Tuesday, January 8, 2019

Residential prices lower by 7% in 2018; smaller ticket sizes make Mumbai more affordable: Knight Frank India

Commercial office space continues its forward march, leasing records 14% growth YoY in 2018: Knight Frank India
Office space leasing across India at historic high, records 46.8 mn sq ft in 2018

 Knight Frank India today launched the 10th edition of its flagship half-yearly report - India Real Estate. The report presents a comprehensive analysis of the residential (across eight cities) and office (across seven cities) market performance for the period July – December 2018 (H2 2018). The report has established 2018 to be historically best performing year for the commercial office with leasing at 46.8 million square feet (mn sq ft). The residential market saw upward movement in sales with total sales of residential units recorded at 182,207 units registering a 6% increase over full year 2017.  
Mumbai saw total new unit launches of 74,363 units in full year 2018, registering a growth of 220% YoY over a low base of 2017. The majority share of the new launches took place in H2 2018 which was recorded at 38,389 units. The residential sales for the full year of 2018 was at 63,893 units depicting a growth of 3% YoY over 2017. At the end of H1 2018, there were signs of revival in sales, but the same was punctuated around Q4 2018 (Oct – Dec 2018) due to the impact of NBFC crisis.

Residential market highlights for Mumbai
·         Total sales in H2 2018 was 31,481 units implying a rise of 4% YoY against same period last year
·         Full year 2018 witnessed annual sales of 63,893 units recording a marginal growth of 3% YoY over 2017
·         Total units launched in Mumbai in H2 2018 was 38,389 units - a growth of 413% YoY over a very low base H2 2017
·         Total launches in full year 2018 was 74,363 units denoting 220% YoY
·         The significant increase in new launches is attributed to release of supply, that was previously held back due to series of regulatory aspects.  The temporary reprieve from the construction ban due to dumping ground issue in Mumbai effective from March 2018 was a significant catalyst for growth.
·         Demonetisation hangover coupled with structural changes like GST and RERA had led to a decadal low in new launches in MMR in 2017. As dust settled on most of these issues, supply volumes were released through 2018. 
·         Policy incentives like PMAY and CLSS have helped steer demand towards affordable housing segment. The supply side has accordingly calibrated itself in this period.
·         A significant shift of strategy was seen within new launches. Compact homes are becoming pervasive. Developers chose to reduce the average size of the apartments in order to make the overall ticket size affordable. MMR region saw a decline of approximately 25% in sizes of new launches in 2018 as compared to five years ago.
·         Average price of units in 2018 saw a reduction of 6.8% YoY making the market more affordable.
·         Mumbai Affordability Index level dropped nearly 400 bps, according to Knight Frank Affordability Index. The index indicates that House price to Household Income Ratio in Mumbai has reduced from 11.0 points in 2010 to 7.2 in 2018.
Shishir Baijal, Chairman and Managing Director, “Mumbai has seen a significant drop of 7% in average prices in 2018, which coupled with reduced sizes of new launches, has brought down the average ticket size in the city. Consequently, homebuyers are getting a better value for their purchase than a few years ago.”

Commercial market highlights Mumbai
·         Commercial office leasing activity was recorded at 5.1 mn sq ft in H2 2018, registering a growth of 14% YoY over same period last year
·         Full year 2018 saw leasing activities to the tune of 7.9 mn sq ft showing a growth of 5.4% over last year
·         The sector posting impressive growth in H2 2018 was BFSI which constituted 32% share of all transactions in this period up from 23% during same period last year. Other services (which includes Co-Working, media, telecom, consulting, etc.)  garnered the highest share 43% of total transactions in H2 2018.
·         SBD Central (25%) and SBD West (32%) together comprised 57% of total leasing activities in 2018
·         Supply of office space in Mumbai for the entire year 2018 was 6.5 mn sq ft denoting a 37% YoY decline from 2017.
·         Vacancy was recorded at 19.6% across Mumbai markets
·         Average rental values for the office market in Mumbai saw a marginal uptick of 1.7% and was recorded at INR 117/ sq ft / month             
Shishir Baijal, Chairman and Managing Director, “The commercial office transactions has witnessed a growth of 5.4 % yoy in full year 2018. Limited supply has helped the city keep rental values buoyant in 2018. Prime markets of BKC and Central Mumbai recorded very low vacancies leading to other regions experiencing higher growth rates”

Business districts and definition
Business district
BKC, Bandra (E), Kalina and Kalanagar
Nariman Point, Cuffe Parade, Ballard Estate, Fort, Mahalaxmi, Worli
Central Mumbai
Parel, Lower Parel, Dadar, Prabhadevi
Thane, Airoli, Vashi, Ghansoli, Rabale, Belapur
SBD Central
Kurla, Ghatkopar, Vikhroli, Kanjurmarg, Powai , Bhandup, Chembur
SBD West
Andheri, Jogeshwari, Goregoan, Malad

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