Trend is likely to continue for the next six months, says Knight Frank
India has seen a 40% drop in residential project launches and 20% dip in home sales in the past one year, according to a report by property advisory firm Knight Frank which points to continuation of the slide that the market has seen for the past 30 months.
The demand for office space has, however, revived in most parts of the country owing to a stronger ITITes sector and growth of tech startups and ecommerce companies.
In the first half of 2015, according to the report, NCR was the worst hit with a 68% plunge in the number of new residential projects to 11,360 from 35,500 in the year-ago period while sales fell 50%.
“This slump indicates that residential real estate is facing a strong price resistance against unattractive and unaffordable prices,“ the report said about the NCR market.
The trend is likely to continue for the next six months, Knight Frank said in the report.
“Developers are holding back on new launches and are realising that they should focus on completing their under construction projects,“ said Shishir Baijal, chairman and managing director of Knight Frank India.
The continuing slowdown notwithstanding, the NCR market had a silver lining in that sales in the first half of 2015 were 18% more than the preceding six-month period, which included the peak selling festive season.
At the current pace of sales, the 189,678 units in the NCR will take over five years to sell.In comparison, the Mumbai Metropolitan Region had 194,510 units that will take over three years to exhaust.The total number of unsold units across the country stood at 706,900, which will take over three years to sell, according to the report.
The growth rate of weighted average price in the NCR has been falling since 2013, from 6% in the first half of 2013 to a mere 1% in the first half of this year. “That means a correction on an inflation adjusted basis,“ said Rajeev Bairathi, executive director-north and capital markets at Knight Frank India. “In the secondary market, prices have corrected by 1520%,“ he said.
The demand for office space was, however, higher during the six months than the yearago period and vacancy levels saw a sharp decline across Mumbai, Pune, NCR, Bengaluru, Chennai and Hyderabad.
The weighted average rental growth in the first half of 2015 was 8% compared to about 4% in the year-ago period and 2% in the first half of 2013.
“Reaching a stage of shortage of good quality office space, vacancy rates have gone down and the market has become favourable for landlords with quality spaces,“ said Baijal.
The office market in the NCR improved during the period, with 3.7 million sq ft of space taken up. “On the demand side, office leasing in NCR saw a marginal increase of 6% in H1 2015, compared to the same period in 2014,“ the report said. Bairathi said that rentals in the NCR appreciated faster than in Bengaluru and Mumbai due to reduced supply .
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