Robust growth of IT/ITeS sector, affordable rentals & start-up boom have worked in favour of Southern office markets
Of 21.32 mn sq. ft. net absorption in FY21 across the top 7 cities, Bengaluru, Chennai & Hyderabad accounted for a 66% share, followed by West (MMR & Pune) with 21% & North (NCR) with 11%
Back in FY18, South cities comprised a 47% share, West – 33%, North – 17%
Office supply – of 40.25 mn sq. ft. of new office space completion in FY21, South cities dominated with a 63% share; West – 19%, North – 18%
Southern office rentals saw double-digit growth (11-15%) in this period; other regions lagged behind
Mumbai, 13 September 2021: The main South India office markets have overtaken other regions in terms of new supply, net absorption, and even rental growth. Among the top 7 cities, Bengaluru, Hyderabad, and Chennai saw their share of total office leasing increase to 66% in FY21 (against 47% in FY18).
The net office absorption in FY21 in the top cities was 21.32 mn sq.
The BFSI sector is finally seeing the feasibility of looking beyond MMR. Cities with sub dollar (under USD 1/sq/ft.) office rents and enough relevant talent pools are now gaining momentum.
Between 2016 and the first half of 2021, corporate and national developers like Godrej Properties Ltd., TATA Housing, Hero Realty, Sobha Ltd., Shapoorji Pallonji Group, Birla Estates and Mahindra Lifespaces took centre-stage.
NCR has maximum stalled stock of approx. 1,13,860 units (approx. value INR 86,463 Cr) or 66% of the total across the top 7 cities. Of the total stalled units in the region, 50% is in the mid-segment, followed by 24% in the affordable segment, 20% in the premium segment and 6% in the luxury category.
COVID-19 has driven a lot of latent demand into tier 2 and 3 cities. This demand is driven by the improved economic growth, infrastructural developments, lower cost of living and more attractive real estate prices in these cities.
As many as 58,290 homes were sold in the top 7 cities in Q1 2021 in comparison to 45,200 units in Q1 2020 - effectively breaching pre-COVID levels. MMR and Pune together accounted for 53% of housing sales in the quarter –
Fractional ownership platforms attract investors interested in not just building future income (in case of commercial or even residential properties) but also in accessing the property (resorts or vacation homes) personally for a specific period
The combination of GST exemption, reduced stamp duty and the lowest home loan interest rates in almost two decades are a strong argument now favouring ready-to-move-in homes.
India's residential real estate segment is witnessing a decisive return of serious enquiries, which are now at 50% of pre-COVID-19 levels in the top cities. Recovery is fastest in Bengaluru, where current enquiries have reached 70% of the January-February period, followed by Gurugram with nearly 65%.
In a market where tenants have the leeway to bargain, property owners need to go the extra mile to attract tenants at good rentals. This helps them to let out their property faster while also justifying higher rental asks.
