INDIA REAL ESTATE RESIDENTIAL AND OFFICE JANUARY - JUNE 2016 - RESEARCH - Knight Frank India
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RESEARCH INDIA REAL ESTATE RESIDENTIAL AND OFFICE JANUARY - JUNE 2016 AHMEDABAD | BENGALURU | CHENNAI | HYDERABAD | KOLKATA | MUMBAI | NCR | PUNE
INDIA REAL ESTATE RESEARCH
TABLE OF CONTENTS
04 INDIA
14 AHMEDABAD
24 BENGALURU
44 CHENNAI
64 HYDERABAD
82 KOLKATA
94 MUMBAI
112 NCR
132 PUNE
2 3
INDIA REAL ESTATE RESEARCH
INDIA RESIDENTIAL & OFFICE MARKET
Hetal Bachkaniwala
Vice President - Research
4 5
INDIA REAL ESTATE RESEARCH
CITY-WISE SPLIT OF RESIDENTIAL LAUNCHES
RESIDENTIAL MARKET FIGURE 3
RESIDENTIAL MARKET LAUNCHES, SALES AND PRICE TRENDS HALF-YEARLY NEW LAUNCHES (TOP EIGHT CITIES)
H2 2015 H1 2016 H2 2016E
• H1 2016 witnessed the lowest
FIGURE 1 40,000
number of new launches in the
HALF-YEARLY LAUNCHES AND SALES TRENDS (TOP EIGHT CITIES)
last three years across the top 35,000
LAUNCHES SALES eight cities, as developers became
cautious because of the huge 30,000
180,000
unsold inventory that has been
Number of units
25,000
piling up since 2013. New launches
160,000
reduced by 9% in the last six 20,000
Number of units
months, from 117,200 units in H1
15,000
2015 to less than 107,120 units in H1
2016. This is down by 54% from the 10,000
140,000
232,490 units that was observed in
5,000
H1 2013.
• NCR has witnessed the sharpest 0
120,000 MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD KOLKATA AHMEDABAD
drop in new launches, at 41% YOY,
followed by Chennai and Pune, Source: Knight Frank Research
at 36% and 32%, respectively.
100,000
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 E Mumbai turned out to be a surprise,
as the city noted growth in new
Source: Knight Frank Research launches by more than 29% YOY in
H1 2016.
Note: The top eight cities are Mumbai, NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata CITY-WISE SPLIT OF RESIDENTIAL SALES
and Ahmedabad
FIGURE 4
FIGURE 2 HALF-YEARLY SALES (TOP EIGHT CITIES)
PRICE AND INFLATION INDICES (TOP EIGHT CITIES) H2 2015 H1 2016 H2 2016E
40,000
125
CPI
35,000
120 MUMBAI
Index value (Q1 2013 = 100)
30,000
NCR
Number of units
115 25,000
BENGALURU
20,000
110 PUNE
15,000
CHENNAI
105
10,000
HYDERABAD
100 KOLKATA 5,000
AHMEDABAD 0
95 MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD KOLKATA AHMEDABAD
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016
Source: Knight Frank Research
Source: Knight Frank Research
• In terms of sales, the top eight cities • Mumbai and Bengaluru led this growth in H1 2016.
observed a positive growth of 7% positive growth in sales volume,
• Price growth across all the cities
in H1 2016, as the number of units at 23% YOY and 18% YOY
remained muted in H1 2016.
sold jumped from 126,615 in H1 respectively, in H1 2016. However,
However, prices in the NCR
2015 to 135,015 in the latest period. cities such as NCR, Chennai and
residential market corrected for the
However, this is considerably lower Kolkata are still reeling under
first time, registering a 4% YOY dip
than 185,800 units that were sold pressure in terms of sales volume
in H1 2016.
across these cities in H1 2015. and have reported a negative
6 7
INDIA REAL ESTATE RESEARCH
FIGURE 5 FIGURE 7
TICKET SIZE SPLIT OF LAUNCHED UNITS IN H1 2016 RELATIVE HEALTH OF THE RESIDENTIAL MARKETS (TOP EIGHT CITIES)
>`20 MN `10-20 MN `7.5-10 MN `5-7.5 MN `2.5-5 MN
INDIA REAL ESTATE RESEARCH
MOVE TO STREAMLINE THE SECTOR the Act lays down guidelines for the are filed against them through the and be compensated as they
C
developers, one must also consider life of the project. Products that complete the different stages of
ome May 2017, and the real provisions of the Act are maintained m or eight apartments will have to
the enablers that will empower the provide insurance on the land title the project? Clarity on such issues
estate market will not be the by the stakeholders, especially from be registered with the Real Estate
developer to implement the project are presently not available in India. will help the sector grow further
same again. The Real Estate the supply side. This, to a great Regulatory Authority (RERA). The
in a systematic manner. However, one can expect such and benefit all the stakeholders.
(Regulation and Development) Act, extent, will reduce the instances of states will have the power to lower
products by the time the Act comes By giving consumers a dedicated
2016, will be a game changer for discord between homebuyers and this ceiling. However, projects that The enablers
into full force by May 2017. grievance redressal system, the load
all the stakeholders in the sector. developers. Ideally, there will be a are meant only for self-consumption
Without the enabling factors that on consumer courts is expected
Currently, only a few sections of the regulator for each state, but there will be outside the purview of this The way forward
will help developers run the project, to reduce. Disputes between
Act, especially those that will enable could also be two regulators for a Act.
the Act will lose its purpose. Going forward, one can expect consumers and developers as a
the full enactment of the Act, have state or one regulator for two states.
Developers will need to disclose The Act does not deal with this certain clauses to be added to the whole is expected to decrease, as
been notified. As per the provisions But how will such a watchdog help
all the information pertaining to aspect, but the states will need to Act, making it more robust. A clause the Act will streamline the sector to a
of the Act, it will come into full force the overall sector?
a project when registering it with implement their own sets of laws to stop discrimination on the basis great extent.
by May 2017. So, what does the Act of religion, caste, sexual orientation,
Increased transparency RERA. This includes details such as that will enable the development of
mean, especially for developers and Conclusion
the project implementation schedule, the sector. Delhi’s recently revised marital status and dietary
homebuyers? The point of interest Transparency in the sector has not
layout plan, land status, government unified bylaws are a step in this preferences is expected to be added The Real Estate (Regulation and
for most stakeholders is the impact been satisfactory, though it has
approvals, real estate agents, sub- direction, providing measures such soon. Further clarifications will be Development) Act, 2016, is good
the Act will have on the sector as a improved over the years and the
contractors, etc. This information will as single window clearance, simpler provided on certain provisions of the for the sector, but developers will
whole once all its provisions come road ahead looks promising. For
be made available to the consumers, documentation and faster approvals Act, such as the clause that states need some time to get used to its
into force. example, if a homebuyer plans to
which will empower them to take to help developers execute projects that 70 per cent of the collections intricacies. They will need to realign
buy a house in the present day,
The new watchdog informed decisions. With all details on time. The Act also carries an from the homebuyers need to be their businesses in accordance with
they would not have access to all
of the project being documented, the important piece of legislation that maintained in a dedicated account, the Act, which could affect launches
Presently, disputes between the information required to take
consumer can approach RERA if the needs further clarification. It speaks to be used only for the said project. in the short term. The move by
homebuyers and developers well-informed decisions. The Act
developer deviates from the details of the title insurance of land, which The developers can withdraw developers to comply to certain
typically end up in consumer courts. will change the rules of the game
mentioned when registering the ensures that chances of the said money from the said account to provisions in the Act could push
Among other things, the regulator completely, thus improving the
project. Similarly, developers facing land being under any encumbrance the extent of the work completed up prices in the short to medium
appointed through this Act will deal transparency in the sector. All
problems with consumers can also are minimal. However, developers on a project. Does this mean that term, however, in the long run due to
with all such disputes. The regulator commercial and residential plots
approach RERA for solutions. While will have unlimited liability in case developers will need to implement efficiencies brought in the sector, by
will also ensure that the relevant with an area of more than 500 sq
any charges of encumbrances the project from their own resources RERA, prices would rationalize.
10 11
INDIA REAL ESTATE RESEARCH
OFFICE MARKET • H1 2016 witnessed a 12% growth in
the transaction volume across the
FIGURE 3
• Vacancy levels in the top six cities
fell marginally, from 17% in H1 2015
SECTOR-WISE TRANSACTIONS SPLIT IN H1 2016
top six cities of India. Transactions to less than 15% in H1 2016. While
FIGURE 1 IT/ITeS BFSI ( including support services) MANUFACTURING OTHER SERVICES
increased from 17.9 mn sq ft in H1 cities such as Pune and Chennai
NEW COMPLETIONS, TRANSACTIONS AND VACANCY LEVEL (TOP SIX CITIES)
2015 to 20 mn sq ft in the latest six- 100% witnessed a sharp drop in vacancy
NEW COMPLETIONS TRANSACTIONS VACANCY (RHS) monthly period. 90% in the last year, it has increased
25 20% 80% marginally in Hyderabad.
• Hyderabad reported the sharpest
jump in transactions, from 1.5 mn 70% • Rental values have continued to
20
sq ft in H1 2015 to 2.8 mn sq ft in 60% maintain their upward movement in
mn sq.ft.
16% H1 2016, resulting in a 91% YOY 50% most of the cities, as the average
15
increase. This was followed by 40% rents shot up by 8% YOY in H1
Mumbai, which reported a 50% 30% 2016. This jump was led by cities
10
14% YOY rise in transactions. The such as NCR, Pune and Bengaluru,
20%
remaining four cities observed a where rents have moved up in the
5 10%
marginal dip in transactions, in the range of 10-14% YOY in H1 2016.
-
range of 1-9%. MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD
0 12%
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 E • In terms of new completions, H1
Source: Knight Frank Research 2016 has been an encouraging Source: Knight Frank Research
Note: The top six cities are Mumbai, NCR, Bengaluru, Pune, Chennai and Hyderabad period, as more than 19 mn sq ft
FIGURE 5
of space was delivered, compared
FIGURE 2 DEAL SIZE ANALYSIS
to just 15.8 mn sq ft in the same
OFFICE STOCK AND OCCUPIED STOCK (AS OF JUNE 2016) period the previous year. While H1 2015 H1 2016
STOCK OCCUPIED STOCK cities such as Mumbai, Bengaluru 60,000
and Hyderabad witnessed a sharp
160
spike in new completions, NCR,
140
Pune and Chennai reported a fall.
40,000
120
sq ft
100
mn sq.ft
80
20,000
60
40
20 0
MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD
0
MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD Source: Knight Frank Research
Source: Knight Frank Research
FIGURE 4 OUTLOOK FOR THE NEXT SIX MONTHS
CITY-WISE NEW COMPLETIONS, TRANSACTIONS AND
VACANCY LEVELS IN H1 2016 H2 2015 H2 2016E GROWTH
NEW COMPLETION TRANSACTIONS VACANCY (RHS)
New completions (mn sq ft) 18.7 19.2 3%
7 25%
20.1% 20.6% Transactions (mn sq ft) 23.2 22.7 -2%
6
20% Vacancy 15% 14%
5 17.1%
Source: Knight Frank Research
4 15%
mn sq.ft
• New completions are set to get a fall by 2% in H2 2016 from 23.2 mn years. Going forward, this trend is
3 9.6%
9.3% 10% marginal boost in the coming six sq ft to 22.7 mn sq ft. This will ease expected to continue in the coming
7.1%
2 months, as cities such as Mumbai, the pressure on the vacancy levels, six-month period, with Mumbai,
5% Pune and Chennai will witness the which are expected to drop to 14% NCR and Bengaluru projected to
1
delivery of multiple projects. by the end of H2 2016. grow at the fastest pace.
0 0%
• However, demand for office space • Rents in most of the cities have
MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD
will be muted and is projected to increased steadily since the last two
Source: Knight Frank Research
12 13
INDIA REAL ESTATE RESEARCH
AHMEDABAD RESIDENTIAL MARKET
Hetal Bachkaniwala
Vice President - Research
14 15
INDIA REAL ESTATE RESEARCH
MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES
RESIDENTIAL MARKET
FIGURE 2
MICRO-MARKET SPLIT OF LAUNCHED UNITS
AHMEDABAD RESIDENTIAL MARKET LAUNCHES, SALES H1 2015 H2 2015 H1 2016 While more than 85%
AND PRICE TRENDS 40% of the total unsold
35%
35% inventory available in
30%
FIGURE 1
27%
AHMEDABAD MARKET TRENDS South Ahmedabad is
26%
30%
23%
23%
23%
22%
22%
25%
LAUNCHES SALES WT. AVG. PRICE (RHS)
below the ticket size of
19%
20%
12,000 3,000
`2.5 mn, homebuyers
15%
15%
10%
10,000
seem to be staying away
10%
2,800
8%
10%
` / sq ft
8,000
from this market. Poor
6%
Number of units
5%
6,000 2,400
0
connectivity to the city
4,000
2,200
CENTRAL EAST NORTH SOUTH WEST
center, the presence of
2,000
Source: Knight Frank Research
multiple manufacturing
0 2,000
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 E
H1 2015: H2 2015: H1 2016:
units and the lack of
Source: Knight Frank Research 8,060 units 7,490 units 8,810 units social infrastructure have
limited this market’s
• The new launches in South • North Ahmedabad, with locations
• The latest sales volume, which • However, these numbers are still
Ahmedabad have fallen by 47% such as Gota, New Ranip, Tragad, attractiveness.
had been falling since the last four drastically low from the heydays of
YOY in H1 2016, as developers are Chandkheda and Motera, has
years, has been arrested in H1 2011, when more than 27,000 units
still trying to offload apartments witnessed the maximum number
2016. Sales have increased by 10% were launched in a six-monthly
in their existing projects. While of new launches in H1 2015.
YOY, from 7,750 units in H1 2015 to period
more than 85% of the total unsold With prices in West and Central
more than 8,550 in H1 2016.
inventory available here is below the Ahmedabad breaching the
• Stagnant prices, improvement in ticket size of `2.5 mn, homebuyers homebuyers’ affordability level,
business sentiment and the revival seem to be staying away from this North Ahmedabad has emerged as
in the manufacturing sector seem to market. Poor connectivity to the the most preferred destination for
have aided this recovery in sales city centre, the presence of multiple mid-segment housing. During H1
manufacturing units and the lack 2016, 70% of the new launches in
• However, the sales volume is still
of social infrastructure have limited this market were below the ticket
47% lower than what was achieved
this market’s attractiveness. size of `5 mn.
in H1 2012, when more than 16,000
units were sold in a six-month
period. We believe it will take a FIGURE 3
The sales volume, at TICKET SIZE SPLIT OF LAUNCHES DURING H1 2016
significant amount of time for the
8,550 units in H1 2016, is Ahmedabad market to reach these 100%
still 47% lower than what levels in terms of volume. 90%
• New launches also witnessed a 80%
was achieved in H1 2012,
surge in H1 2016 on the back of 70%
when more than 16,000 improved sentiment. Developers 60%
seem to have taken a cue from the
units were sold in a six- 50%
recovery in homebuyer sentiment 40%
month period. and have pushed new launches
30%
to the extent of 8,800 units in H1
20%
2016 from 8,060 units in H1 2015,
resulting in a 9% YOY growth 10%
-
< `2.5 MN `2.5 - 5 MN `5 - 7.5 MN `7.5 - 10 MN `10-20 MN >20 MN
CENTRAL EAST NORTH WEST SOUTH
Source: Knight Frank Research
16 17
INDIA REAL ESTATE RESEARCH
AHMEDABAD CITY MAP
MICRO-MARKET-WISE RESIDENTIAL SALES
GIFT City
Adalaj
MICRO-MARKET LOCATIONS
CENTRAL Paldi, Vasna, Navrangpura, Maninagar, Dudheshwar, Ambawadi
Tragad
EAST Naroda, Vastral, Nikol, Kathwada Road, Odhav
Chandkheda
NORTH Gota, New Ranip, Tragad, Chandkheda, Motera
AY
Gota Bhat
IGHW
SOUTH Narol, Vatva, Vinzol, Hathijan Motera Stadium Gidc Naroda
SG H
Chandlodia
OAD
Hansol
NG R
WEST S. G. Highway, Prahlad Nagar, Bopal, Thaltej, Science City Road
I
EL R
Sola Village Nava Naroda
PAT
Meghani
DAR
Memnagar Nagar
SAR
M ROAD
Thaltej Dubeshwar
FIGURE 4 Thaltej Gam Nikol Kathwada
Navrangpur
ASHRA
MICRO-MARKET-WISE RESIDENTIAL SALES Manipur Bopal Bodakdev
H1 2015 H2 2015 H1 2016
Odhav
35% 32%
32%
Prahlad Nagar Paldi
30%
30%
30%
Shela
28%
Vasna
30% Maninagar Vastral Gam
APMC
25%
Sarkhej Gam Isanpur
Sanand
18%
17%
17%
20%
AH
ME
14%
14%
DA
13%
BAD
15% -V
AD
LEGEND Vinzol OD
AR
AE
9%
8%
D
8%
Ring Road XP
OA
10% Major Road GR
Y
RIN
Rail Line TEL Hathijan
AR PA
Metro/Station SARD
5% BRTS Phase 1 (West)
BRTS Phase 1 (East)
BRTS Phase 2
0 Changadar
CENTRAL EAST NORTH SOUTH WEST
Source: Knight Frank Research
H1 2015: H2 2015: H1 2016: MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS AS OF JUNE 2016
Central Ahmedabad’s 7,750 units 9,075 units 8,550 units
share has been holding A
7%
• Central Ahmedabad’s share in the
• The micro-market split of sales retail market continue to attract CENTRAL total number of under-construction
steady over the last B units has increased significantly to
has not witnessed any significant homebuyers to this micro-market
EAST 21%
12 months. Better change in the last six months. despite its higher pricing. C
7% in H1 2016 from just 4% a year
connectivity with the city While the shares of East and NORTH 34% ago. The last 12 months witnessed
North Ahmedabad have increased a slew of new project launches in
D
centre, proximity to the marginally, the shares of the rest of SOUTH 10% this micro-market as the remaining
the micro-markets have reduced E markets were going through a
central business district 28% slowdown. This has pushed its
slightly. B C SOUTH
(CBD) and the presence share higher, as the construction in
• Central Ahmedabad’s share has these projects is progressing in full
of a well-developed retail been holding steady over the last
D
A swing.
12 months. Better connectivity with
market continue to attract • East Ahmedabad’s share in the
the city centre, proximity to the
homebuyers to this micro- central business district (CBD) and E total number of under-construction
the presence of a well-developed units has fallen drastically in the
market despite its higher past year, primarily due to a large
pricing. number of projects getting delivered
in the last six-months.
Source: Knight Frank Research
18 19INDIA REAL ESTATE RESEARCH
PREMIUM RESIDENTIAL MARKET LAUNCHES, SALES AND
PRICE TRENDS
WILL GIFT CITY’S RECOGNITION AS AN
INTERNATIONAL FINANCE SERVICES CENTRE BOOST MICRO-MARKET PREMIUM LOCATIONS
AHMEDABAD’S REALTY MARKET? CENTRAL
Ambawadi, Navrangpura, Shahibaug, Nehru
Nagar Locations closer to the city
centre have remained as
T
Ambli, Bodakdev, Jodhpur, Prahlad Nagar,
he Gujarat International Bank have already commenced forex traders. This, in turn, will WEST
Satellite, Thaltej, Vastrapur
Finance Tec-City (GIFT) their operations, and other banks drive the demand for residential the preferred destination
project has finally received are in the process of setting up properties in the city, especially in for high net worth
FIGURE 5
the much-needed recognition shop in the coming months. The the premium and middle segments.
as an International Finance enthusiasm shown by all the major Since residential locations closer to PREMIUM MARKET TRENDS individuals (HNIs), as a
Services Centre (IFSC) from the financial players of the country is a GIFT City still lag in terms of social LAUNCHES SALES WT. AVG. PRICE (RHS)
well-developed physical
union finance minister in the positive step for the project as well infrastructure, we believe that areas 1,400 6,000
latest budget. GIFT City was as the city. If one has to go by the such as Thaltej, Sola, Science 1,200
and social infrastructure,
5,500
conceptualised by the Gujarat experience of other international City Road, Tragad and Godrej proximity to the CBD areas
1,000
Government in order to cater to finance centres such as Dubai, Garden City will gain the maximum
` / sq ft
5,000
Number of units
India’s large financial services Singapore and London, it can be from this. Apart from being 800 and easy access to the
4,500
potential by offering global firms easily concluded that Ahmedabad’s easily accessible from the major 600 major retail centres makes
world-class infrastructure and real estate market is set to witness arterial roads, such as Sarkhej- 400
4,000
facilities. Apart from hosting an unprecedented development in the Gandhinagar Highway and Sardar these areas attractive
200 3,500
international finance centre, it coming years on the back of this Patel Ring Road, these locations
also has a multi-speciality special project. are also well developed in terms of 0 3,000
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016
economic zone (SEZ). It is located social and physical infrastructure.
In the current scenario, Ahmedabad
at a distance of 12 km from the The recognition of GIFT City as Source: Knight Frank Research
lags behind other Indian cities, such
Ahmedabad International Airport an International Finance Services Note: Premium markets include locations where the average ticket size of a residential unit
as Mumbai, Bengaluru, Delhi, Pune,
and 8 km from the state’s capital, Centre could not have come at a is above `15 mn, are in close proximity to the central business district of the city and have
Chennai and Hyderabad, in terms
Gandhinagar. better time, as the city’s real estate witnessed new project launches in the preceding three years
of service sector jobs. Although it
is undergoing a severe slowdown • The premium segment continues developed physical and social
The latest union budget has has a very strong standing in the
since last two years. to witness a steady traction in the infrastructure, proximity to the CBD
approved the various tax manufacturing sector, the absence
exemptions that the finance of major IT/ITeS companies has sales volume, but new launches areas and easy access to the major
centre was requesting since the deprived the city from high- have taken a hit. While the sales retail centres makes these areas
past few years in order to make it income, white-collar service volume grew by 17% YOY, new attractive
globally competitive. Exemption sector jobs. The real estate launches dropped by more than
from dividend distribution tax, market of the other cities has 50% YOY
securities transaction tax, benefited immensely from the • The premium market includes
long-term capital gains tax and growth in service sector over locations such as Ambawadi,
commodity transaction tax, the last 10-15 years. Apart from Bodakdev, Navrangpur, Prahlad
among others, were some of the fuelling a boom in commercial Nagar, Satellite and Vastrapur,
incentives required to create a real estate, the high spending among others
feasible financial centre at par power of such white-collar
with other global financial centres, employees also gives an • New launches in the premium
such as Dubai and Singapore. With impetus to the residential segment have plummeted from
the regulatory and infrastructure market. a high of 1,240 units in H2 2014
framework already in place, tax to less than 220 units in H1 2016.
Ahmedabad is on the cusp However, the sales volume has
exemptions were the only missing
of witnessing a boom in remained stable in the range of
link and these have finally been
service sector jobs, primarily 500-550 units since 2014
achieved.
aided by the IFSC in GIFT
GIFT City has received an City. Apart from attracting • Locations closer to the city centre
exceptional response from all the numerous bankers, brokers, have remained as the preferred
major banks and stock exchanges financial analysts and other destination for high net worth
in the last few months. ICICI intermediaries, the city will also individuals (HNIs), as a well-
Bank, Yes Bank and Federal attract several international
20 21INDIA REAL ESTATE RESEARCH
AHMEDABAD MARKET HEALTH PRICE MOVEMENT IN H1 2016
FIGURE 6 WEIGHTED AVERAGE PRICE MOVEMENT IN AHMEDABAD Since 2010, premium
QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS
PRICE RANGE IN H1 12 MONTH 6 MONTH segment prices have gone
AHMEDABAD PREMIUM MARKETS LOCATION
24
2016 (`/SQ FT) CHANGE CHANGE up by more than 50%,
Ahmedabad 2,780 5% 0% whereas the city’s average
20
Premium markets 5,585 9% 5% price has moved up by
No. of Quarters
16 only 27%. Steady demand
PRICE MOVEMENT IN SELECT LOCATIONS and a limited supply
12
PRICE RANGE IN 12 MONTH 6 MONTH
LOCATION MICRO-MARKET have helped prices in the
8 H1 2016 (`/SQ FT) CHANGE CHANGE
premium segment to move
Ambawadi Central 5,500 - 7,500 1% 1%
4 in this manner
Navrangpura Central 5,500 - 7,500 2% 1%
0 Mani Nagar Central 3,500 - 6,000 6% 2%
MAR-14
DEC-14
DEC-15
JUN-14
APR-16
JUN-15
JUN-16
SEP-15
FEB-16
Paldi Central 4,500 - 6,200 6% 2%
Naroda East 2,000 - 3,000 4% 0%
Source: Knight Frank Research
• The price growth in the premium
Vastral East 1,800 - 2,500 2% 1%
FIGURE 7 segment outperformed the city’s
Nikol East 1,800 - 2,500 0% 0% average price growth. While the
MICRO-MARKET-WISE QTS VS AGE OF INVENTORY
weighted average price in the city
Prahlad Nagar West 5,000 - 6,500 3% 2%
grew by 5% YOY in H1 2016, it grew
CENTRAL EAST WEST NORTH SOUTH
Satellite West 5,500 - 7,200 1% 0% by 9% in the premium segment
14 Thaltej West 5,000 - 6,000 0% 0% • Since 2010, premium segment
Age of unsold inventory in quarters
Vastrapur West 5,000 - 6,200 0% 0% prices have gone up by more than
50%, whereas the city’s average
Bopal West 3,500 - 4,800 0% 0% price has moved up by only 27%.
11 Steady demand and a limited
Chandkheda North 2,500 - 3,200 2% 1%
supply have helped prices in the
Motera North 2,800 - 3,600 0% 0% premium segment to move in this
Gota North 2,800 - 3,600 1% 0% manner.
8
Source: Knight Frank Research
OUTLOOK FOR THE NEXT SIX MONTHS
The number of quarters 5
PROJECTIONS H2 2015 H2 2016E GROWTH
5 8 11 14
to sell the existing unsold Launches (units) 7,490 9,540 27%
QTS*
inventory has moved up Source: Knight Frank Research
Sales (units) 9,075 10,460 15%
considerably in the last • The high level of unsold inventory is 8.5. At present, the city has more
still a big concern for Ahmedabad’s than 40,000 units in various stages Weighted average price (`/sq ft) 2,730 2,810 3%
three years and currently
developer community. Despite an of construction that still remain Source: Knight Frank Research
stands at 8.5. At present, improving sales volume in the last unsold. • The positive sentiment in the launches and sales will increase by • The price growth in the coming six
six months, the unsold inventory residential market due to the 27% and 15% YOY respectively. months will remain subdued, as
the city has more than • Such a scenario will continue to
level has not reduced significantly, revival in manufacturing activity, the huge number of unsold units
keep prices in check, as developers • We believe that South Ahmedabad
40,000 units in various as developers continued to launch the improving business sentiment currently available in the market
will be unable to demand a higher will continue to witness a subdued
new projects and the renewed interest in the will restrict the upward movement
stages of construction that price from homebuyers when there sales volume, as its great distance
• The number of quarters to sell is already such a huge unsold stock Gujarat International Finance Tec- in prices. However, prices in the
are still unsold. from the city centre, the presence
the existing unsold inventory has present in the market City (GIFT) city from investors are premium segment are expected
of a large number of manufacturing
moved up considerably in the last expected to usher in a double-digit to continue their upward trend, as
units and poor infrastructure
three years and currently stands at growth in new launches and sales demand from homebuyers in this
facilities are expected to restrict
in H2 2016. We forecast that new market remains strong.
homebuyer interest in this zone.
22 23INDIA REAL ESTATE RESEARCH
BENGALURU RESIDENTIAL & OFFICE MARKET
Sangeeta Sharma Dutta
Assistant Vice President - Research
24 25INDIA REAL ESTATE RESEARCH
MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES
RESIDENTIAL MARKET
FIGURE 2
MICRO-MARKET SPLIT OF LAUNCHED UNITS
BENGALURU RESIDENTIAL MARKET LAUNCHES, SALES
H1 2015 H2 2015 H1 2016
AND PRICE TRENDS 45%
40%
FIGURE 1
BENGALURU MARKET TRENDS 35%
30%
LAUNCHES SALES WT. AVG. PRICE (RHS)
25%
40,000 5,000
20%
35,000 4,900 15%
30,000 4,800 10%
0%
0%
0%
22%
26%
27%
37%
25%
22%
32%
38%
42%
11%
25,000 5%
9%
9%
4,700
0
` / sq ft
20,000 4,600
Number of units
CENTRAL EAST NORTH SOUTH WEST
15,000 4,500
Source: Knight Frank Research
10,000 4,400
H1 2015: H2 2015: H1 2016:
5,000 4,300
21,400 units 24,190 units 24,281units
0 4,200
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 E
• The southern zone of the city, expected to bounce back on the North Bengaluru, touted to
Source: Knight Frank Research which had witnessed a somewhat prospective buyers’ radar.
waning developer interest in H1 have an immense potential
• East Bengaluru’s share in the total
• The first half of the year (H1 2016) • We expect the market to remain 2015, accounted for a whopping
number of new launches, which has to grow as a residential
saw the Bengaluru residential steady in the next six months, 42% share in the total number of
market recover sufficiently from owing mainly to the large quantum new launches in H1 2016. This
been observed to rise steadily in destination on account
the past year, reinstated its growth
the setback that it had suffered of office space transacted in the could be attributed to the number
potential with a 27% share in H1 of its good infrastructure,
in H1 2015. While the number of city during H1 2016, as well as the of residential projects that were
new launches continued to remain projected completion of the much- launched in the peripheral locations,
2016 from 22% in H1 2015. saw its share of
somewhat restrained, given the awaited Phase 1 of the metro rail, such as Electronics City and off- • On the other hand, West Bengaluru new launches shrink
cautious market environment, it which is expected to improve the Sarjapur Road. Besides, positive maintained its consistency and
surpassed the number of launches connectivity with several micro- sentiments in the IT/ITeS sector continued to account for a 9% considerably in H1 2016,
in H1 2015 by a satisfactory 13%. markets of the city. We estimate seem to have led to the resurgence share H1 2016 – the same quantum which could be attributed
new launches to firm up by 4% in of residential development in this of new launches as in H1 2015. With
• The city’s sales volume, on the
H2 2016, compared to H2 2015. region. the East–West metro rail corridor to factors such as high
other hand, remained steady and in
becoming operational, connecting land cost and relatively
a much stronger position than the • The sales volume is also expected • North Bengaluru, which had
The Bengaluru residential several key locations, we foresee
new launches. Notwithstanding the to be quite steadfast on a year- witnessed the highest number of
the number of new launches picking expensive property prices.
market saw a vast slightly wary market sentiment, end- over-year (YOY) basis, though it is new launches in H1 2015, saw its
up in the forthcoming months. In H1 2016, the region
user demand boosted sales, and an anticipated to witness a slight dip of share shrink considerably in H1
improvement in H1 2016,
increase of 18% was observed in 5% in H2 2016 over H2 2015. 2016. It declined from a sizable • The eastern zone of the city had accounted for the highest
given the setback that it H1 2016 as compared to its dismal 37% in H1 2015 to 22% in H1 the majority of the projects below
performance in H1 2015.
• On the price front, we expect
2016. While the region was touted the `2.5 mn ticket size in H2 2016, number of residential units
had suffered in H1 2015. a measured growth in H2 2016
to have an immense potential to accounting for 43% of the total priced above the ticket
While the number of new • Meanwhile, weighted average prices compared to H2 2015. The period is
grow as a residential destination on number of new launches in that
continued to scale upwards at a estimated to witness a 3% increase
account of its good infrastructure, segment, while, in contrast, North size of `10 mn. However,
launches increased by gradual pace and saw an increase in the annual weighted average
factors such as high land cost and Bengaluru witnessed the launch of with several office projects
13% on a YOY basis, the of 3% in H1 2016 compared to H1 price.
relatively expensive property prices the most number of residential units
2015. The increase in construction
were responsible for bringing down priced above the ticket size of `10 ready to be operational,
city’s sales volume saw a costs and statutory dues, among
its share in H1 2016. However, mn – to the tune of around 59%. the region is expected
stronger recovery, at 18%. other factors, have led to this price
with several office projects ready Notably, locations such as Hennur
appreciation.
to become operational in the Road, Kogilu and Hebbal saw a to bounce back on the
forthcoming months, creating new number of new launches in the prospective buyers’ radar.
employment hubs, the region is premium housing segment.
26 27INDIA REAL ESTATE RESEARCH
FIGURE 3 MICRO-MARKET LOCATIONS
TICKET SIZE SPLIT OF LAUNCHES DURING H1 2016
CENTRAL M.G. Road, Lavelle Road, Langford Town, Vittal Mallya Road, Richmond Road
100%
90% EAST Whitefield, Old Airport Road, Old Madras Road, K.R. Puram, Marathahalli
80%
70% WEST Malleswaram, Rajajinagar, Yeshwanthpur, Tumkur Road, Vijayanagar
60% NORTH Hebbal, Bellary Road, Hennur, Jakkur, Yelahanka, Banaswadi
50%
Koramangala, Sarjapur Road, Jayanagar, J.P. Nagar, HSR Layout, Kanakapura Road, Bannerghatta
40% SOUTH
Road, Electronics City
30%
20% BENGALURU METROPOLITAN REGION MAP
10%
-
< `2.5 MN `2.5 - 5 MN `5 - 7.5 MN `7.5 - 10 MN `10-20 MN >-20 MN
CENTRAL EAST NORTH SOUTH WEST
Source: Knight Frank Research
MICRO-MARKET-WISE RESIDENTIAL SALES
FIGURE 4
MICRO-MARKET SPLIT OF SALES
H1 2015 H2 2015 H1 2016
45%
40%
35%
30%
25%
20%
15%
10%
0%
0%
0%
23%
26%
29%
29%
25%
22%
40%
39%
40%
10%
5%
8%
9%
0
CENTRAL EAST NORTH SOUTH WEST
East Bengaluru’s share in
Source: Knight Frank Research
the total number of new
launches, which has been
H1 2015: H2 2015: H1 2016:
observed to rise steadily 22,234 units 27,849 units 26,220 units
in the past year, reinstated
its growth potential with
a 27% share in H1 2016
from 22% in H1 2015
28 29INDIA REAL ESTATE RESEARCH
MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION
UNITS AS OF JUNE 2016
METRO PUSH TO WEST BENGALURU
T
he eastern and western parts employment opportunities in the the metro connectivity proposal
of Bengaluru showcase east. Talks with BMRCL are in was announced in the region.
two distinct characteristics process to provide a feeder bus However, with the metro project
A
of the city. While East Bengaluru service from Baiyappanahalli deadlines failing repeatedly,
CENTRAL 0%
is known as one of the city’s key to Whitefield. The company is prospective buyers of residential B
IT/ITeS hubs, housing the iconic expecting half a million commuters properties along the metro nodes WEST 9%
International Tech Park Bangalore daily from the present 45,000 as had grown increasingly uncertain C
(ITPB) in Whitefield, West Bengaluru the metro connects with Majestic, about its completion, deliberating EAST 25%
is recognised primarily as an the nerve centre of the city’s public over their buying decisions. With D
industrial hub, accounting for the transport. the metro now fully functional, B C NORTH 22%
Peenya Industrial Area – one of homebuyers who prefer to reside E
the largest of its kind in Asia. For a
The advent of the East–West metro
in locations with metro connectivity D SOUTH 44%
corridor has been observed to A
long time, these two regions have are assured of the ease of travel
have a considerable impact on
been separated by socioeconomic from their residences to their
residential real estate, particularly
variances and severe traffic workplaces. With connectivity E
towards the west. Till recently,
bottlenecks. to Central and East Bengaluru,
the residential market in the
where the key employment hubs
The incongruence between the western region had struggled to
are located, residents from as
two key regions of the city is set to keep pace with the other regions Source: Knight Frank Research
far as Mysore Road now have
change with the advent of the metro of the city, while East Bengaluru
an increased scope of working
rail connectivity. In April 2016, the remained a preferred market for
in these areas. Further, prices in
long-awaited and much-delayed homebuyers employed in the
localities connected by the metro,
East–West metro rail corridor IT sector. Although it cannot be
such as Nayandahalli, as well
became operational. Called the inferred that the inauguration of • South Bengaluru accounts for the there. Additionally, property
as neighbouring areas, such as
Purple Line by the Bangalore Metro the Purple Line brought a sudden major share of the total number prices are relatively cheaper in the
Rajarajeshwarinagar and Magadi
Rail Corporation Limited (BMRCL), appreciation in real estate prices of units under construction, to the peripheral locations in the south,
Road in the west, are expected to
it is the first complete corridor or demand, the impending launch tune of 44%, given that it has been compared to the other micro-
witness a fair appreciation on the
cutting across the city and the first of this line has gradually been witnessing large-scale residential markets.
back of a relatively increased sales
complete line to begin operations creating a momentum in the real development in the past years.
volume in the near future. Thus, in • The northern and eastern markets
for the Bangalore Metro. estate demand along the western The region is preferred by potential
addition to easing traffic woes and have fairly uniform shares of units
fringes of the city, where property buyers due to its good social
The 18-km stretch now connects enabling speedy commuting in the under construction, with West
prices are currently in the range infrastructure and the presence
Nayandahalli on Mysore East–West corridor, the metro line Bengaluru gradually emerging on
of `3,500–6,000 per sq ft, an of employment hubs, leading
Road in West Bengaluru with is also envisaged to provide an the residential market scene.
appreciation of around 7–10% per developers to launch their projects
Baiyappanahalli in the east. This impetus to the real estate market.
annum in the last three years.
new line is expected to cater to the
Whitefield-bound workforce from The areas along the East–West
the central and western locations, corridor had been witnessing an
while concurrently creating more upsurge in buyer interest ever since
PREMIUM RESIDENTIAL MARKET LAUNCHES, SALES AND PRICE TRENDS
• On the sales front, a few changes • East Bengaluru saw increased number of residential units in the MICRO-MARKET PREMIUM LOCATIONS
have been observed in the micro- sales, from a 23% share of the budget housing segment, thereby
CENTRAL M.G. Road, Lavelle Road, Langford Town, Vittal Mallya Road, Richmond Road
market split in the last year. total sales in H1 2015 to 29% increasing its attractiveness to the
While the shares of the western in H1 2016, owing largely to the price-conscious buyer. EAST Whitefield, Indiranagar
and southern regions of the city employment hubs and social
remained almost constant, in H1 infrastructure in place in the region. WEST Malleswaram, Rajajinagar, Yeshwanthpur
2016 compared to H1 2015, East The IT/ITeS office projects along
NORTH Hebbal, Bellary Road
and North Bengaluru saw their the Outer Ring Road and in the
shares undergo a substantial Whitefield area have contributed SOUTH Koramangala, Jayanagar, J.P. Nagar
variation in H1 2016. majorly to the growth in this region.
Besides, H1 2016 also saw a
30 31INDIA REAL ESTATE RESEARCH
FIGURE 5 FIGURE 7
PREMIUM MARKET TRENDS MICRO-MARKET-WISE QTS VS AGE OF INVENTORY
LAUNCHES SALES WT. AVG. PRICE (RHS)
CENTRAL EAST NORTH SOUTH WEST
14,00 8,700
9.8
1,200 8,600
Age of unsold inventory in quarters
9.6
8,500
1,000
8,400 9.4
` / sq ft
800
Number of units
8,300 9.2
600
8,200 9
400
8,100 8.8
200 8,000 8.6
0 7,900 8.4
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016
8.2
Source: Knight Frank Research
8
Note: Premium markets include locations where the average ticket size of a residential unit
7.8 8 8.2 8.4 8.6 8.8 9 9.2
is above ` 20 mn, are in close proximity to the central business district of the city and have
QTS*
witnessed new project launches in the preceding three years Source: Knight Frank Research
• The premium market of Bengaluru, face of a subdued market. • However, due to the slackening of • The quarters to sell unsold inventory • On the other hand, South Bengaluru
which constitutes locations such the premium housing market in the (QTS) is the number of quarters is one of the worst performing
• While H1 2015 was characterised by
as Lavelle Road, Richmond Road, past year, the weighted average required to exhaust the existing markets, with the largest quantum
poor sales in the premium housing
Indiranagar and Malleswaram, price growth YOY in the premium unsold inventory in the market. The of unsold inventory in the city and
segment owing to cautious market East Bengaluru is currently
among others, observed a segment saw a marginal decline of existing unsold inventory is divided the highest QTS, indicating that
sentiments, H1 2016 witnessed
substantial increase of 23% in 1% in H1 2016, as compared to H1 by the average sales velocity of the the pace of sales in this region is the best performing
a considerable improvement in
new launches during H1 2016 2015. preceding eight quarters in order slower than the other regions of the
demand for such properties, market of the city, with
as compared to H1 2015, when to arrive at the QTS number for city, as many projects are located
clocking an increase of 35% as
developers had refrained from that particular quarter. A lower QTS in distant markets with a lack of the lowest QTS, signifying
against the same period last year.
launching premium projects in the indicates a healthier market. infrastructure, and have been left
that the market has been
idle.
• The QTS for Bengaluru has
witnessing a substantial
been increasing gradually since • North Bengaluru has a lower QTS
September 2013, and currently and age of inventory than the South, traction in recent times.
stands at eight quarters. However, thereby having the potential to
PREMIUM RESIDENTIAL MARKET LAUNCHES, SALES AND PRICE TRENDS The presence of several
the QTS for the premium markets perform better in the forthcoming
in the city is much higher – at 11 months. We expect this market to large employment hubs,
FIGURE 6
quarters currently. This is mainly gain momentum once the office
QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS good social infrastructure,
due to the relatively slow rate of sector gains prominence in the near
BENGALURU PREMIUM MARKETS sales observed in the premium future. substantial availability
12.0 housing segment in the past.
• Meanwhile, despite having a higher of housing in various
• East Bengaluru is currently the QTS than its eastern and northern
10.0
best performing market of the city, counterparts, West Bengaluru
budget sizes and the
8.0
with the lowest QTS, signifying that holds much potential to perform recently operational
No. of Quarters
the market has been witnessing better in the forthcoming months.
a substantial traction in recent The metro rail, operational since
metro connectivity
6.0
times. The presence of several last year, and the recently opened with the central and
large employment hubs, good East–West corridor are expected to
4.0
social infrastructure, substantial be prime factors for this potential.
western parts of the city
2.0
availability of housing in various However, West Bengaluru still does are some of the prime
budget sizes and the recently not have a sufficient inventory and
operational metro connectivity with sales volume compared to the other
factors that facilitated this
0.0
the central and western parts of the zones of the city. development.
AUG-14
DEC-13
FEB-14
JUN-14
APR-16
DEC-14
APR-14
APR-15
FEB-15
JUN-16
OCT-14
AUG-15
JUN-15
FEB-16
DEC-15
OCT-15
city are some of the prime factors
that facilitated this development.
Source: Knight Frank Research
32 33INDIA REAL ESTATE RESEARCH
PRICE MOVEMENT IN H1 2016 OUTLOOK FOR THE NEXT SIX MONTHS
PROJECTIONS H2 2015 H2 2016E GROWTH
WEIGHTED AVERAGE PRICE MOVEMENT IN BENGALURU
Launches (units) 24,190 25,099 4%
LOCATION PRICE RANGE IN H1 2016 (`/SQ FT) 12 MONTH CHANGE 6 MONTH CHANGE
Sales (units) 27,849 26,447 -5%
Bengaluru 4,805 3% 1%
Weighted average price (`/sq ft) 4,780 4,902 3%
Premium markets 8,549 -1% 0% Source: Knight Frank Research
• Price appreciation across most range of price appreciation during growth was pegged at 3%, the
locations in Bengaluru has been the period has been within 1–4%. premium housing segment saw
rather tepid during the last 12 a slight decline of 1%. This could • While H1 2016 has been a period • West and East Bengaluru are
• The premium housing segment
months, ranging between 3–7%. be attributed to the large unsold of steady recovery, with new expected to witness increased
observed a slower rate of growth
The growth in price slowed down inventory that has been building up, launches and sales improving over developer and buyer interest, chiefly
in its weighted average price in
further in the last six months, owing to the increasing QTS. H1 2015, we expect the second due to infrastructure development,
the last 12 months, compared
primarily due to the huge unsold half of the year to remain constant, while locations around the Outer
to the growth in the city’s overall
inventory present in the market. The without drastic upswings. Although Ring Road will witness an increased
price. While the city’s overall price
developments such as the Real traction due to their proximity to
Estate Regulatory Authority (RERA) employment hubs.
PRICE MOVEMENT IN SELECT LOCATIONS bill are positive reinforcements
• On the price front, we expect the
that will boost the market, their
PRICE RANGE IN H1 2016 12 MONTH 6 MONTH overall weighted average price in
LOCATION MICRO-MARKET impact would take some time, as
(`/SQ FT) CHANGE CHANGE Bengaluru to witness a sluggish
developers tend to adopt a wait-
growth of 3% in H2 2016 compared
Langford Town Central 15,000–21,000 0% 0% and-watch approach whenever
to H2 2015, owing to the large
any new bill or law comes into While H1 2016 has been a
Lavelle Road Central 22,000–30,000 0% 0% quantum of inventory that needs to
play. However, market sentiments
be offloaded. period of steady recovery,
will remain largely positive,
K.R. Puram East 4,000–6,750 4% 2%
owing primarily to the large-scale with new launches and
transactions in the office sector.
Whitefield East 4,500–8,500 0% 0% sales improving over H1
• The projected number of new
Marathahalli East 4,500–7,100 3% 1% 2015, we expect the
launches in H2 2016 will exceed
Indiranagar East 9,000–12,500 0% 0% those of H2 2015 by 4%, while second half of the year to
sales will see a dip of 5%. To
Yeshwanthpur West 6,500–10,800 5% 1%
remain constant, without
avoid uncertainty, most buyers
currently prefer ready-to-occupy drastic upswings. West
Malleshwaram West 9,000–13,300 5% 1%
projects located in better markets,
and East Bengaluru are
Rajajinagar West 8,500–14,000 0% 0% with improved physical and
social infrastructure, and good expected to witness
Tumkur Road West 4,000–5,100 3% 1% connectivity. Thus, integrated
increased developer and
developments in locations with
Yelahanka North 4,500–7,500 0% 0% good connectivity are likely to buyer interest, chiefly
witness a good traction in H2 2016.
Hebbal North 5,000–9,800 0% 0% due to infrastructure
Hennur North 4,500–7,500 7% 4% development, while
Thanisandra North 4,100–7,500 5% 1%
locations around the
Outer Ring Road will
Sarjapur Road South 4,500–7,500 6% 3%
witness increased traction
Electronics City South 4,000–6,500 0% 0%
due to their proximity to
Kanakapura Road South 4,300–6,000 0% 0%
employment hubs.
Bannerghatta Road South 4,200–7,500 4% 2%
Source: Knight Frank Research
34 35INDIA REAL ESTATE RESEARCH
OFFICE MARKET FIGURE 2
NEW COMPLETIONS AND TRANSACTIONS
BENGALURU OFFICE MARKET STOCK, NEW NEW COMPLETION TRANSACTIONS
7.0
COMPLETIONS, TRANSACTION AND VACANCY TRENDS
6.0
FIGURE 1
5.0
OFFICE SPACE STOCK AND VACANCY LEVELS
4.0
mn sq.ft
STOCK OCCUPIED STOCK VACANCY (RHS)
3.0
140 12%
2.0
120
10% 1.0
100 0
8%
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 E
80
mn sq.ft.
6% Source: Knight Frank Research
60 • The total office space transacted in H1 2016 was 6.1 mn sq ft, with new office
4% space completions complementing the market at 6 mn sq ft.
40
2%
20
SECTOR ANALYSIS
0 0%
• The IT/ITeS sector—the key demand transactions in the other services
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 E
driver of the city’s office market, sector include companies such
Source: Knight Frank Research whose share in transactions had as Ernst & Young inking an office
• Bengaluru retained the top slot while the occupied stock recorded fairly lessened in H1 2015—strove space deal on Marathahalli Outer The IT/ITeS sector, whose
to maintain its resurgent stance Ring Road and Reliance Jio
for the highest office space 119.4 mn sq ft, making it the office share in transactions had
transactions in the country in the market with the largest occupied in H1 2016. The sector accounted Infocomm taking up 130,000 sq ft of
first half of 2016 (H1 2016). The stock in the country. for 58% of the total transactions in office space in Whitefield. fairly lessened in the last
H1 2016, as compared to H1 2015,
city’s office market clocked a total
• Vacancy rates, which had been • Meanwhile, a few major few quarters, strove to
transaction space of 6.1 mn sq ft which had seen a 50% share. This
transactions were recorded in the
during the period January–June
declining steadily over the years could be attributed to the large- maintain its resurgent
owing to consistent transactions manufacturing sector in H1 2016.
size deals transacted by IT majors,
The Bengaluru office 2016, almost matching the 6.07 mn
and restrained new completions, The sector accounted for a minimal stance in H1 2016. The
sq ft of space transacted during the such as HP India (400,000 sq ft)
share of 7% of the total office space
market continued to lead corresponding period in 2015.
continued to remain at 7% in and Google (100,145 sq ft), among sector accounted for 58%
H1 2016, despite the substantial transactions in H1 2016, showing
others.
the way, with the highest • Bengaluru attracted substantial number of new completions this a slight decline over its share in of the total transactions
• The share of the other services H1 2015. The BFSI sector, too,
office space transactions occupier interest, the demand year. in H1 2016 as compared
being driven primarily by the IT/ITeS sector, of which the e-commerce accounted for a mere 4% share
in the country. It also sector, with big players such as
• In the forthcoming months, the sector is a part, has dropped of the transactions in H1 2016, to H1 2015, which had
office space demand in Bengaluru from 36% in H1 2015 to 30% in including a deal by JP Morgan
witnessed the infusion of Google, Infosys, and HP occupying
is expected to remain upbeat, seen a 50% share. Despite
large office spaces. H1 2016. Although the IT/ITeS Chase.
a whopping 6 mn sq ft driven by corporate occupiers and sector took the lead in the share fewer e-commerce
• Another major milestone achieved startups looking to expand, as of office space transactions in
of new office space, the by the office sector in Bengaluru well as investors, both global and transactions in H2 2015
H1 2016, e-commerce still holds
highest in six years after a during this period is the quantum domestic, who are considering great potential. Despite fewer as compared to the large-
of new completions that entered ownership of their operating assets. e-commerce transactions in H1
lag that had hit the market. the market. The city witnessed the size deals in H1 2015,
2016 as compared to the large-
infusion of a whopping 6 mn sq ft of size deals in H1 2015, developers e-commerce still holds
new office space, the highest in six have recognised that the additional
years after the lag that had hit the great potential in the
demand from the sector has had a
market, leading potential occupiers positive effect on the city’s office forthcoming period.
to turn to pre-leasing deals for large market. Some of the prominent
space requirements. The new office
completions took the total office
stock to 128.5 mn sq ft in H1 2016,
36 37INDIA REAL ESTATE RESEARCH
FIGURE 3 SELECT TRANSACTIONS
SECTOR-WISE SPLIT OF TRANSACTIONS
H1 2015 H2 2015 H1 2016 OCCUPIER BUILDING LOCATION APPROX. AREA (SQ FT)
80%
Reliance Jio Infocom Mindcomp Tech Park Whitefield 130,000
70% 70%
Google Bagmane World Technology Center Marathalli Outer Ring 100,145
60% 58%
50% (Virgo Block) Road
50%
HP India Maruthi Concorde Business Park Hosur Road 400,000
40% 36% Infosys Confident Octans Electronics City 150,000
30% 30%
GE Prestige Shantiniketan Whitefield 185,000
20% 16%
11% 10%
10% 7%
3% 4% 4%
0
IT/ITeS BFSI* MANUFACTURING OTHER SERVICES
Source: Knight Frank Research BUSINESS DISTRICT ANALYSIS
Note: BFSI includes BFSI support services
BUSINESS DISTRICT CLASSIFICATION
H1 2015: H2 2015: H1 2016: BUSINESS DISTRICTS MICRO-MARKETS
6.07 mn sq ft 5 mn sq ft 6.1 mn sq ft
M.G. Road, Residency Road, Cunningham Road, Lavelle Road, Richmond
Central Business District (CBD) and off-CBD
Road, Infantry Road
DEAL SIZE ANALYSIS Suburban business district (SBD) Indiranagar, Koramangala, Old Airport Road, Old Madras Road
FIGURE 4 Peripheral Business District (PBD) East Whitefield
AVERAGE DEAL SIZE AND NUMBER OF DEALS
Peripheral Business District (PBD) South Electronics City, Bannerghatta Road
AVERAGE DEAL SIZE (SQ.FT.) NUMBER OF DEALS (RHS)
Peripheral Business District (PBD) North Thanisandra, Yelahanka, Devanahalli
90,000 120
80,000 Outer Ring Road (ORR) Hebbal ORR, Marathahalli ORR, Sarjapur Road ORR
70,000
The average deal size
Number of deals
60,000 80
remained consistent in 50,000
sq.ft
FIGURE 5
40,000
H1 2016, compared to 30,000 40
BUSINESS DISTRICT-WISE TRANSACTIONS SPLIT
H1 2015. The number of 20,000
H1 2015 H1 2016
10,000 80%
deals, too, was almost 69%
0 0 70%
similar for both periods. H1 2014 H2 2014 H1 2015 H2 2015 H2 2015
Number of units
60%
Although the average deal Source: Knight Frank Research 50%
size has reduced from • The average deal size remained significantly in H1 2016. 40% 33%
consistent in H1 2016, coming close
the figure observed in H2 • This shows that, while deals with 30%
to 53,500 sq ft, compared to 54,200 24%
bigger ticket sizes were inked 18%
2015, the number of deals sq ft in H1 2015. The number of
in H2 2015, a larger number of
20% 16% 16%
8%
deals, too, was almost similar for 10% 2% 7%
have improved significantly transactions took place in H1 2016, 5%
0% 1% 0% 1%
both periods. Although the average 0
indicating the quantum of new
in H1 2016. deal size has reduced from the
completions that entered the market
CBD & Off SBD ORR PBD PBD PBD PBD
figure observed in H2 2015, the CBD EAST SOUTH NORTH WEST
during this period.
number of deals have improved Source: Knight Frank Research
H1 2015: H1 2016:
6.07 mn sq ft 6.1 mn sq ft
38 39INDIA REAL ESTATE RESEARCH
PRE-COMMITTED LEASING ON THE RISE
B
BUSINESS DISTRICTS OF BENGALURU engaluru occupies the transactions, thus increasing the the only way these corporates
foremost rank in the country gap between the demand and could carry out their office
as the office market with the supply progressively over the last space requirements was to pre-
highest office space transactions five years. Vacancy levels, which lease space in upcoming office
on an annual basis. This could were as high as 17% in 2012, projects in key office markets,
be attributed to the city’s repute started to decline in tandem with mainly along the ORR. Other
as one of the most preferred IT/ the high transactions rate and companies preferred to have
ITeS hubs globally, attracting a lower supply infusion. This supply their own space, rather than be
large number of multinational constriction was mainly as a located in multitenant projects,
corporations to set up their offices consequence of the global financial and commissioned built-to-suit
there. While Bengaluru has several crisis that deterred developers in (BTS) facilities. These include
defined business districts, including launching their office projects. The e-commerce majors, such as
a satellite township devoted chiefly negative sentiments in the market Flipkart and Amazon, which pre-
to the development of the IT that persisted even after the crisis committed BTS spaces of 2 mn sq
industry, the commercial hotspots sailed over, led them to take a ft and 1.2 mn sq ft respectively in
at present primarily include the cautious stance and during the 2015, both along the ORR.
Outer Ring Road (ORR), particularly five-year period of 2011 to 2015, the
At present, most office space
on the Sarjapur Road node, and demand for office space was 52 mn
developers have a waiting period
Whitefield. The ORR houses several sq ft, while the new office space
of six months to two years for
major international IT players, completions stood at a dismal
their clients, creating an upward
such as IBM, Intel, Accenture and 39 mn sq ft. As a result of such
pressure on rentals in key office
Cisco, and has been increasingly trends, the vacancy rate recorded a
markets. This alarming state of
preferred by corporates due to low of 7% by the end of first half of
supply lag may result in companies
factors such as proximity to the the year 2016 (H1 2016).
looking at Grade B office space
CBD and major residential markets,
However, notwithstanding the or even opting for offices in less
access to large talent pools, the
dearth of ready office space, favourable locations on a short-
availability of contiguous land
Bengaluru continued to display term basis, paying a premium rent.
parcels, connectivity to the airport
the strength of its office market This shift in the market towards
and the presence of hotel and retail
and persistently attracted more pre-committed office space will
projects.
occupiers. While some of these be instrumental in deciding the
While the city continued to reel in occupiers were new entrants into future course of action adopted
corporate occupiers, both national the market, including e-commerce by developers as well as potential
and foreign, its key office markets players, the majority of them were occupiers, who might just choose
gradually began to be depleted companies that wanted to carry to set up office in another city.
of its ready office space. The out expansion plans or consolidate
new office supply that came into their offices in anticipation of
the market was staggered and growing requirements. Due to
could not match up to the high the space crunch in the market,
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