KOLKATA Residential Q2 2020
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M A R K E T B E AT KOLKATA Residential Q2 2020 Sharp contraction in residential launches due to the Covid-19 outbreak Kolkata witnessed just 427 unit launches in Q2, a contraction of around 79% q-o-q, with the impact of COVID and the lockdown weighing heavy on the city’s real estate sector. Construction activity for ongoing projects has also come to a grinding halt. Phase 4 of Srijan Realty’s Greenfield City project alone NEW UNIT LAUNCHES (Q2 2020) 427 accounted for around 45% of the new launches with small, local developers contributing the rest. Even before the pandemic, the city’s residential sector had been experiencing stagnancy in sales with demand levels remaining sluggish. This trend is likely to persist over the next few quarters due to the rising economic uncertainty and slightly muted buyer sentiments. This is likely to create more pressure on developers’ liquidity positions, given limited funding DROP IN Q-O-Q UNIT LAUNCHES availability and subdued sales environment. While the larger, branded developers may be able to tide over the current conditions, the problems may ~80% (Q2 2020) intensify for smaller developers and this can further impact project completions. However, new unit launches are expected to reach pre-COVID levels only by H1 2021 due to labour issues and the near term focus on under construction projects. Affordable and mid-segment housing will continue to account for a SHARE OF MID SEGMENT large proportion of new launches driven by government incentives for both segments. Moreover, the West Bengal Housing Industry Regulatory Authority 85% IN TOTAL UNIT LAUNCHES (Q2 2020) (WBHIRA) has extended project completion deadlines by nine months, which comes as a major relief for financially stressed developers. Developers offer a range of incentives to drive transactions Kolkata’s real estate developers have been devising attractive incentive packages for serious homebuyers at a time when the market is passing through a sharp deceleration. These incentives are largely in the form of price benefits and relaxation of various associated charges. For instance, Srijan Realty is offering price protection plan upto March 2021 and zero cancellation policy on its Greenfield City Project in the Behala submarket. Other noted developers MARKET INDICATORS OVERALL Q2 2020 are innovating with design in some of their projects in keeping with the rising popularity of remote working. PS Group’s One10 project in the Rajarhat submarket has additional study rooms to enable smooth transition to a work from home (WFH) schedule. These initiatives could drive a long-term change in Y-O-Y 12-Months the market with key value additions becoming a part of every project and delivering tangible benefits to end-users. Change Forecast New Launches Stable capital values with limited scope of price reduction Average capital values and rentals across majority of the submarkets were stable and range-bound in Q2 due to the sluggish sales environment and low transaction evidence. While mid-segment property prices in prime locations of South Central (Bhawanipore), East (EM Bypass) and South East (Ajoy Nagar, P.A. Shah Connector) Kolkata did not experience a drop backed by steady demand from serious buyers, peripheral locations in north and north eastern part Units Sold of the city recorded a decline of 2-4% in average quoted capital values. High volume of unsold inventory and slow pace of infrastructure development in these submarkets triggered the price drop. For the next 6-9 months, capital values in the mid-segment projects are likely to experience stagnancy with downward pressure as buyers grapple with income uncertainty leading to weak housing demand in the short to medium term. Developers have been looking Average Capital for fiscal support from the state government, which has not been forthcoming as yet. While unsold inventory has been piling up, regulatory norms on circle rates have negated any possibility of sharp cuts in house prices. The state government has been requested for non-fiscal support in the form of reduction in Values (INR/sf) stamp duties on property transactions and lower circle rates, which will allow developers to reduce prices and boost sales activity. Though discounts of 5- 10% might be offered by smaller developers in the coming quarters subsequent to a drop in demand in select suburban and peripheral locations, developers having projects in Narendrapur, Sonarpur and Joka are unlikely to offer discount on base prices due to steady demand for affordable and mid-segment projects in this belt. SIGNIFICANT PROJECTS LAUNCHED IN Q2 2020 BUILDING LOCATION DEVELOPER UNITS LAUNCHED RATE**(INR/SF) Greenfield City-Phase 4 Maheshtala Srijan Realty 192 3,500-3,800 4 Sight Vivante EM Bypass Value Housing 60 5,000 Bijay Residency Kamalgazi Paradise Land & Housing 51 3,800 Totini Sobha Behala Individual Landlord 28 5,500 M A R K E T B E AT MARKET NAME Residential Q2 2020 RENTAL VALUES AS OF Q2 2020* CAPITAL VALUES AS OF Q2 2020* AVERAGE QUOTED AVERAGE QUOTED QoQ CHANGE YoY SHORT TERM QoQ CHANGE YoY SHORT TERM SUBMARKET SUBMARKET CAPITAL VALUE RENT (INR/MONTH) (%) (%) OUTLOOK (%) (%) OUTLOOK (INR/SF) High-end segment High-end segment South 63,000-85,000 0% 0% South 7,500-13,000 0% 0% South-East 40,000-85,000 0% 0% South-East 6,300-14,000 0% 0% South-West 100,000-185,000 0% 0% South-West 12,000-17,000 0% 0% Central 85,000-155,000 0% 0% Central 12,000-19,500 0% 0% East 38,000-68,000 0% 0% East 5,000-7,750 0% 0% Mid segment Mid segment South 20,000-35,000 0% 0% South 4,000-8,400 -1% -1% South-Central 28,000-36,000 0% 0% South-Central 5,900-9,250 0% 0% South-East 20,000-35,000 0% 0% South-East 3,100-5,550 2% 0% North-East 15,000-25,000 0% 0% North-East 2,900-4,300 -3% -3% North 16,500-31,000 0% 0% North 3,150-6,200 -2% -2% SIGNIFICANT PROJECTS COMPLETED IN Q2 2020 With construction activity being stalled for a major part of Q2 following the COVID-19 outbreak and a subsequent lockdown, no significant project completions were recorded in the city. Rohan Sharma Despite resumption of activities during Unlock 1.0 from 8th of June onwards, the pace of construction has been quite slow due to labour and resource constraints. However, we shall continue to monitor the projects which were due for completion during H2 2020 for any possible completion and handover during the coming quarters. Director, Research Services +91 124 4695555 /[email protected] SIGNIFICANT PROJECTS UNDER CONSTRUCTION – TO BE COMPLETED IN NEXT 12 MONTHS Kapil Kanala BUILDING LOCATION DEVELOPER UNITS LAUNCHED EXPECTED COMPLETION Associate Director, Research Services GM Meena Icon Sodepur GM Group 72 Q4 2020 +91 40 40405555 /[email protected] Madgul Antaraa Joka Rungta Group 280 Q1 2021 cushmanwakefield.com Mani Vista Tollygunge Mani Group 168 Q1 2021 A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION Source: Cushman & Wakefield Cushman & Wakefield (NYSE: CWK) is a leading global Data collated from primary and secondary resources. Estimations are subject to change real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is * Rental and capital values have been depicted only for key submarkets based on built-up area among the largest real estate services firms with ** Quoted base capital value does not include other charges such as Preferential Location Charges, External Development Charges, Internal Development Charges, etc. approximately 51,000 employees in 400 offices and 70 The above values for high-end segment are for units typically of 2,000-3,000 sf countries. In 2018, the firm had revenue of $8.2 billion The above values for mid segment are for units typically of 1,300-1,800 sf across core services of property, facilities and project KEY TO SUBMARKETS Mid Segment management, leasing, capital markets, valuation and other High-end Segment South: Golf Green, Tollygunge, Lake Gardens, Jodhpur Park, Anwar Shah Road services. South: Southern Avenue, Hindustan Park, Triangular Park South-central: Deshapriya Park, Hazra Road, Bhawanipur South-east: EM Bypass - Science City, Pancha Sayar South-east: Ajoy Nagar, Hiland Park, PA Shah Connector ©2020 Cushman & Wakefield. All rights reserved. The information South-west: Alipore Park Road, Ashoka Road, Burdwan Road North-east: Rajarhat, Rajarhat Chowmatha contained within this report is gathered from multiple sources believed Central: Camac Street, Minto Park, Elgin Road, Loudon Street South-west: Tollygunge Circular Road, New Alipore, Behala, Jones Lang Sarani to be reliable. The information may contain errors or omissions and is North: Kankurgachi, Lake Town, VIP Road East: Salt Lake North: Jessore Road, Ultadanga, Shyambazar, Bagbazar, Manicktala, Dum Dum presented without any warranty or representations as to its accuracy. East : New Town, Rajarhat North-peripheral: BT Road, Barasat, Madhyamgram, Sodepur South-peripheral: Garia, Narendrapur, Sonarpur South-west peripheral: Joka, Maheshtala, Budge Budge, Thakurpukur.