Hospitality [email protected] [email protected] [email protected] RESIDENTIAL & LAND (MUMBAI) CHENNAI SAURABH MEHROTRA FALI PONCHA National Director - Advisory Director Kanchana Krishnan [email protected] [email protected] Director [email protected] ADITYA SACHDEVA OFFICE AGENCY Director - Retail VIRAL DESAI BENGALURU & HYDERABAD [email protected] National Director Satish BN [email protected] Executive Director - South CAPITAL MARKETS [email protected] RAJEEV BAIRATHI PROJECT MANAGEMENT Executive Director DEBEN MOZA [email protected] Executive Director - Knight Frank Property PUNE Services Private Limited* Shantanu Mazumder [email protected] FACILITY MANAGEMENT Director NELLIE SAMUEL [email protected] Executive Director - Knight Frank Property RESEARCH Services Private Limited* [email protected] DR. SAMANTAK DAS Chief Economist and National Director [email protected]

COPY EDITOR DESIGN & GRAPHICS Deborah Herbert Nitin More Mahendra Dhanawade Copy Editor Sr. Manager - Graphic & Design Manager - Graphic & Design [email protected] [email protected] [email protected]

*Facility Management and Project Management services are offered by Knight Frank Property Services Private Limited which is a wholly owned subsidary of Knight Frank ( India ) Private Limited. COMMERCIAL BRIEFING For the latest news, views and analysis RESEARCH of the commercial property market, visit knightfrankblog.com/commercial-briefing/

RESEARCH Dr. Samantak Das C E R INDIA REAL ESTATE - RESIDENTIAL AND OFFICE ULY - DECEMBER 2016

PRESS OFFICE Sukanya Chakraborty C

INDIA REAL ESTATE RECENT MARKET-LEADING RESEARCH PUBLICATIONS Knight Frank India Pvt. Ltd. RESIDENTIAL AND OFFICE A THE WEALTH JANUARY - JUNE 2016 REPORT The global perspective on prime property and investment 2016 A R 10th Edition A CES A AREHS HE EAH A REA ESAE RER ARE RER RER A AHEAA EAR | CHEA | HERAA | AA | A | CR | E CIN N UMHPTC

R R KnightFrank.com/Research