INDIA REAL ESTATE RESIDENTIAL AND OFFICE JULY - DECEMBER 2015

Transcription

1 RESEARCH INDIA REAL ESTATE RESIDENTIAL AND OFFICE JULY - DECEMBER 215 AHMEDABAD BENGALURU CHENNAI HYDERABAD MUMBAI NCR PUNE

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3 INDIA REAL ESTATE RESEARCH CONTENT 4 INDIA 9 AHMEDABAD 12 BENGALURU 17 CHENNAI 22 HYDERABAD 27 MUMBAI 33 NCR 38 PUNE 3

4 Hetal Bachkaniwala Vice President - Research INDIA 4

5 INDIA REAL ESTATE RESEARCH RESIDENTIAL MARKET 215 ended with the lowest number of new launches and sales volumes across the top eight cities of India since 21. While the sales volume during the year was similar to that in 214, new launches fell sharply, by 21%. NCR (-2%), Mumbai (-36%) and Bengaluru (-27%) witnessed the sharpest drops in new launches during 215. While sales grew by 3% during H2 215 compared to H2 214, launches continued to fall by 13%. The recovery in sales was largely on account of the better-thanexpected sales volume during the festive season. NCR led in terms of sales volume growth at 15% during H However, Mumbai and Chennai are still lagging behind, with a fall in sales volume by 6% and 9%, respectively. Steady sales volume and restricted new launches have helped in bringing down the stress level in the residential market, with the unsold inventory reverting to the 213 level. While Mumbai leads in this unwinding, Hyderabad and Pune follow. Price growth across all the eight cities continues to fall, but there is no imminent threat of a sharp correction. The unwinding of unsold inventory has helped in stabilising prices and hence, we do not expect prices to fall. In fact, the upward pressure on prices is being felt in the coming six months, with Bengaluru likely to be the first city to start this trend with a 7% price rise in H Encouraged by the improving sales volume, we believe that developers will start pushing new projects in the coming six months. In H1 216, new launches and sales are estimated to jump by 8% and 1%, FIGURE 1 ANNUAL NEW LAUNCHES AND ABSORPTION TREND IN THE TOP EIGHT CITIES LAUNCHES 5, 4, 3, 2, 1, 466, ,568 ABSORPTION 458, , , ,63 39,73 274,19 244, , Note: The top eight cities are Mumbai, NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata and Ahmedabad FIGURE 2 HALF-YEARLY NEW LAUNCHES AND ABSORPTION TREND IN THE TOP EIGHT CITIES LAUNCHES 2, 175, 15, 125, 1, 75, 5, 25, 159, ,644 ABSORPTION 15, , , ,51 131, , ,42 133,556 H1 214 H2 214 H1 215 H2 215 H1 216 E Note: The top eight cities are Mumbai, NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata and Ahmedabad respectively, compared to the same period of the previous year. Pune and Bengaluru continue to be among the best performing residential markets in the country, with low quarters to sell unsold inventory and minimal age of unsold inventory. NCR continues to be the worst performing market in India, as it will take more than four years to unwind the existing unsold inventory of 26, units. This is significantly higher than the average time of less than three years that other cities will take. 5

6 FIGURE 3 UNSOLD INVENTORY LEVELS IN THE TOP EIGHT CITIES 72, 7, 68, 66, 64, 62, 6, 644, ,3 714, ,972 71,34 691,591 H1 213 H2 213 H1 214 H2 214 H1 215 H1 215 FIGURE 4 CITY-WISE HALF-YEARLY NEW LAUNCHES H1 215 H2 215 H1 216 E 32, 24, 16, 8, 18,887 2,776 16,998 29,458 34, 28, 21,4 28,284 29,87 12,762 18,135 13,9 9,12 6,34 8,5 MUMBAI NCR BENGALURU PUNE CHENNAI 5,457 5,74 5,3 HYDERABAD 8,372 1,68 1,76 KOLKATA 8,62 7,491 9,7 AHMEDABAD FIGURE 5 CITY-WISE HALF-YEARLY ABSORPTION H1 215 H2 215 H1 216 E 35, 3, 25, 2, 15, 1, 5, 28,446 34,135 29,868 25, 23,8 26, 22,234 29,684 28,367 15,524 2,74 16,449 9,91 9,42 9, MUMBAI NCR BENGALURU PUNE CHENNAI 7,123 7,78 7,45 HYDERABAD 5,883 8,36 8,345 KOLKATA 7,751 9,75 8,77 AHMEDABAD 6

7 INDIA REAL ESTATE RESEARCH FIGURE 6 CITY-WISE UNSOLD INVENTORY LEVEL H2 214 H1 215 H , 15, 1, 5, 24,7 194,51 181, ,37 195,828 26,28 1,968 15,525 98,734 39,123 37,847 36,354 39,123 37,846 36,354 MUMBAI NCR BENGALURU PUNE CHENNAI 35,183 33,517 31,477 HYDERABAD 35,183 36,95 35,874 KOLKATA 41,25 41,368 39,782 AHMEDABAD FIGURE 7 CITY-WISE PRICE MOVEMENT H1 215 H2 215 H1 216 E 8, Weighted avg. price ( ` /sq.ft.) 6, 4, 2, 7,9 7,99 8, 4,5 4,58 4,58 4,65 4,78 4,99 4,82 4,83 4,88 4,53 4,6 4,66 MUMBAI NCR BENGALURU PUNE CHENNAI 3,51 3,62 3,65 HYDERABAD 3,49 3,54 3,6 KOLKATA 2,64 2,73 2,77 AHMEDABAD Note: The prices indicated for each city are the weighted average price FIGURE 8 CITY-WISE QTS VS AGE OF UNSOLD INVENTORY ANALYSIS 17 HYDERABAD 15 Age of unsold inventory in quarters PUNE MUMBAI CHENNAI AHMEDABAD BEGALURU KOLKATA NCR Note: The size of the bubble indicates the quantum of unsold inventory. QTS is the quarter to sell unsold inventory QTS 7

8 OFFICE MARKET Vacancy levels in India reached an eight-year low of 15.8% in 215. Bengaluru had the lowest vacancy level in the country, at 8%, and Pune followed with 11.3%. Similar to 214, demand surpassed new completions in 215 as well. While 4.8 mn sq ft of office space was absorbed in 215, only 35.5 mn sq ft was delivered. This helped in bringing down the vacancy level in the past year. In terms of absorption, 215 managed to surpass the 214 numbers. While 38.3 mn sq ft of space was absorbed during 214, it increased by 7% in 215. Chennai and Pune led in terms of annual absorption growth, at 37% and 15%, respectively. In terms of new completions, NCR and Bengaluru witnessed the fastest growth, at 56% and 13%, respectively. FIGURE 1 OFFICE SPACE STOCK AND VACANCY LEVELS- ANNUAL mn sq.ft. STOCK OCCUPIED STOCK VACANCY (RHS) FIGURE 2 NEW COMPLETIONS AND ABSORPTION- ANNUAL NEW COMPLETION 5 19.% % % ABSORPTION 2.% % % % 2% 16% H2 215 also observed a healthy growth in absorption and new launches, at 11% and 7%, respectively. However, new completions are expected to grow at a faster pace of 8% in the next six months, compared to just 4% in absorption growth. Rents in most of the cities have increased steadily since the last two years. Going forward, this trend is expected to continue in the coming six-month period, with Pune and Bengaluru projected to grow at the fastest pace. mn sq.ft NEW COMPLETION FIGURE 3 NEW COMPLETIONS AND ABSORPTION- HALF-YEARLY ABSORPTION 2 15 mn sq.ft H1 214 H2 214 H1 215 H2 215 H1 216 E 8

9 INDIA REAL ESTATE RESEARCH Hetal Bachkaniwala Vice President - Research AHMEDABAD 9

10 RESIDENTIAL MARKET AHMEDABAD MARKET TRENDS FIGURE 1 AHMEDABAD MARKET TREND- ANNUAL LAUNCHES 5, 4, 3, 2, 1, 45,12 29,694 ABSORPTION 3,758 3,577 23,867 25, FIGURE 2 AHMEDABAD MARKET TRENDS - HALF-YEARLY LAUNCHES ABSORPTION WT. AVG. PRICE (RHS) 12, 1, 8, 6, 4, 2, 9,21 1,472 14,11 18,49 15,552 16,826 2, H1 214 H2 214 H1 215 H2 215 H1 216 E 4,991 8,19 8,62 7,751 7,491 9,75 9,7 8,77 3, 2,8 2,6 2,4 2,2 ` / sq ft The situation in Ahmedabad s residential markets deteriorated in 215. While the sales volume continued to fall, new launches made a quick recovery. The sales volume in Ahmedabad fell by 9% during 215 to 16,826 units from 18,49 a year ago. This is the city s lowest sales volume in the last six years and has nearly halved from its peak of 3, units in 212. On the other hand, new launches have recovered by 11% during 215, to 15,552 units from 14,11 in 214. This has increased the stress in the market and worsened the oversupply situation in the city. However, H2 215 brings in some cheer, with a positive sales volume growth compared to the same period last year. Fuelled by the festive season during the second half of the year, demand pushed the sales volume up by 13%. Going forward, we expect new launches to increase by 13% during H1 216, with North and East Ahmedabad leading the way. However, the sales volume will witness a muted growth, as homebuyer sentiment is still lackadaisical. MICRO-MARKETS OF THE AHMEDABAD Micro-market Central East North South West Locations Paldi, Vasna, Navrangpura, Maninagar, Dudeshwar, Ambawadi Naroda, Vastral, Nikol, Kathwada Road, Odhav Gota, New Ranip, Tragad, Chand Kheda, Motera Narol, Vatwa, Vinzol, Hathijan S G Highway, Prahlad Nagar, Bopal, Thaltej, Science City Road 1

11 INDIA REAL ESTATE RESEARCH FIGURE 3 MICRO-MARKET SPLIT OF LAUNCHED UNITS H2 214 H1 215 H , 2,5 2, 1,5 1, ,45 1,458 2,13 1, ,825 2, , ,725 1,891 1,67 CENTRAL EAST NORTH SOUTH WEST FIGURE 4 MICRO-MARKET-WISE RESIDENTIAL SALES H2 214 H1 215 H , 2,5 2, 1,5 1, ,852 2,474 2,76 2,391 2,19 2,691 1,95 1,5 1,228 1,328 1,39 1,584 CENTRAL EAST NORTH SOUTH WEST FIGURE 5 MICRO-MARKET-WISE QTS VS AGE OF INVENTORY 14 The premium market of Ahmedabad witnessed a phenomenal recovery in sales volume during H While sales were up by 3% in this segment, new launches dropped by 6%. Premium markets in Ahmedabad are locations where the average ticket size of new launches is above `15 mn. Some of the city s prominent premium market locations are Ambawadi, Navrangpura, Shahibaug, Bodakdev, Jodhpur and Prahladnagar. Lack of investor interest in the peripheral markets due to poor price performance has shifted the focus back to the premium locations. Fewer new launches and the steady growth in sales volume have boosted project prices in the premium segment, with H2 215 observing a 9% price growth compared to H West Ahmedabad is the worst performer among the city s zones. High ticket sizes and a supply glut are the primary reasons for such the poor performance reported by this zone. Central Ahmedabad is currently the best performing market, as restricted supply and steady demand have helped in bringing down the quarter to sell unsold inventory there. Age of unsold inventory in quarters 11 8 CENTRAL WEST NORTH SOUTH EAST With poor price appreciation and a supply glut in the rest of the city s zones, investor focus has shifted back to Central Ahmedabad. This has helped in pushing up the sales volume in this zone during the last 12 months QTS 11

12 Sangeeta Sharma Dutta Lead Consultant - Research BENGALURU 12

13 INDIA REAL ESTATE RESEARCH RESIDENTIAL MARKET On an annual basis, steep decline in new project launches observed in 215, to the tune of 27% as compared to the lowest number of launches in five years This can be largely attributed to the cautiousness shown by developers in the first half of the year, restricting their project launches Absorption, although the lowest in three years, fell by just 7% in 215 vis-à-vis 214 New launches continue to fall Y-O-Y in H2 215 as compared to H2 214, to the tune of 13%; sales witnesses a marginal recovery of 4% during the same period. On the other hand, H2 215 performed better as compared to the number of launches in H1 215 by 32% Weighted average price continued to move upwards. H2 215 saw weighted average price increase by 4%. BENGALURU MARKET TRENDS FIGURE 1 BENGALURU MARKET TREND- ANNUAL LAUNCHES 9, 8, 7, 6, 5, 4, 3, 2, 1, 63,261 41,944 ABSORPTION 67,773 5,692 78,3 57, FIGURE 2 BENGALURU MARKET TRENDS - HALF-YEARLY LAUNCHES ABSORPTION WT. AVG. PRICE (RHS) 4, 35, 68,134 55,71 49,684 51,918 5,5 While other markets saw decline in new launches, South Bengaluru bucks the trend in H An increase of 3% in new launches Y-o-Y was witnessed in the South. Almost 88% of the total new launches in H2 215 in the budget housing segment (ticket size of below INR 2.5 mn) were in South Bengaluru Majority of these launches were observed in the distant peripheral locations of South Bengaluru, such as Chandapura, Electronics City, Begur and Hosa Road North Bengaluru accounted for 45% of the total new launches in the premium housing segment (ticket size of above INR 2 mn), in areas such as Hennur Road, Thanisandra and Hebbal 3, 25, 2, 15, 1, 5, 35,545 27,256 32,589 28,445 21,4 22,234 5, 4,5 4, H1 214 H2 214 H1 215 H2 215 H1 216 E Notably, 66% of the total new launches witnessed in Bengaluru belonged to the ticket size of INR mn 28,284 29,684 29,87 28,367 ` / sq ft 13

14 MICRO-MARKETS OF THE BENGALURU Micro-market Central East West North South Locations MG Road, Lavelle Road, Langford Town, Vitthal Mallya Road, Richmond Road Whitefield, Old Airport Road, Old Madras Road, KR Puram, Marathahalli Malleswaram, Rajajinagar, Yeshwanthpur, Tumkur Road, Vijayanagar Hebbal, Bellary Road, Hennur, Jakkur, Yelahanka, Banaswadi Koramangala, Sarjapur Road, Jayanagar, JP Nagar, HSR Layout, Kanakapura Road, Bannerghatta Road FIGURE 3 MICRO-MARKET SPLIT OF LAUNCHED UNITS H2 214 H1 215 H , 1, 8, 6, 4, 2, ,973 4,759 7,43 11,8 7,888 7,5 8,26 6,811 1,725 4,293 1,947 3,75 CENTRAL EAST NORTH SOUTH WEST FIGURE 4 MICRO-MARKET-WISE RESIDENTIAL SALES H2 214 H1 215 H , Demand in Bengaluru witnessed sluggish growth of 4% in H2 215 vis-à-vis H In terms of sales growth, West Bengaluru leads with 3% increment Y-o-Y. Metro connectivity and availability of lifestyle projects is attracting home-buyers in the region. East Bengaluru, accounting for almost 5% of the new launches in the INR mn ticket size, also saw increased sales in H2 215, while marginal decline was observed in North and South Bengaluru. West Bengaluru the best performing market in the city with lowest QTS South Bengaluru, in spite of having the highest launches, performed poorly in H , 1, 8, 6, 4, 2, ,681 5,34 7,698 7,439 6,455 7,41 12,3 8,91 11,618 2,275 1,771 2,938 CENTRAL EAST NORTH SOUTH WEST 14

15 INDIA REAL ESTATE RESEARCH FIGURE 5 MICRO-MARKET-WISE QTS VS AGE OF INVENTORY 1 CENTRAL EAST WEST NORTH SOUTH Age of unsold inventory in quarters QTS OFFICE MARKET The Bengaluru office market continued to lead the way with the highest office space absorption in the country. With 5 mn sq ft transacted in H2 215, the city recorded a total absorption of 11.1 mn sq ft in 215. The absorption in 215 emerged as the highest in four years, falling marginally short of the absorption in 211. Bengaluru attracted substantial occupier interest in 215, the demand being driven primarily by the IT/ITeS and e-commerce sectors. E-commerce accounted for 3.4 mn sq ft absorption in 215, including pre-committed deals of 3.2 mn sqft, compared with.5 mn sq ft transacted in 214. FIGURE 1 NEW COMPLETIONS AND ABSORPTION- ANNUAL mn sq.ft NEW COMPLETION ABSORPTION

16 Consistent absorption and slightly improved new completions contributed to steady vacancy rates in H2 215, maintaining it a level of 8%. The city is progressively witnessing additions to its total office space stock, currently standing at mn sq ft, with the occupied stock at mn sq ft. The total absorption during H2 215 was 5 mn sq ft, while 4.5 mn sq ft of new office space came online. Going forward, owing to improving business sentiment and the macroeconomic scenario, we expect the office market to sustain its momentum in H1 216 as well and envisage absorption of approximately 6 mn sq ft. The weighted average rental values witnessed an increase of 6%, from `48.5/sq ft/month in H2 215 to `51.5/sq ft/month in H Going forward, the weighted average rentals are expected to increase by 7% from the current values in H2 215 to around `55/ sq ft/month in H FIGURE 2 OFFICE SPACE STOCK AND VACANCY LEVELS- HALF-YEARLY mn sq.ft. FIGURE 3 NEW COMPLETIONS AND ABSORPTION- HALF-YEARLY mn sq.ft STOCK OCCUPIED STOCK VACANCY (RHS) % H1 214 H2 214 H1 215 H2 215 H1 216 E NEW COMPLETION % % ABSORPTION % % 1% H1 214 H2 214 H1 215 H2 215 H1 216 E 8% 7% 8% 6% 4% 2% FIGURE 4 WEIGHTED AVERAGE RENTAL MOVEMENT INR / sq.ft./month H1 212 H2 212 H1 213 H2 213 H1 214 H2 214 H1 215 H2 215 H1 216E 16

17 INDIA REAL ESTATE RESEARCH Yashwin Bangera Assistant Vice President - Research CHENNAI 17

18 RESIDENTIAL MARKET Annual demand and supply levels dropped to five-year lows in 215 as homebuyers and developers continued to shy away from the market, waiting for more concrete signs of revival. Development activity continued to erode as stakeholder confidence threatened to weaken further in the face of the infrastructure breakdown during the recent floods. However, the impact was not as bad as expected. H2 215 experienced a 13% drop in launches and a 9% drop in sales, while prices grew at a nominal 1.5% YoY, the lowest in five years. However, the unsold inventory has proved to be a silver lining, as it has continuously trended down since H1 213, from approximately 43,8 units to the current 36,35 units. Going forward, we expect H1 216 to be better than H2 215, as the first half of the year constitutes the festival season in Chennai and developers prefer to launch their projects during this time of the year. However, YoY growth will be hampered, as the market sentiment is yet to recover from the aftermath of the floods. We forecast that H1 216 will experience launches and absorption levels to the tune of 8,5 and 9, units a modest drop of 7% and 1% YoY, respectively. MICRO-MARKETS OF CHENNAI CHENNAI MARKET TRENDS FIGURE 1 CHENNAI MARKET TRENDS ANNUAL LAUNCHES 4, 35, 3, 25, 2, 15, 1, 5, 37,41 28,13 ABSORPTION 37,79 29,422 24,846 24,444 18,695 2,556 15,442 18, FIGURE 2 CHENNAI MARKET TRENDS - HALF - YEARLY LAUNCHES ABSORPTION WT. AVG. PRICE (RHS) 12, 1, 8, 6, 4, 2, 11,377 1,212 3,9 H1 214 H2 214 H1 215 H2 215 H1 216 E 7,318 1,343 9,12 9,91 6,34 9,42 8,5 9, 4,7 4,5 4,3 4,1 ` / sq ft Micro-market Central Chennai West Chennai South Chennai North Chennai Locations Anna Nagar, Adyar, Kilpauk, T. Nagar, Alandur Porur, Ambattur Mogappair, Iyyappanthangal, Sriperumbudur Perumbakkam, Chrompet, Sholinganallur, Guduvancheri, Kelambakkam Tondiarpet, Kolathur, Madhavaram, Perambur 18

19 INDIA REAL ESTATE RESEARCH Buyer behaviour has been largely consistent across the last three periods, with an inevitable dip in demand for South Chennai due to the floods. Buyers responded favourably to the increasing and lowerpriced supply in the West zone. Western micro-markets, such as Thiruverkadu, saw an increase in traction due to an increased uptake of the lower-priced inventory and good connectivity with SBD locations such as Mount Poonamallee High Road and Valasaravakkam. Absorption numbers dropped by 18% in the South zone, while increased homebuyer interest in more affordable locations in the West, such as Thiruverkadu, caused demand to increase 12% YoY in that zone. Demand has decelerated by 9% YoY in H2 215 and over half the buyers bought apartments priced under `5 mn. Landmark Constructions, Doshi Housing, Emami Constructions, Vijay Raja Group and Godrej Properties were the most active during this period and contributed to over half of the units launched during H The QTS of the Chennai residential market has been trending upward steadily, from 6.1 quarters in H2 213 to 7.4 quarters in H The budget segment in Chennai has traditionally underperformed in the overall market, as it is plagued with endemic infrastructure and connectivity issues, and the current slowdown has caused it to regress further. Currently, it holds about 1.5 quarters of unsold inventory compared to the 7.4 of the overall market. Central Chennai emerged as the best performing micro-market in H2 215, with a QTS and inventory age of seven quarters each. Comprising locations mostly included in the strong premium FIGURE 3 MICRO-MARKET SPLIT OF LAUNCHED UNITS H2 214 H1 215 H , 6, 5, 4, 3, 2, 1, CENTRAL NORTH FIGURE 4 MICRO-MARKET-WISE RESIDENTIAL SALES H2 214 H1 215 H , 6, 5, 4, 3, 2, 1, CENTRAL NORTH segment, this performance can be attributed to the steady demand and steep fall in launches that this zone has been experiencing over the last six quarters. Relatively affordable residential prices, proximity to employment hubs and improving social infrastructure continue to drive the South and West micro-markets. North Chennai is the worst performing micro-market, with a QTS and age of inventory of just over 1 quarters, though its QTS has been reducing over the last four analysis periods. 1,746 5,763 3,22 SOUTH 6,735 6,19 5,534 SOUTH 3,195 3,17 1,873 WEST 2,693 2,385 3,8 WEST 19

20 FIGURE 5 MICRO-MARKET-WISE QTS VS AGE OF INVENTORY CENTRAL WEST NORTH SOUTH 13 Age of unsold inventory in quarters QTS OFFICE MARKET FIGURE 1 NEW COMPLETIONS AND ABSORPTION- ANNUAL NEW COMPLETION ABSORPTION mn sq.ft The Chennai office space market moved from strength to strength as demand rose for the third consecutive year. 215 recorded 5.1 mn sq ft of absorption, 37% higher than the 3.7 mn sq ft absorbed during also witnessed 2.1 mn sq ft of office space come online, compared to 2.6 mn sq ft in the previous year. Spiralling absorption numbers, coupled with falling supply, has pushed down vacancy levels from 24% in 213 to 15.4% at the end of 215. H2 215 experienced the highest absorption levels of any half-yearly period in the history of the Chennai office space market on the back of big-ticket transactions by Yes Bank, AstraZeneca, Sutherland and Ericsson among others. 2

21 INDIA REAL ESTATE RESEARCH Rental values have seen a sustained rise since 212 on the back of steady demand and a lesser amount of office space inventory coming online in successive years. Severe shortage of good quality office space in prime areas has turned the market in favour of landlords, who are asking for higher rents from tenants with each passing quarter. We expect the demand pipeline to continue to be strong, while supply shows signs of revival. This will boost rental levels even further, with an estimated 4% rise in H1 216 compared to H We estimate that the strong demand pipeline will push absorption levels up 2% YoY in H1 216, while around 1.4 mn sq ft is expected to come online during the same period. FIGURE 2 OFFICE SPACE STOCK AND VACANCY LEVELS- HALF-YEARLY mn sq.ft. STOCK OCCUPIED STOCK VACANCY (RHS) % H1 214 H2 214 H1 215 H2 215 H1 216 E FIGURE 3 NEW COMPLETIONS AND ABSORPTION- HALF-YEARLY NEW COMPLETION % % 19.% ABSORPTION % % % 2% 15% 1% 5% 2.5 mn sq.ft H1 214 H2 214 H1 215 H2 215 H1 216 E FIGURE 4 WEIGHTED AVERAGE RENTAL MOVEMENT INR / sq.ft./month H1 212 H2 212 H1 213 H2 213 H1 214 H2 214 H1 215 H2 215 H1 216E 21

22 Yashwin Bangera Assistant Vice President - Research HYDERABAD 22

23 INDIA REAL ESTATE RESEARCH RESIDENTIAL MARKET 215 ended on a flat note as the Hyderabad residential market has yet to show definite signs of recovery in market activity, albeit demand has stayed virtually the same as in 214. While the sales volume fell marginally, by 1% in 215 compared to the previous year, new launches dropped by a more pronounced 14% during the same period. The end of the year did show some promise in terms of supply, as H2 215 saw an 11% growth in the number of units launched compared to the previous period. On the other hand, the festive season did not boost absorption levels, which stayed largely stagnant. Steady absorption, coupled with falling demand, has reduced the unsold inventory levels to their lowest point since 21. These factors helped residential prices, which have been moving at a steady clip, to grow at a 3.1% YoY during H This prolonged consolidation is expected to persist in H1 216 as well, as developers wait for further inventory unwinding to continue. However, steady demand over the last three half-yearly periods shows a positive undercurrent and leads us to believe that a modest recovery in absorption levels of 5% YoY during H1 216 is warranted. MICRO-MARKETS OF HYDERABAD HYDERABAD MARKET TRENDS FIGURE 1 HYDERABAD MARKET TRENDS ANNUAL LAUNCHES 24, 2, 16, 12, 8 19,919 16,92 ABSORPTION 22,725 19,5 18,643 18,428 13,5 15,111 11,197 14, FIGURE 2 HYDERABAD MARKET TRENDS HALF YEARLY LAUNCHES ABSORPTION WT. AVG. PRICE (RHS) 9, 3,9 8, 7, 6, 3,6 5, 4, 3, 3,3 2, 1, 3, H1 214 H2 214 H1 215 H2 215 H1 216 E 7,899 7,282 5,151 7,829 5,457 7,123 5,74 7,78 5,3 7,45 ` / sq ft Micro-market HMR Central HMR West HMR East HMR North HMR South Locations Begumpet, Banjara Hills, Jubilee Hills, Panjagutta, Somajiguda Kukatpally, Madhapur, Kondapur, Gachibowli, Raidurgam Uppal, Malkajgiri, L. B. Nagar Kompally, Medchal, Alwal, Quthbullapur Rajendra Nagar, Shamshabad 23

24 The annual trend in launches shows a clear decline; however, the half-yearly trend over the last three periods shows supply numbers stabilising gradually. While the West zone continues to dominate the residential market, northern locations, such as Jeedimetla and Aminpur particularly, saw greater development interest compared to their counterparts on the southern and eastern peripheries. East Hyderabad has seen development interest plummet in recent years, as homebuyer activity has greatly fallen short of expectations. This lack of supply has, however, helped reduce unsold inventories to a large extent. The premium segment, which traditionally performs better than the overall market, came under pressure early this year, as its QTS level exceeded that of the market. The situation worsened in H2 215, as demand flattened out in this segment. Pacifica, Prestige, Lansum, HomeAway and Ashoka Builders were the most active during this period and contributed to well over half the units launched during H The QTS of the Hyderabad residential market has ranged between eight and nine quarters over the last five years and currently stands at 8.4 quarters, at the same level as at the end of 214. FIGURE 3 MICRO-MARKET SPLIT OF LAUNCHED UNITS H2 214 H1 215 H ,5 4, 3,5 3, 2,5 2, 1,5 1, HMR CENTRAL HMR EAST the youngest unsold inventory among all the residential markets of Hyderabad. This could be attributed to the limited inventory and inherent supply constraints in this zone. West Hyderabad follows closely on the same parameters. Its relative health can be gauged quite clearly from the fact that it has a lower QTS and that its inventory also gets liquidated much quicker than the other markets, despite having the largest block of unsold inventory. H2 214 H1 215 H HMR NORTH FIGURE 4 MICRO-MARKET-WISE RESIDENTIAL SALES 5, HMR SOUTH 2,99 3,59 3,991 HMR WEST North Hyderabad holds the oldest inventory, while South Hyderabad will take the most time to liquidate its existing unsold inventory. East Hyderabad has a QTS of 5, which is much below the 8.4-quarter average of the Hyderabad market as a whole. This can be attributed to the drastic reduction in unsold inventory levels due to the steep drop in development activity. The relative positions of the markets have not moved significantly over the last two years either. This capacity to maintain equilibrium underscores the efficient interplay of supply and demand in the Hyderabad residential market. It is clear from the adjoining chart that the Central zone is the healthiest market today, as it has the lowest QTS, and comparatively, 4, 3, 2, 1, HMR CENTRAL 1, HMR EAST ,35 HMR NORTH HMR SOUTH 4,536 4,77 4,63 HMR WEST 24

25 INDIA REAL ESTATE RESEARCH FIGURE 5 MICRO-MARKET-WISE QTS VS AGE OF INVENTORY 22 2 HMR CENTRAL HMR EAST HMR NORTH HMR SOUTH HMR WEST Age of unsold inventory in quarters QTS OFFICE MARKET FIGURE 1 NEW COMPLETIONS AND ABSORPTION- ANNUAL NEW COMPLETION ABSORPTION mn sq.ft The Hyderabad office space market continues its upward trend as demand stays robust and supply tapers down for the second straight year. 215 recorded 4.6 mn sq ft of absorption, marginally lower than the 4.7 mn sq ft absorbed during also saw 3.9 mn sq ft of office space come online, compared to the 5 mn sq ft in the previous year. Robust absorption numbers, coupled with falling supply, has pushed down vacancy levels from 17.7% in 213 to 14.4% at the end of 215. H2 215 experienced the highest absorption levels of any halfyearly period in history on the back of big-ticket transactions by Qualcomm, Salesforce, Unitedhealth Group and J.P. Morgan. 25

26 Rental values have been increasing steadily since 212 and picked up momentum especially after H2 214, post the resolution of the Telangana issue, as demand started trending up significantly. Severe shortage of good quality office space in prime areas has turned the market in favour of landlords, who are asking for higher rents from tenants with each passing quarter. We expect the demand pipeline to continue to be strong, while supply shows some signs of revival. This will boost rental levels even further, with an estimated 7% rise in H1 216 compared to H We estimate that the strong demand pipeline will push absorption levels up 23% YoY in H1 216, while close to 1.9 mn sq ft is expected to come online H FIGURE 2 OFFICE SPACE STOCK AND VACANCY LEVELS- HALF-YEARLY mn sq.ft. STOCK OCCUPIED STOCK VACANCY (RHS) % 6 49 % H1 214 H2 214 H1 215 H2 215 H1 216 E 16.7% 16.3% FIGURE 3 NEW COMPLETIONS AND ABSORPTION- HALF-YEARLY NEW COMPLETION ABSORPTION 14.6% 14.4% % 18% 16% 14% 12% 1% 8% 6% 4% 2% mn sq.ft H1 214 H2 214 H1 215 H2 215 H1 216 E FIGURE 4 WEIGHTED AVERAGE RENTAL MOVEMENT INR / sq.ft./month H1 212 H2 212 H1 213 H2 213 H1 214 H2 214 H1 215 H2 215 H1 216E 26

27 INDIA REAL ESTATE RESEARCH Vivek Rathi Vice President - Research MUMBAI 27

28 RESIDENTIAL MARKET MMR MARKET TRENDS Drastic reduction in new project launches to combat demand slowdown, averted price correction in the MMR residential market. In H2 215, 23% less or 2,776 houses were launched, compared to the same period last year. Demand shrunk by 6% to 34,135 houses. As a result of such demandsupply dynamics, the annual price increase in the region stood at just 3%, presenting a great opportunity for homebuyers. Developers in the peripheral markets are the most concerned. Many put brakes on new project plans in H The Peripheral Central Suburbs (Kalyan, Karjat, Kasara, etc.) and Navi Mumbai are the worst hit, seeing launches lower by 44% and 59%, respectively. The South and Central Mumbai markets are critical for the industry because of their value. Even though they represent just 3% of the MMR s unsold inventory volume, they contribute a massive 29% to its value. The MMR has an unsold inventory worth `2,2 bn, of which `595 bn is in the South and Central Mumbai markets. The premium South and Central Mumbai markets witnessed a tenfold jump in new project launches, to 956 units in H2 215 compared to just 1 units in H FIGURE 1 MMR MARKET TREND- ANNUAL LAUNCHES 14, 12, 1, 8, 6, 4, 2, 114,71 96,226 ABSORPTION 121,615 85,978 19,229 74,94 62,345 67,715 39,663 62, FIGURE 2 MMR MARKET TRENDS - HALF-YEARLY LAUNCHES ABSORPTION WT. AVG. PRICE (RHS) 4, 35, 3, 25, 2, 15, 1, 5, 35,512 31,21 7, H1 214 H2 214 H1 215 H2 215 H1 216 E 26,833 36,55 18,887 28,446 2,776 34,135 16,998 29,868 8,5 8, 7,5 ` / sq ft 28

29 INDIA REAL ESTATE RESEARCH MICRO-MARKETS OF THE MMR Micro-market Central Mumbai Central Suburbs Navi Mumbai Peripheral Central Suburbs Peripheral Western Suburbs South Mumbai Thane Western Suburbs Locations Dadar, Lower Parel, Mahalakshmi, Worli, Prabhadevi Sion, Chembur, Wadala, Kurla, Ghatkopar, Vikhroli, Bhandup, Mulund Vashi, Nerul, Belapur, Kharghar, Airoli, Panvel, Ulwe, Sanpada Kalyan, Kalwa, Dombivli, Ambernath, Bhiwandi, Mumbra, Karjat Vasai, Virar, Boisar, Palghar, Bhayandar, Nala Sopara Malabar, Hill, Napean Sea Road, Walkeshwar, Altamount Road, Colaba Naupada, Ghodbunder Road, Pokhran Road, Majiwada, Khopat, Panchpakhadi Bandra, Andheri, Goregaon, Kandivali, Borivali, Santacruz, Vile Parle FIGURE 3 MICRO-MARKET SPLIT OF LAUNCHED UNITS H2 214 H1 215 H , 9, 8, 7, 6, 5, 4, 3, 2, 1, CENTRAL MUMBAI ,24 5,194 3,224 CENTRAL SUBURBS 6,63 2,224 2,724 NAVI MUMBAI 9,78 4,325 5,469 PERIPHERAL CENTRAL SUBURBS 56 1,935 1,473 PERIPHERAL WESTERN SUBURBS SOUTH MUMBAI 1,39 2,486 3,918 THANE 3,133 2,686 3,12 WESTERN SUBURBS FIGURE 4 MICRO-MARKET-WISE RESIDENTIAL SALES H2 214 H1 215 H , 1, 8, 6, 4, 2, CENTRAL MUMBAI 3,68 2,728 3,56 CENTRAL SUBURBS 6,218 4,554 5,443 NAVI MUMBAI 11,555 8,716 9,677 PERIPHERAL CENTRAL SUBURBS 7,663 5,94 7,451 PERIPHERAL WESTERN SUBURBS SOUTH MUMBAI 2,733 2,74 THANE 3,97 4,33 3,671 4,555 WESTERN SUBURBS 29

30 Even though demand shrunk by 6% in the MMR, Thane bucked the trend with a growth of 13%. Good connectivity to office markets, coupled with the right ticket size products made Thane successful in attracting buyers. Incidentally, Thane s Majiwada Kasarvadavali belt also featured as a top investment destination in our last report. Incremental infrastructure in terms of the 32-km Mumbai Metro Line 4 (Wadala Ghatkopar Thane Kasarvadavali) is scheduled for implementation in Employment hubs in the peripheral business district (PBD), which includes the office markets of Thane and Navi Mumbai, have an office stock of 23 mn sq ft, out of which 5.4 mn sq ft is present in localities such as Wagle Estate and Ghodbunder Road, Thane. Going forward, we estimate an incremental office space addition of 13.7 mn sq ft in the PBD in the next five years (216 22). Of this, approximately 5 mn sq ft (62,5 jobs) will be in Wagle Estate and Ghodbunder Road. A silver lining emerged in the MMR residential market, in terms of lower unsold inventory and QTS. The MMR QTS has come down from 12 in Dec 214 to 11 in Dec 215 on account of the sharp decline in new launches. At 181, units, the unsold inventory is 11% lower than its previous 24,7 units. Going forward in H1 216, infrastructure thrust, the improving office market and stable house prices will aid the housing market revival. The Central and state governments are pushing critical transit-oriented infrastructure projects in the MMR and aim at completion by The Mumbai Trans Harbour Link has secured the environment clearance, and the bidding process will begin in March Mumbai s coastal road has secured the forest and CRZ clearances. The bidding process will begin in June The metro rail for the Dahisar to DN Nagar, Dahisar East to Andheri East, and Cuffe Parade to SEEPZ corridors has been expedited. Construction is to begin this year. 4 The Navi Mumbai International Airport construction contract is to be awarded by June 216. Amidst demand revival, new launches are to be lower and prices stagnant on account of the inventory backlog. FIGURE 5 MICRO-MARKET-WISE QTS VS AGE OF INVENTORY Age of unsold inventory in quarters CENTRAL MUMBAI CENTRAL SUBURBS NAVI MUMBAI PERIPHERAL CENTRAL SUBURBS PERIPHERAL WESTERN SUBURBS SOUTH MUMBAI THANE WESTERN SUBURBS QTS 3

31 INDIA REAL ESTATE RESEARCH OFFICE MARKET In 215, demand exceeded supply for the first time in the MMR since 28, as only 5.8 mn sq ft of new project completions were recorded against an occupier demand of 7.5 mn sq ft. In H2 215, new completions comprised 3.5 mn sq ft or 45% lower and absorption was at 5 mn sq ft or 3% higher than same period last year. As a result of the improving demand-supply equation, the vacancy level trended down from 22.6% in H2 214 to 2% in H Surpassing the BFSI sector, the IT/ITeS industry emerged as the top occupier of office space in the MMR, contributing 46% of the demand in H2 215 compared to 26% in H The manufacturing sector boosted its share even further, with leading engineering and pharmaceutical companies taking up more space in H2 215 compared to the same period last year. With an 83% jump in demand, e-commerce raised its head. The sector generated 122, sq ft of office demand in H2 215, led by players such as Amazon, Zomato and Toppr. The demand share of the PBD (Thane and Navi Mumbai) increased from 32% in H2 214 to 53% in H2 215 on account of the robust demand from the IT/ITeS industry. The IT/ITeS industry remained an active consumer of office space in the relatively affordable, yet well connected peripheral markets of Thane and Thane-Belapur Road. The IT/ITeS occupier thrust also ensured a jump of 34% in the average deal size, from 27,7 sq ft in H2 214 to 37,3 sq ft in H FIGURE 1 NEW COMPLETIONS AND ABSORPTION- ANNUAL mn sq.ft. NEW COMPLETION ABSORPTION FIGURE 2 OFFICE SPACE STOCK AND VACANCY LEVELS- HALF-YEARLY mn sq.ft. STOCK OCCUPIED STOCK VACANCY (RHS) % % H1 214 H2 214 H1 215 H2 215 H1 216 E 22.6% % % % % 22% 21% 2% 19% 31

32 FIGURE 3 NEW COMPLETIONS AND ABSORPTION- HALF-YEARLY NEW COMPLETION ABSORPTION mn sq.ft H1 214 H2 214 H1 215 H2 215 H1 216 E BUSINESS DISTRICT-WISE RENTAL MOVEMENT Business district Rental value range in H2 215 (`/sq ft/ month) 6-month change BKC & off-bkc % CBD & off-cbd % Central Mumbai % PBD 5 7 3% SBD Central % SBD West % Owing to the improved demandsupply dynamics, office market rents are trending up. Government focus, and IT/ ITeS and manufacturing sector leadership will improve the MMR office market prospects, going forward. New completions will grow by 26% in H1 216 and absorption will improve steadily by 9%, translating into a lower vacancy level of 19.7% compared to 21.9% during the same period last year. 32

33 INDIA REAL ESTATE RESEARCH Ankita Sood Consultant - Research NCR 33

34 RESIDENTIAL MARKET NCR saw the leanest year in terms of new launches since 21. NCR MARKET TRENDS Dropping to 63,46 units in 215, new launches registered a 2% dip YoY compared to the same period in 214. Piling-up inventory and a low sales velocity led developers to restrict the supply of new launches in 215. New launches in NCR have been on a constant decline since 21. The average number of launched units has come down from 86, in 21 to 31,7 units in 215. Residential projects under the Haryana government s Affordable Housing Policy 213 contributed significantly to the new launches in NCR in H However, developers released their pent-up supply in the market in H2 215, pinning new launches at 34, units a 15% increase from H On the other hand, demand also witnessed a recovery in H The market registered a 15% recovery in sales in H2 215 compared to the same period in 214. Along with the impact of macroeconomic factors, delays in the delivery of some major largescale projects had put buyers on the back foot. FIGURE 1 NCR MARKET TREND- ANNUAL LAUNCHES 2, 18, 16, 14, 12, 1, 8, 6, 4, 2, 172, ,559 ABSORPTION 11,751 93,986 1,259 74,94 79,577 48,63 63,458 48, FIGURE 2 NCR MARKET TRENDS - HALF-YEARLY LAUNCHES ABSORPTION WT. AVG. PRICE (RHS) 5, 4,6 45, 4, 4,55 35, 4,5 3, 25, 4,45 2, 15, 4,4 1, 4,35 5, 4,3 H1 214 H2 214 H1 215 H2 215 H1 216 E 34,577 28, 45, 2,63 29,458 25, 34, 23,8 28, 26, ` / sq ft The growth rate of the weighted average price has been witnessing a downward trend since 213, and has slowed down considerably, from 6% in H1 213 to a mere 1% in H This muted price growth of three years indicates that residential real estate is facing a strong price resistance against unattractive and unaffordable prices in NCR. 34

35 INDIA REAL ESTATE RESEARCH Greater Noida continues to have the maximum number of project launches in NCR, with a 4% share of the total new launches in H A massive 88% of the new launches fall in the `2.5 5 mn category. Affordable and mid-segment project launches saw a push in Ghaziabad, with 79% of the total new launches falling in the `<5 mn category. Both Greater Noida and Ghaziabad have established themselves as affordable residential choices, with the lowest capital values in NCR. Gurgaon also contributed significantly to the new launches in NCR in H2 215, taking up 27% of the overall pie. A substantial 35% of the new launches fall in the ` mn category. Approximately 23,8 units were sold in the second half of 215, compared to 2,63 units in H2 214, thus registering a YoY increase of 15%. Affordability drives sales in the micro-markets of Greater Noida and Ghaziabad. Both these markets together make up a considerable 64% share of the overall sales in H Gurgaon registered a 13% uptick in sales in H2 215 compared to the same period in 214. Fresh launches in New Gurgaon and New Sohna have provided buyers with several options in the steep price market of Gurgaon. Though 215 was the leanest in terms of new launches, the slowdown in sales velocity has pushed the QTS to nearly five years. The unsold inventory stands at approximately 26,28 units till December 215. Pushed by the affordable and mid-segment demand, Ghaziabad and Greater Noida are the best performing markets of NCR, with a QTS of 14 and 15, respectively. FIGURE 3 MICRO-MARKET SPLIT OF LAUNCHED UNITS H2 214 H1 215 H , 18, 16, 14, 12, 1, 8, 6, 4, 2, DELHI FARIDABAD H2 214 H1 215 H ,79 3,62 5,886 GHAZIABAD FIGURE 4 MICRO-MARKET-WISE RESIDENTIAL SALES 14, 12, 1, 8, 6, 4, 2, DELHI FIGURE FARIDABAD 4,179 5,64 4,882 GHAZIABAD 18,41 5,24 13,93 GREATER NOIDA 8,986 1,846 1,518 GREATER NOIDA MICRO-MARKET-WISE QTS VS AGE OF INVENTORY Age of unsold inventory in quarters ,2 15,138 9,68 GURGAON 3,944 4,774 4,451 GURGAON 6,368 4,664 4,811 NOIDA 3,8 3,753 3,421 NOIDA DELHI FARIDABAD GHAZIABAD GREATER NOIDA GURGAON NOIDA QTS 35

36 OFFICE MARKET The NCR office market maintained its absorption appetite, achieving a total of 7.4 mn sq ft of absorbed space at the end of 215. FIGURE 1 NEW COMPLETIONS AND ABSORPTION- ANNUAL NEW COMPLETION ABSORPTION Gurgaon emerged as the most preferred business district in NCR, taking up 66% of the total absorption pie. A pent-up supply of 11 mn sq ft in the NCR market led to a 37% growth in new completions in 215 compared to the previous year. mn sq.ft Quality office space attracts occupiers, and instead of high volume, it was the high-value transactions that characterised the market in 215. The office stock in NCR stood at 139 mn sq ft till the end of Dec 215, of which 18 mn sq ft is occupied stock. The influx of pent-up project completions in the second half has been instrumental in nudging the vacancy levels from 2.7% in H1 215 to 22% in H2 215, with the micro-market of Greater Noida contributing significantly to the new supply FIGURE 2 OFFICE SPACE STOCK AND VACANCY LEVELS- HALF-YEARLY mn sq.ft. STOCK OCCUPIED STOCK VACANCY (RHS) % % % % 22% % 22% 21% 2% 19% 18% H1 214 H2 214 H1 215 H2 215 H1 216 E 36

37 INDIA REAL ESTATE RESEARCH On the half-yearly demand side, office leasing in NCR saw a marginal 1% dip in leasing activity in H2 215 compared to the same period in 214. The total absorption during H2 215 was 3.7 mn sq ft, while 7 mn sq ft of new office space came online. Going forward, we expect the office market of NCR to sustain its half-yearly momentum in H1 216 as well, and envisage the absorption of approximately 3.5 mn sq ft. The weighted average rental values witnessed a sharp increase of 11%, from `58 per sq ft per month in H2 214 to `64 per sq ft per month in H Going forward, we expect the weighted average rentals to increase by 5% from the current values in H2 215 to around `67 per sq ft per month in H However, quality office space in micro-markets such as Gurgaon is expected to witness a significant upward pressure on price. FIGURE 3 NEW COMPLETIONS AND ABSORPTION- HALF-YEARLY mn sq.ft NEW COMPLETION ABSORPTION H1 214 H2 214 H1 215 H2 215 H1 216 E FIGURE 4 WEIGHTED AVERAGE RENTAL MOVEMENT INR / sq.ft./month H1 212 H2 212 H1 213 H2 213 H1 214 H2 214 H1 215 H2 215 H1 216E 37

38 Hetal Bachkaniwala Vice President - Research PUNE 38

39 INDIA REAL ESTATE RESEARCH RESIDENTIAL MARKET 215 was the best time to buy property in Pune, as the steady sales volume and stagnant price growth provided an ideal opportunity for homebuyers. While the sales volume grew marginally by 4% during 215 compared to the previous year, new launches dropped by 8% during the same period. However, encouraged by the consistent growth in sales volume, developers were back in action during H New launches increased by 9% during H2 215 compared to H Nonetheless, new launches are still happening at old prices. The majority of the new launches during H2 215 are in price ranges similar to those of H The price growth in Pune has fallen from above 12% to less than 2% over the last three years. This consistent drop in price growth presented a good opportunity for homebuyers to buy property. Going forward, developers are expected to push new launches during H1 216 on the back of the steady sales volume. We expect a 9% jump in new launches during H1 216 compared to H The majority of these new launches would be focused in peripheral areas, such as Wagholi, Dhanori, Hinjewadi, Shivane, Pisoli and Pirangut, among others. We estimate that most of these new launches will be at 215 prices, as the scope for a price rise is limited, given the huge unsold inventory in these locations. PUNE MARKET TRENDS FIGURE 1 PUNE MARKET TREND- ANNUAL LAUNCHES 6, 5, 4, 3, 2, 1, 54,147 45,725 ABSORPTION 55,971 48,17 45,372 38,795 33,58 34,87 3,89 36, FIGURE 2 PUNE MARKET TRENDS - HALF-YEARLY LAUNCHES ABSORPTION WT. AVG. PRICE (RHS) 25, 2, 15, 1, 5, 16,88 14,72 4,4 H1 214 H2 214 H1 215 H2 215 H1 216 E 16,7 2,15 Micro markets of Pune Micro-market Central East West 12,76 15,52 18,13 2,74 Locations 13,9 16,5 Koregaon Park, Boat Club Road, Erandwane, Deccan, Kothrud, Model Colony Viman Nagar, Kharadi, Wagholi, Hadapsar, Dhanori Aundh, Baner, Wakad, Hinjewadi, Bavdhan, Pashan 5, 4,8 4,6 ` / sq ft North South Pimpri, Chinchwad, Moshi, Chikhali, Chakan, Talegaon Kondhwa, Ambegaon, Undri, Dhayari, Warje, Sinhgad Road 39

40 Mid-segment housing is leading in terms of sales traction. The maximum sales traction is being witnessed in the mid segment (ticket size between of `2.5 mn - 1 mn), with the premium (ticket size above `2 mn) and budget (ticket size below `2.5 mn) segments lagging behind. Despite its low ticket size, the budget segment is not witnessing sufficient traction due to the considerable distance of these projects from the major employment centres of the city. Additionally, the lack of social infrastructure has resulted in a lukewarm response from homebuyers towards this segment. Some of the prominent locations in the budget segment are Lonikand, Pirangut, Pisoli, Phursungi and Shivane. The stress level in the premium segment is reducing due to falling launches and a steady sales volume. While the sales volume has remained consistent, in the range of units in each of the six-monthly periods since 213, new launches have been decreasing steadily from 492 units in H2 213 to zero during H Some of the prominent locations in the premium segment are Koregaon Park, Boat Club Road, Kalyani Nagar, Prabhat Road and Bhosale Nagar. South Pune witnessed a phenomenal recovery in the last two years. One of the worst performing zones in H1 214, it has emerged as one of the best performing markets in H The QTS (quarters to sell unsold inventory) has fallen from 9 in H1 214 to less than 5.7 in H A steady sales volume, fewer new launches and lower ticket sizes have helped South Pune improve its performance compared to the city s other zones. The advantage of being located between the two major employment hubs of Hinjewadi in the east & and the FIGURE 3 MICRO-MARKET SPLIT OF LAUNCHED UNITS H2 214 H1 215 H , 5, 4, 3, 2, 1, ,842 3,46 5,47 CENTRAL EAST WEST NORTH SOUTH Hadapsar-Kharadi belt in the west has sustained homebuyer interest in this zone. West Pune continues to be the best performing zone in Pune, with a QTS of 5.7 in H Strong demand, on the back of the incremental employment generation in Hinjewadi and Wakad, has helped this zone sustain in terms of sales volume. The situation in Central Pune has worsened, as sales volume in this zone has been falling consistently since 213. Higher ticket sizes and a lack of investor interest have resulted in Central Pune s poor performance. 2,796 5,12 5,71 FIGURE 4 MICRO-MARKET-WISE RESIDENTIAL SALES H2 214 H1 215 H , 5, 4, 3, 2, 1, ,963 4,13 5,444 5,38 4,254 6,37 5,316 2,374 2,733 4,611 3,633 3,714 3,336 1,666 4,57 4,853 3,351 4,966 CENTRAL EAST WEST NORTH SOUTH 4

41 INDIA REAL ESTATE RESEARCH FIGURE 5 MICRO-MARKET-WISE QTS VS AGE OF INVENTORY CENTRAL EAST WEST NORTH SOUTH Age of unsold inventory in quarters QTS OFFICE MARKET Office space demand in Pune continues to outstrip new completions for the fourth straight year. 215 recorded 5.2 mn sq ft of absorption, which was 15% higher than the 4.5 mn sq ft mark in 214. In terms of new completions, only 2.7 mn sq ft of office space was delivered during the year led by Blue Ridge in Hinjewadi and Commerzone in Yerwada. This was higher by 6% from the 2.5 mn sq ft delivered during 214. With demand consistently outstripping supply, vacancy levels have witnessed a free fall from 28% in 29 to 11% in 215. H2 215 recorded one of the highest absorptions, at 3 mn sq ft. This was 26% higher than H2 214, when 2.4 mn sq ft of space was absorbed. Certain largesized deals by companies such as HSBC, Siemens and Northern Trust Bank have helped in pushing the absorption numbers to this level. On the other hand, new completions have remained tepid at 1.1 mn sq ft during H Although this is more than double the.5 mn sq ft achieved during H2 214, it is still considerably lower in comparison to absorption. FIGURE 1 NEW COMPLETIONS AND ABSORPTION- ANNUAL mn sq.ft NEW COMPLETION ABSORPTION