Track2Realty: top eight cities witnessed total estimated residential unit launches of 132,000 units between January to September 2013 which represented an increase of 5% as compared the to the same period for 2012, says a report by Cushman & Wakefield (C&W).
High end property launches in the first 3 quarters of 2013, which was recorded at 23,500 units, saw the highest growth of 142 % over same time last year, while launches in the luxury housing category recorded a decline of 10.5 % between Jan – Sept 2013 over same period last year.
The residential market has been witnessing stagnant trends in the capital values as well through most micro markets as through across major cities on account of restrained activities.
Shveta Jain, Executive Director, Residential Services, Cushman & Wakefield said, “Contrary to tradition, there has been a decline in new launch activities in Q3 2013 as economic conditions have not been encouraging for developers. Slowed down in demand with consumer confidence at lower ebb on account of increased and consistently high pricing in key cities. Having said that, the demand from first time buyers and end users has been consistent as genuine buyers with adequate capital look at this phase as ideal to enter the property market on account of stable capital values.”
“Most developers are focused on keeping the levels of unsold inventories low, thus to promote sales, developers are resolving to innovating marketing to ensure buyers can get more value from their product. Their problems are compounded on account of higher input cost, thereby keeping capital values consistent. Developers are looking at alternate strategies from promotional offers to resizing of units in order to meet the end consumer demand of economically viable housing. Developers have reduced their concentration on low demand category of luxury and on affordable housing which has high input costs,” adds Shveta.
Ahmedabad, Bengaluru and Chennai witnessed a quarter on quarter increase of 41%, 25% and 28% respectively in Q3. Though Hyderabad witnessed the maximum decline of 56% in launches compared to Q2 2013, it however witnessed one of the highest rises in y-o-y appreciation. Number of launches in 2013 more than tripled in Bengaluru to nearly 35,000 units till September, 2013. Bengaluru, NCR and Mumbai, respectively contributed to 27%, 23% and 19% of the launches across top eight cities in 2013.
Rental remained stable across most of the cities except Ahmedabad which registered 4-10% decline in rentals across segments. Gurgaon in NCR also registered a 4-12% dip in rental values for high-end spaces. Bengaluru witnessed maximum appreciation of 4-12% q-o-q across a few submarkets in mid-end segment capital values due to persistent demand from working population. Kolkata witnessed a 5-7% appreciation in capital values of prime areas, due to growing demand for high-end projects in these locations.
Capital values across segments in Chennai, Hyderabad and Pune remained stable during the quarter due to sluggish sales, subdued demand and rising construction costs. High-end segment capital values in locations like Lower Parel, Worli in South Central Mumbai declined by 2%, while in Gurgaon, NCR fell by 3-5% to boost demand and push transaction activity in an oversupply scenario. Ahmedabad witnessed maximum price correction of 4-8% across majority of the markets for both mid-end and high-end segments in Q3.
AHMEDABAD
After a slow start in the first half of the year, the launch activity seems to have picked up in Ahmedabad, with 2,100 units launched in Q3 2013. This was an increase of 41% q-o-q and exceeded the total number of launches during the first half of the year. Despite the sluggish market, significant pick up in the launch activity over the last two quarters could majorly be attributed to the fact that some planned projects can no longer be delayed further.
To generate demand, developers are resizing their projects to match the ticket size. As a result, the city witnessed launch of 1BHK units with an average size of around 650 sf and 2 BHK apartments sized between 820 to 1,150 sf this quarter. 51% of the launches in this quarter were in the affordable segment and majority of the launches were concentrated in the peripheral areas of S.G. Highway and Bopal.
Though prices for ready residential properties continued to remain stable, new launches were priced mostly towards the lower end of the capital value range in various submarkets. Corrections were noted in many under construction properties contributing to a 4-8% decline in mid-end and high-end capital values across most submarkets the city.
However, some prominent locations in Central and Southern Ahmedabad maintained stability in capital values due to limited availability of newly constructed units in this area with stable demand. After the implementation of new GDCR mostly from Q4 2013 and the declaration of ‘Affordable Housing Zone’ of one km radius along S.P. Ring Road with Floor Space Index (FSI) of 4, the city is expected to see a rise in construction of affordable housing units with many private developers venturing into the segment.
BENGALURU
Bengaluru witnessed launch of 13,200 units, accounting for the highest share of 30% launches across top eight cities during the third quarter of the year. It was the only city to register more than 10,000 unit launches for the third consecutive quarter in the year. The mid-end segment contributed to 55% of the total launches in the city and 29% of the total mid-end segment launches across top eight cities during Q3 2013. Despite the higher number of launches, the mid-end segment saw an appreciation of 5-12% in the capital values across select sub markets.
This was been primarily due to the growing demand of residential units in proximity to IT hubs and the paucity of new launches in certain central areas of the city. Majority of the launches in mid-end segment were concentrated in areas like Sarjapur Road and Bannerghatta Road in the South, Whitefield in East and Yelahanka and Jakkur in the North of Bengaluru.
Though the affordable segment contributed to nearly 31% of the total launches for Bengaluru, it amounted to 44% of the launches in top eight cities during the quarter. Affordable launches were concentrated in peripheral areas of North and West owing to the availability of land parcels and expected ease of connectivity due to ongoing and proposed infrastructure initiatives in these submarkets. Areas like Mysore Road in West and Jalahalli in North witnessed majority of launches in this segment.
The substantial number of launches in the affordable and mid-end segment across the city indicated the diversity and availability of residential properties to suit the needs and budgets of different consumers. The city also saw nearly 1,800 units being launched in the high-end segment, a 19% increase q-o-q. High-end projects during the quarter were mostly concentrated in Eastern areas of Whitefield having a sizeable chunk of expat population while the two luxury projects launched in Q3 were located in prime Central submarket.
The city also witnessed an appreciation of 40-80% in the new guidance values released by the State Government in August. The inherent demand for residential spaces across the city coupled with the rising aspirations of the local population and the growing migration of working population due to the IT sector dominance in the city have contributed to this rise.
Going forward, Eastern and Southern submarkets are expected to witness good launch activity. The high-end capital values are expected to remain stable while mid-end capital values in Eastern, South-eastern and South-western submarkets might witness a slight upward bias due to continued demand for mid-end residential properties.
CHENNAI
Chennai continued to witness an upsurge in the number of new launches for residential units in Q3 as more than 4,100 units were launched during this quarter.. 94% of these launches were contributed by the mid-end segment, followed by 4% in affordable and the remainder in the high-end segment. Compared to the last quarter, the high-end segment registered a decline of 41% in the number of new launches in Q3 2013.
Most mid-end segment launches were either 2 BHK configurations of 850 – 1,100 sf or 3 BHK units of 1,150 – 1,700 sf. Rajiv Gandhi Salai contributed to nearly 50% of the launch activity during the quarter followed by approximately 10% in Grand Southern Trunk Road. Other locations like like Mylapore, T. Nagar and R.A. Puram also witnessed new launches in high – end segments. Majority of these new launches were concentrated in the peripheral areas due to easy availability of land and sufficient potential for future development.
Though overall capital and rental values remained stable over the quarter across micromarkets, few developers in locations like Mogappair, East Coast Road, Egmore, T. Nagar and Rajiv Gandhi Salai increased prices for their under construction projects due to higher demand. More than two-third of the nearly 1,180 units delivered this quarter were from the mid-end segment and were located in areas like Grand Southern Trunk Road, Rajiv Gandhi Salai, Velachery and T. Nagar. Chennai
It is expected that the next quarter will witness the completion of 6,000 under construction units which will infuse new residential supply in the market. This infusion of space is not expected to affect the capital and rental values which are anticipated to witness little or no movement in the coming months.
HYDERABAD
Hyderabad witnessed launch of nearly 1,945 units this quarter, a decline of nearly 56% compared to Q2 2013. Activity in the residential market contributed to be sluggish with Hyderabad contributing to only 4% of the total launches across top eight cities. Mid-end segment contributed to more than half of the total launch activity in the quarter with Kukatpally witnessing maximum activity in the segment.
Most of the launches in the mid-end category were 2 to 3 BHK units of 850 to 2,450 sf. Affordable segment contributed to 33% of the total demand followed by high-end segment at 11%. Shamirpet and Banglaguda contributed to the total launches in the affordable segment during the quarter and a villa project of size greater than 4,000 sf in Gachibowli led to the total share of unit launches in the high-end segment.
Amidst the sluggish market and existing political scenario in the city, capital and rental values remained stable across segments during the quarter. The capital values are expected to remain stable in the coming quarter amidst the cautious buyer sentiment prevailing in the market. Going by the trend, launch activity in the coming quarters is expected to be mainly concentrated in the mid segment category mostly in the north western quadrant of the city due to its proximity to major commercial locations.
KOLKATA
Kolkata continued to be a cool market for residential real estate activity accounting for only 4% of the launches amongst top eight cities, at par with Hyderabad. City witnessed nearly 1,800 launches in Q3, which was at par with the normal activity in the market. These launches were a decline of 21% as compared to Q2 and a rise of 14% in year-to-date (YTD/till Q3) comparisons over the previous year.
Mid-end segment continued to dominate the launch activity with 56% market share. Majority of the launches in the segment were concentrated in the peripheral areas of Sonarpur, Narendrapur in the Southern submarket and Barasat, Sodepur and Madhyamgram in the Northern submarket due to availability of land parcels at reasonable rates in these areas. Mid-end segment units were mostly 2 and 3 BHK configurations of 800 to 1,650 sf.
The city over the past has seen a decent contribution of the high-end and luxury segment in the total share of launches. These two segments together contributed to 44% of the launch activity in Q3, indicating the substantial demand for such products in the city. Majority of these launches were located in the North-east and South-east submarkets.
Amidst slow transaction activity, capital and rental values remained mostly stable across the city both for high-end and mid-end segment except for a few submarkets. In the high-end segment, South-Central, South-West and Central submarkets witnessed an appreciation of 5%, 7% and 7% respectively due to new projects been launched at higher price points with increase in land acquisition costs.
Capital values for the mid-end segment in Southern submarket appreciated by 5% due to persistent demand. In the coming quarter, capital and rental values are expected to remain stable and sales unlikely to witness any major improvement. North-east submarket and peripheral areas in South are likely to contribute significantly to launch activity in Q4 due to scheduled launches of a few large group housing projects in the mid-end segment.
MUMBAI
Mumbai witnessed approximately 7,200 unit launches in Q3 2013. Though this was a decline of nearly 34% q-o-q it was an increase of 19% for the first three quarters of the year, and was at par with the average number of quarterly launches in the city over the past two years. The decline in launches over Q2 could mainly be attributed to slow sales in the market and the delay in regulatory approvals, as a result of which Q4 might witness a slight increase in launch activity. Panvel in Navi Mumbai contributed to 64% of these unit launches in Q3 with major contribution from a single large project.
Central Suburban areas like Mulund, Powai and Wadala contributed to 13% of the launches followed by Thane at 10% contribution. Mid-end segment contributed to nearly 64% of the launches during the quarter followed by high-end segment at 36%. High-end segment launches were mostly concentrated in areas like Wadala, Powai and Thane.Rental and capital values remained mostly stable q-o-q except for high-end segment in South Central areas like Lower Parel and Worli which witnessed a decline of 2% over Q2.
Rental yields have witnessed a decline over the last year due to an increase in capital values by 20-25% against stable rentals over the year. To cater to the demand generating segment, many developers downsized their projects to two BHK configurations of average 1,150 sf contributing to reduction in overall ticket size in South and South Central Mumbai.
The low transaction activity coupled with the spurt in demand is expected to exert a downward pressure on capital values next quarter. Rental values are expected to remain stable due to stable demand and limited availability.
NCR
NCR residential market witnessed launch of nearly 9,600 units in Q3 at par with the number of units launched in Q2 and contributed to 22% of the total launches across top eight cities. Affordable, mid-end and high-end segment contributed almost equally to the total launch activity during the quarter.
NCR recorded the highest contribution of 33% to the high-end launch activity among eight major cities of India during Q3. Majority of the high-end launches were located in Gurgaon while the affordable units were concentrated in Noida. Noida and Greater Noida together contributed nearly 55% of the total number of units launched whilst Gurgaon accounted for 44% during the quarter.
The capital and rental values for mid-end segment remained stable q-o-q. Due to pile of inventory and cautious buyer sentiments prevailing in the market amidst sluggish sales, the rental and capital values for high-end properties in Gurgaon declined by 3-12% over the last quarter. The city has seen reduction in investor activity with most enquiries generated by end users due to high gestation period of return and price points.
In the coming quarters, the rental and capital values are expected to remain stagnant in Delhi and Gurgaon submarkets due to cautiousness among buyers, most of which are anticipating notable price correction. . However, areas in Noida, Greater Noida and those located along the Yamuna Expressway might witness an upward revision in capital values due to recent hike of 10-25% in the circle rates.
PUNE
Nearly 3,850 units were launched in Pune this quarter out of which two-third were contributed by the mid-end segment and rest by high-end segment. Amidst sluggish sales, piling up inventories and soaring construction costs, the launch activity witnessed a decline of nearly 13% q-o-q as developers adopted a wait-and-watch approach.
The NH4 Bypass (North) stretch comprising of areas like Balewadi, Hinjewadi, Wakad, etc. in continuation of the trend witnessed last quarter dominated the launch activity this quarter too for the mid-end segment due to continuous demand from working population in the nearby IT sector dominated commercial areas.
High-end launches were concentrated in NH4 Bypass (North) and North-East submarkets. Kharadi and Wagholi in North-eastern submarket also contributed to nearly 29% of the launch activity in the city during the quarter. 2 BHK configurations of 850 to 1,650 were mostly favoured by developers.
Capital values remained stable across segments during the quarter despite a slowdown in sales. Rental values continued to remain stable across most of the submarkets but saw a minor appreciation of 2% each in mid-end segment for East (Hadapsar, Manjri, Mundhwa) and NH4 Bypass (North) submarket due to higher demand from IT population.
In the coming months, the market activity and capital and rental values are expected to remain at par with the current trends despite the upcoming festive season and any discounts by developers. Majority of the construction/launch activity will be concentrated in peripheral areas like Ravet, Balewadi, Punawale along the NH4 Bypass or in proximity to industrial hubs around Pimpri-Chinchwad, to cater to buyers looking for reasonable projects with good connectivity.
