PROPERTY INSIGHTS India Quarter1,2021 - INDIA REAL ESTATE OVERVIEW - Citibank
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PROPERTY INSIGHTS India Quarter 1, 2021 INDIA REAL ESTATE OVERVIEW
Introduction Economy The Indian economy returned to growth in October - December 2020, following two consecutive quarters of contraction, thereby breaking out of the recession in the aftermath of the COVID-19 outbreak. Economic activity recovered significantly in the quarter with improvement in business sentiments and growth in several high frequency indicators on the back of the festive period that led to a gradual recovery in consumer demand. Real GDP expanded by 0.4% in October – December 2020, as compared to the 7.5% contraction in the previous quarter with manufacturing and construction sectors posting healthy growth. The construction sector recorded an expansion of 6.2%, as compared to the 7.2% contraction in the previous quarter while manufacturing output grew by 1.6%, reversing the 1.5% decline in July – September 2020. Electricity, gas and water supply continued to do well with a 7.3% expansion while the agricultural sector remained a crucial support for the economy, recording a growth of 3.9%, faster than the 3.0% expansion in the previous quarter. Parts of the services sector witnessed a recovery, thereby adding to the economic momentum. For instance, the finance, real estate and professional services segment registered a growth of 6.6% as compared to a 9.5% contraction in the previous quarter. The trade, hotels, transport and communications segment declined by 7.7%, slower than the 15.3% contraction in July – September 2020. Private consumption declined by 2.4%, a marginal recovery over the 11.3% contraction in the previous quarter. Recovery in consumer sentiments is likely to be gradual and will depend on the employment and income outlook over the next couple of quarters. Investment demand, measured by gross fixed capital formation (GFCF), increased by 2.6% as compared to the 6.8% decline in the previous quarter, with capital spending by the government picking up sharply. Retail inflation slowed down to 4.6% in December, lower than 7.3% in September, due to the fall in food prices. Government policies, in particular, the Union Budget which hiked capital spending substantially with a greater focus on infrastructure investments, are likely to facilitate faster economic recovery and job creation. Incentives to promote domestic manufacturing and tax benefits for affordable housing, both from the demand and supply sides, will enable sustainable growth of the manufacturing and construction sectors. With vaccinations gaining momentum and better employment outlook, consumer sentiments are likely to show further improvement over the next few quarters. However, resurgence in COVID cases in major urban centres and imposition of localized restrictions might pose challenges for the economic recovery that is currently in progress.
Introduction
GDP Growth Rate & Repo Rate
15.00%
10.00%
5.00%
0.00%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 Q2 Q3
-5.00% 2020 2020 2020
-10.00%
-15.00%
-20.00%
-25.00%
GDP Growth Repo rate
Source: World Bank, RBI
Note: GDP numbers for Q3 2020 correspond to the October - December quarter
POLICY UPDATES
Union budget incentivizes affordable and rental housing
The Union Budget 2021-22 extended the tax deduction of INR 150,000 on the interest component of affordable
housing loans to 31st March 2022. Apart from this announcement, which is expected to provide a demand
stimulus to affordable housing, the Budget also sought to incentivize the supply of such projects by developers.
As a result, the eligibility period for claiming tax holiday on profits from affordable housing projects has been
extended by another year upto 31st March 2022.
The Budget also provided tax exemption to Affordable Rental Housing Projects for urban migrants as a measure
to enhance the supply of low-cost rental accommodation in major urban centres. This announcement follows the
Affordable Rental Housing Complexes (ARHCs) scheme that was launched in July last year.
RBI monetary policy review
The Reserve Bank of India’s Monetary Policy Committee kept the repo and reverse repo rates unchanged at 4.0%
and 3.35% respectively in the February policy review meeting. The MPC stated that the accommodative
monetary policy stance will remain in place as long as necessary to enable durable economic growth and at the
same time inflation will be monitored and ensured that it remains within the target range. Inflation declined
sharply to 4.6% in December 2020 after staying elevated for the previous six months due to the fall in food prices.
However, the monetary authority has said that higher industrial raw material prices could lead to a broad-based
Introduction escalation in price levels going forward. The economic outlook has been brightened by rollout of the vaccination programme and improvement in high frequency indicators such as railway freight traffic, toll collection, e-way bills, steel consumption and GST collections. Manufacturing activity has been gaining momentum and the agricultural sector remains resilient. With activity picking up across both the manufacturing and services sectors, the Indian economy is expected to bounce back strongly with a growth expectation of 10.5% in FY 2021-22. Going forward, the policy announcements made in the Union Budget 2021-22 are expected to facilitate greater infrastructure investments with a favourable impact on jobs and economic growth. The surge in foreign direct investment in 2020 despite the impact of COVID-19 shows that India’s attractiveness as an investment destination remains intact. With the continuous improvement in the interest rate mechanism and fall in the home loan rates, residential real estate transactions will increase further over the next few quarters and facilitate faster recovery in the construction sector as well as the broader economy.
Union Budget 2021-22: Setting the foundation for Long-term Growth After an unprecedented year which saw widespread economic disruption and a national public health emergency, the Indian economy is on its way to a strong recovery in 2021. Both the government as well as private agencies have forecasted double digit growth this year, which would make India the fastest growing major economy globally. Manufacturing and construction activity have normalized with large companies and developers moving ahead with pending projects. After a prolonged contraction, contact-intensive service sector industries – finance, real estate, professional services, for instance – have expanded in Q4 2020 though the hospitality sector remains susceptible to business uncertainty. Vaccinations have been gaining momentum, thereby instilling confidence in the ongoing recovery. Against this backdrop, the Union Budget was unveiled on 1st February with the government widely expected to announce measures to boost sustainable growth over the medium to long term. As expected, the Budget included a number of growth-oriented measures including a significant hike in capital spending, putting in place modalities for infrastructure financing, new health schemes, higher allocation for vaccines and the agricultural sector and relaxation in foreign direct investment (FDI) norms for specific sectors. Affordable and rental housing were incentivized as well. The government relaxed the fiscal deficit target for FY 2020-21 significantly to 9.5% of GDP followed by 6.8% of GDP in FY 2021-22 given the need to increase spending for strong economic recovery. Budget gives primacy to the infrastructure and healthcare sectors One of the key Budget announcements was related to the establishment of a Development Finance Institution (DFI) to fund infrastructure with INR 200 billion provided from the Budget. The Budget also hiked capital expenditure by 34.5% to INR 5.54 trillion, allowed debt financing for REITs and INvITs by foreign portfolio investors and provided tax benefits on zero coupon bonds issued by Infrastructure Debt Funds (IDFs), which are used for infrastructure financing. Relaxation of conditions for Sovereign Wealth Funds (SWFs) and Pension Funds (PFs) to avail 100% tax exemption was another important initiative to facilitate infrastructure investment. The Budget increased outlays on a range of sectors including roads and highways, ports, shipping and urban infrastructure. For instance, INR 1082.3 billion was allocated as capital expenditure on roads and highways with economic corridors planned in Tamil Nadu, West Bengal, Kerala and Assam. The government will also fund metro projects in Kochi, Chennai, Bengaluru, Nagpur and Nashik. Apart from the wide range of infrastructure-oriented initiatives, the Budget also announced the launch of Mega Investment Textile Parks to promote textile production and exports. The healthcare sector received special attention given the need to boost health infrastructure for better delivery of services. Total Budget outlay for Health and Well-Being was increased by 137% to INR 2238.5 billion in FY 2021-22 along with the launch of PM Atmanirbhar Swasth Bharat Yojana with an outlay of INR 641.8 billion over six years. Allocation of INR 350 billion for COVID-19 vaccines in FY 2021-22, critical care hospital blocks in 602 districts and 12 central institutions and launch of a voluntary Vehicle Scrapping Policy for old vehicles were other important initiatives. Among other key sectoral announcements, agricultural credit target was hiked to INR 16.5 trillion in FY 2021-22 and the FDI limit in insurance was raised from 49% to 74% to allow foreign ownership with safeguards. Start-ups were incentivized by extending the eligibility period to claim tax holiday to 31st March 2022.
Union Budget 2021-22: Setting the foundation for Long-term Growth Focus on housing, infrastructure and banks will drive real estate growth Affordable housing received additional incentives both from the demand and supply sides in keeping with the broader government objective to provide housing for all citizens by 2022. For instance, the tax deduction of INR 150,000 on the interest component of loans given for affordable housing was extended to 31st March 2022. Moreover, developers of affordable housing projects were provided the benefit of availing tax holiday on profits by extending the eligibility period for such claims upto 31st March 2022. Tax exemption was also provided to affordable rental housing projects with the vision of providing low-cost rental accommodation for urban migrants. A key intervention in the banking sector was the announcement of an Asset Reconstruction and Management Company to take over and manage the stressed assets of banks and subsequently dispose them to investors. This is likely to free up bank lending to productive sectors, including the real estate sector. Developers are likely to benefit due to greater access to bank funds, thereby addressing their liquidity challenges. Overall, the broader Budget focus on infrastructure and capital spending will lead to multiplier effects on real estate job creation and economic growth.
1
Real Estate Market Snapshot
Residential
7.0% 54.0% 83%
Increase (q-o-q) in new unit Share of mid segment in overall Contribution of Mumbai,
launches during Q1 2021 unit launches in Q1 2021 Pune, Chennai and Hyderabad
in new launches during Q1 2021
Office
11.35 msf 10.9 msf 3.58 msf
Gross leasing in Q1 2021, New supply in Q1 2021, Net absorption in Q1 2021,
decline of 2.2% q-o-q 14% decline q-o-q 42.7% decline q-o-q
Retail
81.5 msf 12.7% 24.2msf
Completed malls inventory Pan-India vacancy in malls PAN-India upcoming
in Q1 2021 in Q1 2021 mall supply
1
Bengaluru, Chennai, Delhi-NCR, Hyderabad, Kolkata, Mumbai, PuneIndian Residential Sector Overview Affordable Segment Mid Segment Chennai and Mumbai witness maximum units Bengaluru, Hyderabad, Mumbai and Pune contributed launched in Q1 2021 over 81% of total launches in Q1 2021 High-end Segment Luxury Segment Hyderabad, Mumbai and Chennai contributed Chennai and Hyderabad had a 85% share in luxury over 77% of new launches in Q1 2021 segment new launches during Q1 2021
New Launches in Q1 2021
2.29% 1.3% 0.5%
3.2%
17.0% 14.2% 12.2% 16.2%
37.1%
47.7%
29.2%
66.1%
50.8%
56.8%
77.5%
62.9%
56.4% 49.8%
32.2% 30.1%
27%
8.4% 1.2%
Kolkata Bengaluru Chennai Delhi NCR Hyderabad Mumbai Pune
Affordable Mid High-end Luxury
Key Trends
Unit launches across the top 7 cities (Delhi-NCR, Bengaluru, Mumbai, Chennai, Hyderabad, Pune, and Kolkata)
posted 7% growth on a q-o-q basis in Q1, continuing the healthy launch momentum that was witnessed in the
previous quarter. The growth was driven by favourable policies such as stamp duty cuts in Maharashtra and
better demand from homebuyers on the back of low home loan rates and incentives from developers. During
Q1, Mumbai had the largest share (26.5%) in new launches, followed by Pune (20.6%) and Chennai (18.5%).
Hyderabad, Pune and Mumbai saw a q-o-q fall in new launches due to a high base of the previous quarter. On
an absolute unit basis, Chennai witnessed the maximum increase, followed by Delhi-NCR and Kolkata.
The share of mid segment in new launches was lower at 54% during Q1 2021, as compared to around 56% in
the previous quarter. The share of affordable segment in new launches fell to 26% from over 33% in the
previous quarter. All residential segments, except affordable, recorded growth with the high-end segment
expanding at the fastest pace on the back of new launches in Mumbai, Chennai and Hyderabad. The luxury
segment recorded a 52% quarterly growth with Chennai alone accounting for 55% of the new launches in
this category.
Mid segment continued to account for the maximum share (54%) in new launches in Q1 2021, followed by the
affordable and high-end segments with shares of 26% and 19% respectively. The affordable segment,
however, saw a 17% q-o-q decline due to lower launches in Bengaluru and Hyderabad. Mumbai, Pune and
Hyderabad contributed the most towards new launches in the mid segment. Affordable segment launches
were the highest in Chennai (40%), Mumbai (28%) and Pune (24%) during the quarter. In the high-end
segment, Hyderabad contributed the most with a 43% share followed by Mumbai at 23%.
Despite the resurgence of COVID cases, we expect residential market growth to continue in the next quarter
on the back of improving consumer sentiments, price incentives from developers and stamp duty cut on
affordable housing in markets such as Bengaluru. However, rising COVID cases in Mumbai and Pune might
affect sales momentum in the near term.Index Mumbai ...................................................................................... 1 Delhi-NCR .................................................................................. 4 Bengaluru .................................................................................. 7
Mumbai
Residential Overview
Mumbai’s residential sector witnessed the launch of Mid segment continued to lead in new launches
10,742 units during the first quarter of 2021, a marginal q-
o-q drop of 6.5%. Developers launched fewer units in the Share of launches in price segments
current quarter on the back of a second COVID-19 wave
with rising number of cases. 4% 4% 2%
2% 0.4%
8% 11% 7%
23%
On a y-o-y basis, launches were down by 39.1%, which
45%
means that sustained recovery is still a few quarters away
though residential sales have been improving gradually. 69% 72%
88% 76%
Eastern Suburbs submarket witnessed the maximum
51%
launches during the quarter with a share of 29% followed
19%
by Extended Eastern Suburbs and Western Suburbs with 16%
3% 1%
26% and 21% shares, respectively. 2017 2018 2019 2020 Q1 2021
The mid and affordable segments together accounted < 7,500 7,501 - 25,000 25,001 - 40,000 > 40,000
for nearly 84% of new launches in Q1 2021, with the mid
Source: Cushman & Wakefield Research
segment contributing 57% and the affordable segment The values in the legend are in INR/sf.
making up the remaining 27%. The high-end segment
witnessed the maximum q-o-q growth in percentage
terms in Q1, mainly due to new projects launched by However, the affordable segment witnessed the maximum
prominent developers in Eastern Suburbs and Western q-o-q drop in new launches due to the decline in project
Suburbs. launches in the peripheral submarkets.
Average Capital Values – High-End (INR ‘000/sf)
Location 2017 2018 2019 2020 Q1 2021
South 48.0 - 75.0 48.0 - 75.0 48.0 - 83.0 48.0 - 78.0 48.0 - 78.0
South Central 46.0 - 83.0 46.0 - 83.0 46.0 - 83.0 46.0 - 78.0 46.0 - 78.0
Central 27.0 - 61.0 27.0 - 61.0 27.0 - 61.0 27.0 - 57.0 27.0 - 57.0
North 28.0 - 50.0 28.0 - 50.0 30.0 - 60.0 30.0 - 57.0 30.0 - 57.0
Far North 12.5 - 20.0 12.5 - 20.0 12.5 - 20.0 12.5 - 18.0 12.5 - 18.0
North East 15.0 - 24.0 15.0 - 24.0 15.0 - 24.0 15.0 - 21.0 15.0 - 21.0
Average Capital Values – Mid (INR '000/sf)
Location 2017 2018 2019 2020 Q1 2021
South 40.0 - 50.0 40.0 - 50.0 40.0 - 50.0 40.0 - 48.0 40.0 - 48.0
South Central 45.0 - 58.0 45.0 - 58.0 45.0 - 58.0 45.0 - 54.0 45.0 - 54.0
Central 23.0 - 45.0 23.0 - 45.0 23.0 - 45.0 23.0 - 42.0 23.0 - 42.0
North 20.0 - 30.0 20.0 - 30.0 20.0 - 30.0 20.0 - 28.0 20.0 - 28.0
Far North 10.0 - 16.0 10.0 - 16.0 10.0 - 16.0 10.0 - 15.0 10.0 - 15.0
North East 10.0 - 14.0 10.0 - 14.0 10.0 - 14.0 10.0 - 13.0 10.0 - 13.0
Source: Cushman & Wakefield Research
1Q1 2021 Launches – segment-wise across submarkets (%)
Submarkets Affordable Mid High-end Luxury Total (Number of units)
Eastern Suburbs 0% 78% 22% 0% 3,099
Western Suburbs 0% 58% 42% 0% 2,204
South Central 0% 0% 100% 0% 46
Thane 0% 96% 4% 0% 1,214
Navi Mumbai 50% 50% 0% 0% 800
Extended Eastern Suburbs 78% 22% 0% 0% 2,775
Extended Western Suburbs 63% 37% 0% 0% 539
KEY TO SUBMARKETS:
Eastern Suburbs: Sion, Wadala, Kurla, Chembur, Ghatkopar, Vikhroli, Powai, Chandivali, Kanjurmarg, Bhandup, Mulund
Western Suburbs: Andheri, Jogeshwari, Goregaon, JVLR, Malad, Kandivali, Borivali, Dahisar
South Central: Worli, Prabhadevi, Lower Parel / Parel, Dadar, Matunga
Thane: Thane, Ghodbunder Road
Navi Mumbai: Airoli, Ghansoli, Rabale, Koparkhairane, Vashi, Turbhe, Sanpada, Nerul, Belapur, Kharghar, Panvel
Extended Eastern Suburbs: Kalyan, Dombivali, Ambernath, Badlapur, Bhiwandi, Diva, Karjat, Khopoli, Asangaon, etc.
Extended Western Suburbs: Mira Road, Bhayandar, Vasai, Virar, Palghar, etc.
% indicates proportion of unit launches in different segments within a submarket.
Source: Cushman & Wakefield Research
Developers across all submarkets have been suburbs remained healthy as well. We expect a near
focusing on the completion of ongoing projects but term temporary slowdown in sales activity due to
rising COVID cases and localized restrictions might the evolving COVID situation though residential
impact construction timelines and further delay the transactions are likely to pick up momentum during
possession of new homes by at least 3-6 months. the second half of the year.
Nonetheless, Thane, Eastern Suburbs, Extended
The average quoted capital values across all
Eastern Suburbs have witnessed some major project
submarkets continued to remain range-bound
completions in Q1 2021. During the quarter, sales
during the first quarter as compared to the previous
activity remained healthy as developers continued
quarter. However, developers across segments and
to offer various payment incentives to attract
submarkets are offering 5-10% discounts in quoted
homebuyers and the cut in stamp duty driving
rates selectively to potential home buyers along
housing demand. However, towards the end of the
with other price incentives like zero stamp duty, cash
quarter, sales activity slowed down marginally,
discounts, zero floor rise, no PLC charges, free gifts,
primarily due to the COVID resurgence across major
etc. The capital values for mid and affordable
suburban locations, which restricted site visits by
segments are expected to remain range-bound in
homebuyers. The ready-to-move-in or nearing
the near future as well. However, we expect prices
possession homes in the price bracket of INR 10-20
for high-end and luxury homes to witness a marginal
million in Western Suburbs, Eastern Suburbs, Thane
drop during the upcoming quarters. Rental values
and Navi Mumbai submarkets continued to witness
also remained unchanged across all locations during
the maximum sales activity during the quarter. Sales
the quarter.
of affordable housing projects in the Extended
2Outlook
Residential
Launches Price Buyer sentiment
Developers across all submarkets are expected to remain cautious before launching new projects in the upcoming
quarters. They will continue focusing on offloading the unsold inventory and completing ongoing projects.
However, we expect new launches to continue increasing compared to the previous quarters.
Going forward, Western, Eastern suburbs and Thane submarkets are expected to continue to lead the way in mid
segmentlaunches,whereasExtendedsuburbsandNaviMumbaiwillholdthehighestshareintheaffordablesegment.
Sales activity is likely to remain muted over the next few quarters with the stamp duty cut coming to an end and the
second COVID wave affecting Mumbai and surrounding areas.
Lower home loan rates and attractive payment schemes by developers are the major influencing factors which are
likely to push sales activity in the near future.
Average capital values are expected to remain unchanged in the near future in affordable and mid segment and some
minor short-term reductions are likely in luxury and high-end segments.
Office
Absorption Vacancy Rentals
A total of only 0.495 msf of new supply was added during the quarter with BKC witnessing new completion. We
anticipate an additional 13.84 msf of supply over the next three years with the highest contributions from Thane-
Belapur Road (Navi Mumbai), Lower Parel-Worli, and Malad-Goregaon submarkets. Tenants exits and new project
completions added to the Q1 vacancy rate, which stood at 21.0%.
However, in the near term, the COVID-19 resurgence might pose challenges for ongoing projects as the
government has imposed a number of restrictions in recent weeks including night curfew and weekend lockdown.
Although construction sites have been allowed to operate if the developer provides an accommodation facility for
the workers. Considering these factors, completion delays of at least 3-6 months can be expected across all
projects.
Going forward, overall leasing demand is expected to gain some momentum in the second half of 2021, as
occupiers from IT-BPM, engineering & manufacturing, professional services and BFSI segments along with GCCs
of BFSI are expected to drive office space demand in the upcoming quarters.
The quoted rental values across all major submarkets remained stable in Q1. However, select set of projects saw a
marginal increase in rents. Some of the landlords have continued to offer rental discounts of 5-10% during
transaction closures, though institutional landlords have not offered any rental flexibility during the quarter.
Retail
Leasing Vacancy Rentals
Leasing activity in Mumbai malls continued to witness higher traction during the first quarter of 2021. All the
prominent superior malls have witnessed improved leasing activity, mainly on the back of prevailing tenants
renewing their existing spaces across all major malls during the quarter. Retailers from fashion,
hypermarket/supermarket, F&B and consumer electronics segments were the major contributors towards
leasing activity.
City-wide mall vacancy rose marginally to 9.17% at the end of the first quarter with fresh leasing activity primarily
in select superior malls and a few retailers exits in some average malls.
As Mumbai started witnessing increasing number of COVID cases towards the end of the quarter, we expect overall
leasing activity to remain muted in the upcoming quarters. Also, the retail sector is likely to get affected by the
government’s new COVID guidelines stating that theatres (single screen/multiplex) and restaurants will have to
operate at 50% capacity and imposition of specific operational time limits on these businesses.
Quoted rentals across both malls and main streets at prominent locations remained stable on a quarterly basis.
Rental discounts are being phased out gradually given that mall developers / landlords have their own financial
obligations and have been accommodative towards retailers since the onset of the pandemic. However, a number
3
of retailers have continued to negotiate for rental incentives largely in the form of revenue sharing agreements.Delhi-NCR
Residential Overview
After an extended period of subdued launches, Q1 New launch activity improved in Q1 2021
2021 saw an improvement in new launches with the city
recording 1,912 units during the quarter. Renowned
Share of launches in price segments
developers were relatively more active with a share of
more than 50% in the total new launches, a trend that 1.7%
can be attributed to the high customer preference for 17%
37.8% 35% 37%
projects of developers with good execution track
record. Mid segment had the majority share of 63% in 52%
78%
63%
new launches with the rest being in the high-end
segment. Launch activity improved by 73% on a y-o-y 60.5% 63%
comparison as developers launched projects that were 31%
22%
kept on hold in 2020. Dwarka Expressway, Golf Course 2%
Extension Road, Sushant Lok, Noida Expressway and 2017 2018 2019 2020 Q12021
Greater Noida West recorded launches in Q1. < 3,500 3,501 - 8,000 8,001 - 20,000 > 20,000
Affordable housing segment that has been seeing
Source: Cushman & Wakefield Research
high traction in previous quarters also saw launch of
The values in the legend are in INR/sf.
726 units during Q1 in sector 93, Gurugram under the
Haryana Affordable Housing Scheme. from customers with offtake of a large portion of the
launched units.
Sales activity in the city has been improving as
serious buyers attracted by the low interest rates on Delhi NCR, especially Gurugram, is seeing a high interest
home loans have been able to negotiate good deals in in plots with the increased FAR for residential plots in
the current market. A prominent project launched in licensed colonies. Developers plan to launch more projects
Noida during the quarter received a welcome response in this format in the coming quarters.
Average Capital Values – High-End (INR ‘000/sf)
Location 2017 2018 2019 2020 Q1 2021
South-West 32.0 – 49.0 32.0 – 51.0 33.0 – 53.0 33.0 – 53.0 33.0 – 53.0
South-East 24.0 - 35.0 24.0 - 35.0 24.0 - 35.0 24.0 - 35.0 24.0 - 35.0
South-Central 25.0 - 43.0 25.0 - 45.0 28.0 - 45.0 28.0 - 45.0 28.0 - 45.0
Central 60.0 - 90.0 60.0 - 95.0 63.0 - 98.0 63.0 - 98.0 63.0 - 98.0
Gurugram 10.0 – 16.2 10.0 – 16.2 10.0 – 16.2 10.0 – 16.2 10.0 – 16.2
Noida 7.0 – 9.0 7.0 – 9.0 7.0 – 9.0 7.0 – 9.0 7.0 – 9.0
Average Capital Values – Mid Segment (INR '000/sf)
Location 2017 2018 2019 2020 Q1 2021
South-East 20.0 – 25.0 20.0 – 25.0 20.0 – 27.0 20.0 – 27.0 20.0 – 27.0
South-Central 23.8 – 33.3 23.8 – 33.3 24.0 – 35.0 24.0 – 35.0 24.0 – 35.0
Gurugram 4.5 - 9.0 4.5 – 9.0 4.5 – 9.0 4.5 – 9.0 4.5 – 9.0
Noida 4.0 - 6.5 4.0 - 6.5 4.0 - 6.5 4.0 - 6.5 4.0 - 6.5
Source: Cushman & Wakefield Research
4Q1 2021 Launches – segment-wise across submarkets (%)
Submarkets Affordable Mid High-end Luxury Total (Number of units)
Delhi 0% 0% 0% 0% 0
Gurugram 0% 74% 26% 0% 1012
Noida 0% 0% 100% 0% 450
KEY TO SUBMARKETS:
Gurugram: Excludes Manesar, Sohna
Noida: Excludes Greater Noida, Noida Extension
% indicates proportion of unit launches in different segments within a submarket.
Source: Cushman & Wakefield Research
NOTE:
Even though the quoted price ranges have been shown as stable, price discounts and incentives have brought a decline in the effective property price with price
adjustments within the range.
The construction activity on ongoing projects in Disbursements under the government sponsored
both Gurugram and Noida has been gradually picking SWAMIH fund for last mile funding of stalled projects in
pace with sites being fully functional, though project the city will lead to completion of several projects and aid
timelines for various projects are likely to be extended in improving the overall buyer sentiment. The first
with the disruption caused by COVID. The current quarter saw completion of some projects in the Noida
evolving situation with a rapid surge in cases in the Extension micro-market with more projects in Golf
city is bound to further impact the upcoming supply, Course Extension Road, Gurgaon-Faridabad Road and
though developers will be better prepared this time. Old Gurgaon likely to be completed in the year ahead.
Sales activity in the city is expected to pick pace in Capital values remained largely stable during the
the coming quarters as the current time is quarter. Delhi government notified a 20% reduction in
opportune for property purchase. Buyers are able to circle rates till 30th September 2021 to boost sales
negotiate sweetened deals with developers who activity, though this is bound to impact a very limited
have been giving various incentives which also number of properties in the city. With subdued
include instances of inaugural discounts. The demand for rental properties, rental rates witnessed a
prevailing low interest rates on home loans has been further correction of 4 – 5% across all submarkets for
compelling fence-sitters to close their property both mid and high-end segment properties.
purchase decisions. Relatively higher sales activity Continued remote working arrangement in several
and controlled new launches in 2020 will help in corporates / domains led to a subdued demand for
bringing down the unsold inventory in the city and rental properties, thereby impacting the rentals which
augur well for the sector. had declined by 5 – 7% in 2020 as well.
5Outlook
Residential
Launches Price Buyer sentiment
Developers are expected to focus on the completion of ongoing projects and offloading their existing unsold
inventory leading to a gradual growth in new unit launches in the city. Gurugram is likely to see launch of more
plots with a higher demand for this format in the recent months. West Delhi micro-market is expected to see
addition of new supply with a prominent project launch planned in the area.
Virtual site visits are expected to become more popular as developers, channel partners and homebuyers are
adapting to the new normal situation with a higher risk involved in physical meetings and site visits.
Incentives and benefits given by developers to drive sales activity are likely to continue for some more time, especially in
projects and micro-markets with higher availability of inventory. Buyer sentiment is likely to improve over the next couple
of quarters with the ongoing vaccination drive and property rates that have remained stable. However, the current rise in
COVID cases in the city might bring a temporary blip in sales activity. Buyers are more likely to remain inclined towards
developerswithexecutioncapabilityandgoodtrackrecordinacitythatalreadyhasahighnumberofstalledprojects.
Overall prices are expected to remain largely stable over the next few quarters, though a slight upward revision in
prices may be seen in select projects / micro-markets with higher demand in the medium term. Rentals are
expected to stabilize and gradually increase in the subsequent quarters with a gradual pick-up in demand for
rented properties as more and more offices are reopened.
Office
Absorption Vacancy Rentals
Despite COVID-induced disruption leading to rescheduling of completion timelines of several upcoming projects,
construction activity in most of the key corridors in Noida and Gurugram has resumed. The city is likely to see new
supply addition of around 4 – 4.2 msf in the year ahead led by the Noida Expressway corridor. Other key areas to
record addition of new supply in 2021 will be Golf Course Extension Road, NH8 - Prime and Sohna Road.
Q1 2021 recorded a gross leasing of 2.05 msf with occupiers executing space take-up decisions that were kept on
hold in 2020. The space take-up is expected to maintain a steady pace in the coming quarters with corporates
contemplating relocation / consolidation strategies. Demand for managed workspaces is likely to rise with
adoption of hybrid working models in the long run as corporates look at de-densification of offices as part of
employee well-being. Despite the challenges posed by the pandemic, quarterly leasing was around 17% lower than
the average first quarter leasing between 2017-19, excluding the exceptionally strong space take-up in Q1 2020.
The flexibility given by developers earlier to accommodate occupiers by offering higher rent-free period subject to
lock-in commitments and CAM waivers is coming to an end with lesser scope left for more such waivers. Effective
rents are gradually moving to pre-COVID levels with demand firming up. However, the flexibility in deal structuring
in investor-owned inventory in strata-sold projects with higher availability might continue in the medium term.
Retail
Leasing Vacancy Rentals
The first quarter saw an improvement in retail leasing with retailer churn constituting majority of the retail
demand in the city. Leasing activity in the retail sector is likely to improve gradually in the medium term, led by
segments including hypermarkets, athleisure and value formats for some large lifestyle brands. However, the
rapid growth in online demand is likely to have an impact on the overall leasing volume for physical retail spaces.
Mall vacancy increased by 86 basis points to 16.97% in Q1 due to some spaces being vacated by retailers in select
malls. Addition of 0.35 msf of mall space in Gurugram also contributed to this rise in vacancy, though the premium
mall completed in Golf Course Extension Road, Gurugram has already seen a healthy space take-up by anchor
tenants. North Delhi micro-market is also expected to see a new mall completion by the end of the year.
Landlords are not willing to offer further rental waivers to retailers with their cash flows already taken a severe hit
in 2020. Retailers are still negotiating to switch to revenue sharing arrangements with developers which is
happening on a case-to-case basis depending on the retailer brand and their ability to attract customer traffic
towards the development. The resurgence of the second wave of COVID will determine the way forward on the
extent of accommodation provided by landlords as retail activity might again take a hit amidst the measures 6
including night curfew and other restrictions imposed in Delhi.Bengaluru
Residential Overview
At 3,700 units, Bengaluru recorded a marginal 5% q-o- High-end segment unit launches witness
q growth in unit launches during the first quarter of the healthy traction in Q1 2021
year on the back of a revival in housing demand,
especially for ready-to-move-in properties. Share of launches in price segments
Normalization of construction activities provided a 1% 1% 2%
2%
further boost to launch activity even though there was an 5%
19%
5% 3%
14%
18% y-o-y decline in quarterly launches, which shows
sustainable growth in the residential market will take a 68% 70%
few more quarters. 80% 52%
77%
The mid-segment continued to dominate new
launches, accounting for over 77% of quarterly launches 28% 26% 25%
13% 8%
while the high-end segment accounted for 14%. However,
2017 2018 2019 2020 Q12021
the affordable segment witnessed limited launches with
< 2,800 2,801 - 8,000 8,001 - 20,000 > 20,000
smaller developers holding back projects due to liquidity
challenges. As a result, the affordable segment Source: Cushman & Wakefield Research
accounted for just 8% of the new launches in the quarter. The values in the legend are in INR/sf.
Whitefield, Sarjapur Main Road, Electronic City, Rentals remained largely stable in most of the micro
Kanakapura Road and Hennur Road were the prominent markets but there was a 1-2% correction in some peripheral
locations that recorded launches during the quarter, with locations in the southern and western quadrants. Incentives
projects largely in the mid-segment. Demand for larger from developers, including EMI holidays and tax benefits,
apartments continued to increase with over 55% of new continued in the quarter and led to higher sales conversions of
launches consisting of 3 & 4BHK configurations. enquiries. Landlords in the rental market continued to offer
benefits such as lower security deposits to attract tenants.
Average Capital Values – Mid-End (INR '000/sf)
Location 2017 2018 2019 2020 Q1 2021
Central 10.0 – 12.5 10.0 – 12.5 9.5 - 14.5 9.5-14.5 9.5-14.5
East 4.3 - 6.0 4.3 - 6.0 4.6 - 6.6 4.6 – 5.8 4.6 – 5.8
South East 4.5 – 6.75 4.5 – 6.75 5.0 – 6.75 4.9 - 6.10 4.9 - 6.10
South 7.0 – 10.0 7.0 – 10.0 8.0 – 11.0 8.0 -11.0 8.0 -11.0
North 4.5 – 6.5 4.5 – 6.5 5.5 – 7.5 5.3 – 6.5 5.3 – 6.5
South West 5.0 – 7.0 5.0 – 7.0 5.5 – 7.5 5.5 – 6.8 5.5 – 6.8
Off Central I 7.0 – 11.0 7.0 – 11.0 8.0 – 11.5 8.0 - 11.5 8.0 - 11.5
Off Central II 6.5 – 8.5 6.5 – 8.5 7.5 – 9.5 7.5 – 8.9 7.5 – 8.9
North West 6.5 – 7.5 6.5 – 7.5 6.5 – 7.5 6.3 - 7.0 6.3 - 7.0
Average Capital Values – High-End Segment (INR '000/sf)
Location 2017 2018 2019 2020 Q1 2021
Central 18.0 - 21.0 18.0 - 21.0 18.5 - 21.0 18.5 - 21.0 18.5 - 21.0
South 7.5 – 11.5 7.5 – 11.5 9.0 - 12.5 9.0 - 12.5 9.0 - 12.5
Off Central 8.5 - 12.0 8.5 - 12.0 9.0 -13.0 9.0 - 13.0 9.0 - 13.0
East 6.5 - 10.0 6.5 - 10.0 7.5 - 11.5 7.5 - 11.5 7.5 - 11.5
North 7.5 - 11.5 7.5 - 11.5 8.5 - 12.5 8.5 - 12.5 8.5 - 12.5 7
Source: Cushman & Wakefield ResearchQ1 2021 Launches – segment-wise across submarkets (%)
Submarkets Affordable Mid High-end Luxury Total (Number of units)
North 0% 100% 0% 0% 744
East 7% 73% 20% 0% 1425
North East 0% 0% 0% 0% 0
North West 0% 0% 0% 0% 0
South 0% 100% 0% 0% 260
Central 0% 0% 0% 0% 0
South East 21% 79% 0% 0% 676
South West 0% 62% 38% 0% 595
KEY TO SUBMARKETS
North: Hebbal, Bellary Road, Yelahanka, Doddaballapur Road, Hennur Road, Thanisandra Road, Jakkur, Devanahalli
East: Marathahalli, Whitefield, Old Airport Road, Old Madras Road
North-west: Malleshwaram, Rajajinagar, Tumkur Road, Yeshwantpur
South: Koramangala, Jakkasandra
Central: Brunton Road, Artillery Road, Ali Askar Road, Cunningham Road, Lavelle Road, Palace Cross Road, Off Cunningham Road, Ulsoor Road, Richmond Road
South-east: Sarjapur Road, Outer Ring Road (Marathahalli- Sarjapur), HSR Layout
South-west: Jayanagar, J P Nagar, Kanakapura Road, Bannerghatta Road, BTM Layout, Banashankari
(South East: Excludes Hosur Road, Electronic City, Bommasandra, Attibele, Anekal & Chandrapura)
South West: Excludes Mysore Road
% indicates proportion of unit launches in different segments within a submarket.
Source: Cushman & Wakefield Research
Demand momentum in Bengaluru’s residential locations such as Attibele, Anekal and
sector maintained a steady pace in the first quarter Bommanahalli, as consumers look for spacious
of the year, backed by government policy incentives homes with surrounding greenery in the post
and rising end-user demand for mid-segment pandemic world. Gated apartment communities too
projects. Some of the recent initiatives of the have witnessed a revival in demand to around 65-
government that aided the sector were reduction of 70% of pre-COVID levels.
stamp duty rates on properties priced less than INR
3.5 million last year and for properties priced While the recent COVID resurgence might pose
between INR 3.5-4.5 million from 5% to 3% in Q1 challenges in the near term, rising vaccinations, low
2021. This had a positive impact and is expected to home loan rates, developer incentives and the need
provide a further boost to the affordable housing to possess one’s own home are likely to drive steady
segment. While residential inventory overhang growth in housing demand, especially for affordable
remains a concern, though on a much smaller scale and mid-segment projects. While the government
than some of the other Tier I cities, gradual revival in sponsored SWAMIH Fund (for last-mile funding of
demand augurs well for the sector in the next few stalled residential projects) has started disbursing
quarters. Demand for ready-to-move-in properties funds; fund allocation for more such projects in
is on the rise and enquiries from cash rich investors Bengaluru will provide relief to both developers and
and end-users for high-end apartments have also homebuyers resulting in improved market
been increasing. Several developers have looked to sentiment. Overall, we anticipate housing demand
leverage rising enquiries for plotted developments to witness steady rate of recovery in the coming
and villas on the outskirts of the city, especially at quarters due to controlled supply and stable prices
that would keep attracting serious buyers.
8Outlook
Residential
Launches Price Buyer sentiment
Demand for large configuration (3 & 4BHK) apartments in the city is likely to continue with developers
launching a larger proportion of apartments but at relatively affordable prices to attract interested buyers.
This trend has been witnessed in the last couple of quarters with 55% of newly launched units consisting of
3 & 4BHK apartments in Q1 2021. Reputed and large-scale developers are even adding features such as an
additional study room for kids or workstation in keeping with the rising trend of companies providing
greater remote working flexibility to employees.
The trend of combining physical site visits and technology-enabled solutions such as virtual walkthroughs
are likely to continue even after the pandemic is over. While most homebuyers continue to prefer physical
site visits for inspections, many of them are increasingly becoming digital savvy and developers are either
offering new solutions themselves or partnering prop-tech startups who specialize in 3D and AI-based real
estate solutions. This omnichannel approach will enable greater convenience, better focus on safety and
health and drive sales activity.
Ready-to-move-in projects will continue to account for a larger share of housing demand even though
developers might not provide significant price incentives on these projects. Homebuyers will continue to
look for quality projects from established, branded developers and might even be ready to pay a premium
for such projects depending on their requirement. However, project delivery schedules might have to be
revised in case construction timelines are affected in the near term due to the COVID resurgence.
Marginal discounts on rentals and security deposits are likely to continue for the next couple of quarters at
select locations in the city as work from home norms are likely to get extended on the back of the rising
COVID cases. However, with partial opening of offices and gradual return of employees to their work
locations, rentals are expected to recover by the end of 2021.
Office
Absorption Vacancy Rentals
While there have been certain delays in project construction activity during H2 2020, the city’s office sector
recorded a healthy completion of around 3.58 msf during the quarter, which translates to a 67% q-o-q
growth. With construction activity in the city gradually regaining pace and with labour availability reaching
65-70% of pre-COVID levels at majority of the project sites, we anticipate a healthy supply of ~12.0 msf by
end of 2021, given that many of these projects are in their advanced stages of construction or are nearing
completion. Steady project supply would further be backed by developers prioritizing completion of
projects with high pre-lease levels.
The quarterly gross lease volume of 2.39 msf though has seen a 27% decline on a q-o-q basis, is still a
healthy number considering the slowdown observed in leasing momentum in 2020 and current rising
COVID infection levels since the mid of Q1 2021. Despite occupiers adopting a cautious approach in deciding
their return-to-work timelines post the resurgence, pre-planned return to office timelines scheduled by end
H1 2021 seem to have aided in keeping a steady demand momentum in the city’s office sector. Even though
occupiers are rethinking their planned exits amidst improving business scenario, mid (30,000-40,000 sf)
and large (>100,000 sf) office spaces remain in demand.
Office rentals in the city continue to remain stable with no perceptible decline in the rental values. Majority
of the landlords/developers are less willing to offer any rental discount, instead are proposing CAM
reductions and higher rent-free periods. Despite increase in vacancy levels due to portfolio downsizing by
occupiers across submarkets, rising investor interest, steady supply with high-prelease volume and healthy
absorption is likely to support a marginal appreciation of rents in the medium term.
9Outlook
Retail
Leasing Vacancy Rentals
While hypermarkets, consumer durables & information technology (CDIT) and home décor & furnishing
sectors have been witnessing high demand since the reopening of retail sector post lockdown, pent-up
demand and consumers venturing out for both essential as well as lifestyle-based shopping helped in
demand revival across sectors like fashion & apparel, sports goods and accessories & lifestyle among
others. The F&B sector which has been largely impacted by the pandemic continued to witness healthy
demand during Q1 2021 amid rising footfalls and surge in online deliveries. Recovery in the F&B sector has
also resulted in few space take ups by food chains across main streets and malls.
Main streets across the city continue to witness a high proportion of retailer activity backed by rising
consumer footfalls and better revenue performance. During the quarter, increased retailer activity was also
observed in the superior grade malls with a 70-75% revival in their footfalls. While most of the well
performing and superior malls have been witnessing market churn over the last few quarters, increased
retailer interest for fresh space has also been noted in the upcoming malls. Thereby despite rising vacancy
levels in the average grade malls caused by retailer exits, we anticipate the city level mall vacancy to remain
range-bound in the coming quarters. With rising retailer activity and improved business performance in the
existing malls, developers who have been holding back on new supply, are gearing up for scheduled
completion of 1-1.5 msf of mall space by the end of 2021.
Rental discounts and lease term modifications that were being offered across malls and main streets
during 2020 was a limited period adjustment. With majority of the existing retailers having resumed their
business by end 2020, developers/ landlords are unwilling to offer any further flexibility in terms of rental
waivers and other benefits (viz. flexible rental payment schemes, contract renegotiations and revised
revenue sharing arrangements). Few select main streets have even recorded a marginal appreciation (2-
4%) from post COVID rentals, indicating early recovery in the city’s retail sector.
10This research report has been prepared by Cushman & Wakefield
specially for distribution to Citibank customers.
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