India Real Estate Outlook: Knight Frank India

Let us have a look at the residential market takeaways for the metro cities:

Mumbai and Bengaluru are expected to lead the recovery in sales volume, with 49% and 26% growth respectively from H2 2013 to H2 2014. The election results and incentives announced for the housing sector in the Union Budget have improved home buyer sentiments in the last three months. In contrast, the numbers of new launches are expected to show a subdued growth of 5% in the next six months owing to high unsold inventory and poor response to new launches. Prices in Bengaluru have appreciated at the fastest pace of 11% in H1 2014 compared to H1 2013. This was followed by Hyderabad, at 9% during the same period. Going forward, Mumbai is expected to lead in terms of price appreciation during H2 2014, at 10% on the back of a strong revival in absorption. 

Office market takeaways for the metro cities:

The office market of the top six cities have been recovering steadily, with vacancy levels falling from 21% in H2 2012 to less than 19% in H1 2014. The combined absorption of these cities has increased from 14.7 million square feet in H2 2012 to 17.9 million square feet in H1 2014, and it is expected to even rise further to 18.7 million square feet during H2 2014. The IT/ITeS sector continues to lead in terms of share in total absorption across all the cities, except for Mumbai.  During H1 2014, the office space market in each of the six cities has witnessed a substantial jump in the number of deals. During H2 2014, Pune and NCR are expected to lead in terms of growth in the weighted average rental value, compared to the rest of the cities.

Residential and office market takeaways for MMR:

As for the residential space, demand within the MMR dropped by a whopping 25% in H1 2014 in comparison with the same period last year.  Buyers continued to sit on the fence for the most part of H1 2014 in anticipation that the new and stable leadership at the Centre would revive the ailing economy. The QTS ratio for the MMR has more than doubled in the last ten quarters, from being 5 in December 2011 to 12 in June 2014, implying that the unsold inventory will take almost three years to sell. Although 2014 would witness a decline of 15% in new launches to 92,845 housing units, it would be a trend reversal year for absorption, which will increase by 8% to 80,022 units. Taking a look at the office space, the absorption of office space at 2.5 million square feet declined by 34% in H1 2014 over H1 2013, owing to the general elections which resulted in corporates adopting a non-committal attitude towards taking up office space during the first half. In comparison with H1 2013, when the market vacancy stood at 22.3%, the vacancy in H1 2014 increased marginally. The manufacturing sector has emerged as the largest demand driver, with a contribution of 48% in H1 2014, leaving behind the BFSI and IT/ITeS sectors at 15% and 12% respectively.