india residential property market overview feb 2016

www.colliers.com/india

Residential Property Researchand Forecast Report

February 2016

INDICATORS 2014 2015 QoQ % CHANGE

²

³

Return on Alternative Investments

INDIA | RESIDENTIAL

¹SBI home loan rate for loan up to INR 30 lakhs ²SBI fixed deposit rate for a period of more than one year & amount below INR 1 crore ³Realty index is a free float weighted index, comprised of real estate development companies in BSE – 500 Index

Source: Government of India, Colliers International India Research

The general residential buyer has maintained a cautious approach in 2015, however, an increase in enquires has been witnessed towards the end of the year in select cities. We recorded launch of nearly 120,000 units across seven major cities. Despite, decrease in home loan interest rates and various incentives being offered by developers, the transaction volumes in residential real estate continued to remain on lower side across cities. One of the primary reasons of this restraint is increasing delay in the existing under construction projects, quality issues, and higher price points etc.


INDICATORS 2014 2015

¹

Economic Barometers

Economic Indicators


In 2016, overall property markets are expected to edge further into recovery. There are several factors that can be considered as key drivers for the sector in 2016, such as decreasing interest rates and boosted employment scenario due to increase office absorption. Capital values across cities are expected to remain stable due to huge supply pipeline.

Colliers View

https://twitter.com/Colliersintlind

https://www.facebook.com/Colliers-International-India-257636574287193/?ref=hl

https://www.linkedin.com/company/colliers-international-india?trk=biz-companies-cym

https://www.youtube.com/watch?v=Vb1SL54DJCo&index=1&list=PLc6nW60zbFzUhOG2JHzXnQ-HpObNrvyyi

Overall the residential market in Mumbai has seen a slight recovery towards the end of the year, which is evident in the increased number of enquiries. However, the transaction volume has not picked up much. In the primary market, the sales were majorly driven by the mid-range and affordable projects located in Western Suburbs and peripheral areas of Mumbai. In the secondary market, a few premium residential apartments were bought by celebrities and industrialists in South Mumbai and Western Suburbs. On the supply side, due to high unsold inventory levels and overall lower transaction volumes, developers remained cautious in launching new projects. Moreover, an uncertainty loomed over the Mumbai development plan 2034. We recorded, the launch of approximately 35,000 new units this year, which was about 40% less than the last year’s new launches. In the premium residential category, majority of the projects were launched in micro markets such as Worli, Prabhadevi, Bandra West and BKC Annexe, in the price range of INR 23,500 - 27,300 per sq ft. ; in the mid-segment projects were launched in locations such as Kandivali (E), Kanjurmarg (E), Goregaon (E), Thane, Borivali, Vikhroli, Bhandup and Chunabhatti, in the price range of INR 10,500 – 15,000 per sq ft; peripheral markets of Thane and Navi Mumbai witnessed project launches in the range of INR 4,000 to 7,000 per sq ft.

Market Indicators

Relative to prior period 2014 2015 2016F 2017F

Capital Value

New Projects

Project Completions

MICRO MARKETS CAPITAL VALUES* (INR Per sq ft)

% CHANGE

QoQ YoY

Market Trends

* Indicative asking price for premium properties in secondary market

MUMBAI | RESIDENTIAL

Source: Colliers International India Research


Rental Value





During 2015, only a few premium projects were

completed in Bandra East and Prabhadevi locations

during the year.

Despite lower transaction volumes, the capital values in

secondary market increased by 6% YoY across major

micro markets, barring few locations such as Breach

Candy, Napeansea Road, Peddar Road, where capital

values remained stable during the year.

In 2015, the city witnessed various private equity

transactions such as Altico Capital, IIFL Real Estate Fund

and Primal Fund have invested in premium residential

projects located in Mazgaon, Chandivali and BKC micro

markets respectively. Apart from this, in major land deals,

Wadhwa Group bought 6.5 acres from Gopal Narang and

Rajan Raheja and Tata Housing Development acquired a

7 acre plot from KEC International located in Pokharan

Road 2, Thane.

Average Capital Value Trends


Average Rental Values

Colliers View

In primary market, while absorption in the luxury

segment is expected to remain under pressure due to

high price points, the pre-launches in the mid and low-

end segments will continue to witness traction at the

induction prices. In the secondary market, premium

locations continued to remain in demand including,

South Mumbai, Prabhadevi, Lower Parel, Parel, Juhu

Andheri and Bandra. Overall capital values are

expected to increase marginally in select micro

markets in the mid term.

Project Name Location Developer Name Tentative

Possession*

Rate

(INR Per Sq ft)**

Select New Projects Launched in 2015

Research & Forecast Report | February 2016 | <<India>> | Colliers International



Notes:

* As mentioned by developer or secondary market sources

** Base Selling price as quoted by developer’s website or secondary market sources

^ Base Selling price varies for different configurations

Market Indicators


Capital Value

New Projects

Projects Completed

MICRO MARKETS CAPITAL VALUES* (INR per sq ft )

% CHANGE

QoQ YoY

Market Trends

Delhi | RESIDENTIAL


Following the last year’s trend, prime residential market in Delhi remained lack luster in 2015, transaction volumes for prime residential properties remained low in both primary and secondary market. In the primary market, only a few small-scale projects were launched by local level developers in premium locations such as Vasant Vihar, Westend, Jorbagh and Anand Niketan. These projects are currently in the range of INR 45,000 – 65,000 per sq ft. Apart from this, we have seen initial level of activities in newly developing L- Zone under land pooling policy. This area has started developing high interest levels among buyers due to the affordability and address of Delhi. On the supply side, the city witnessed completion of a few small-scale residential redevelopment projects such as ‘Metro Buildtech’, ‘Windshield’, ‘ Uppals’, ‘ Salcon’ and ‘Sanskar Homes’ were ready for possession in Shanti Niketan and Vasant Vihar micro markets. The preference of top executive of embassies and large MNCs to stay near their offices located in secretariat zone, kept the leasing market upbeat. The micro markets such as Defence Colony, Vasant Vihar, Chhatarpur, Diplomatic Enclave, Malcha Marg, Jorbagh, Safdurjung Enclave, Westend and Shanti Niketan were the most preferred micro markets this year.

Rental Value

* indicative asking price for premium properties in secondary market






Colliers View





In 2016, we anticipate a stable scenario in Delhi, with

less new prime projects expected to launch. Capital

values are expected to remain stable in most of the

micro markets, except Vasant Vihar, Greater Kailash,

Westend where few redevelopment projects will

command a premium over the prevailing market rates

due to their newly build configuration and amenities,

like car parking and open area. Rents will remain under

pressure and landlords will be more accommodating in

lease terms in order to retain current tenants and

secure new ones.

On a yearly basis, capital values for prime residential

properties declined in most of the micro-markets barring

few premium micro markets such as Prithviraj Road,

Aurangzeb Road, Chanakya Puri, Golf Links, Jor Bagh,

Sunder Nagar, Shanti Niketan and Westend, where

capital value increased on an average by 7% YoY. Also

rents remained under pressure this year and posted a

average 2% YoY decline.

In a major policy level change, under review of Master

Plan of Delhi 2021, the Ministry of Urban Development

has approved a proposal to allow building residences in

hotels in Delhi. After this change get approved by the

Development Control Regulations for Commercial

Centers, Hotels will be allowed to use up to 40% of the

floor area ratio for commercial offices, retail and

residential purposes. However residential units, can be

built only on 20% of the FAR.


Possession*

Rate

(INR Per Sq ft)**

Select Ongoing Projects of 2015



Notes:


** Base Selling price as quoted by developer or secondary market sources



% CHANGE

QoQ YoY

Market Trends

Gurgaon | RESIDENTIAL

2015 remained a dull year for Gurgaon residential market. Transaction volumes and number of new launches both have declined, as the investors choose to remain at bay in anticipation of further decrease in prices. In view of the reduced demand, the city has witnessed launch of a little over 10,000 new units this year, which was about 45% less than the last year. A majority of these projects were launched in micro markets such as Sector 53, Sector 79, Sector 88A & B and Sector 68, in the price range of INR 6,000 – 6,600 per sq ft. ; in Sector 85 and Sector 92 in New Gurgaon, the projects were launched in the price range of INR 4,400 – 5,500 per sq ft. A few projects were also launched in Sohna Region, a newly developing sector, in the affordable range of INR 2,600 to 3,600 per sq ft. In the primary market, the sales were primarily concentrated in New Gurgaon Sectors such as Sector 69 – 73 towards south and Sectors 81 to 95 in west, also some traction was observed in upcoming Sohna region. Apart from this, the projects launched under affordable housing projects scheme in the last two years have observed decent absorption. There are a number of projects lying ready at Dwarka Expressway and New Gurgaon Sectors. Due to connectivity issues the area still has to see proper habitation. However, we noticed, end-users started living in few sectors adjoining NH-8 in new Gurgaon.

Market Indicators


Capital Value

New Projects

Project Completions


Rental Value







On the leasing side, Golf Course Road and M G road

remained as the most preferred locations by expats of

various MNCs and large corporates, mainly due to better

connectivity and availability of premium residential space at

best prices.

This year, the State government has come up with the New

Integrated Licensing Policy (NILP). In this policy, the

government introduced the concept of Transferable

Development Rights (TDR) for the first time in Haryana.

This policy is expected to unlock land in the existing sectors

in Gurgaon and will allow farmers or land owners with small

piece of land to voluntarily monetise their land at current

market price.

The capital values on an average posted a decline of 1%

on yearly basis, however, a few locations such as Golf

Course Road and NH 8 increased by 2 – 7% YoY.



Average Rental Values Colliers View

In 2016, we expect investors and occupiers will relook

at the residential real estate sector and transaction

volumes to grow from the current levels. This will be

backed by various infrastructural upgrades happening

across the city and the Government initiatives like

Haryana Global Investment Summit, which is further

expected to infuse foreign investment in the city.

Segment wise, mid-range and affordable schemes

projects will continue to see traction . Capital values are

expected to remain under pressure in emerging

locations like New Gurgaon, SPR and Dwarka

Expressway, due to huge supply pipeline; while Golf

Course Road, DLF phase micro market, Sohna Road

and other micro markets are likely to remain stable in

mid term.


Possession*

Rate

(INR Per Sq ft)**





Notes:





% CHANGE

QoQ YoY

Market Trends

NOIDA | RESIDENTIAL

Market Indicators


Capital Value

New Projects

Project Completions


Rental Value

2015 started on a cautious note when due to National Green Tribunal’s (NGT) order several completed projects which were awaiting possession could not get occupation certificate from the authority within the eco-sensitive zone around the Okhla Bird Sanctuary. The investor sentiment has abated towards the end of the year where the NGT issue got resolved. The decision has put a ray of hope for buyers as well as developers whose projects were stuck along the Noida Expressway. Despite the resolution of the NGT issue in the later half of 2015, only a handful of new projects were launched towards the end of Noida Expressway. The city witnessed launch of only 6,300 units this year, which was about 36% less than the last year’s new launches. Micro market wise, a few premium projects were launched in sector 128 and 132, in the price range of INR 8,650 – 9,090 per sq ft. In the mid range category, projects were launched in newly developing Sector 150 which is located on NOIDA Expressway and in Sector 79. These projects were priced in the range of INR 4,000 – 4,600 per sq ft. All of these projects are expected to complete in 2019 – 2020. During 2015, various mid segment projects were completed in micro markets like Sector 74, 75, 76, 78 and 137. These were priced in the range of INR 4,400 - 6,000 per sq ft in the secondary market.







Low sales transaction volumes has impacted the capital

values in the secondary market for under construction

projects and deals were available on discount in select

projects. However, sectors such as Sector 100 to 110

and Sector 70 to 79 witnessed an average increase of

4% YoY due to completion of a few residential projects.

In 2015, NOIDA authority has hiked the circle rates by 5 –

10%. With this, Sector 15A and Sector 44 have become

the costliest sectors with a circle rate of INR

90,500/Sq.mtr., which was earlier INR 86,000/ Sq.mtr.

This year private equity fund ICICI Prudential made an

exit from Logix Blossom Green for about INR 62 crores

and invested INR 130 crore in ATS Infrastructure villas

based projects located in Sector 150. Apart from this,

Supertech Ltd. has raised INR 100 crore from Indiabulls

Real Estate Fund to develop its various projects located

in Delhi NCR region.




Colliers View

The market is likely to regain momentum only if, it sees

completion of projects as expected; falling interest

rates, coupled with an upbeat economic backdrop,

which will support the overall sentiments. We expect

the completion of a number of projects along NOIDA

Expressway and Sector 70 to 79. Huge upcoming

inventory will continue to put pressure on capital

values. Rents are also likely to come under pressure

due to increased supply in the market.


Possession*

Rate

(INR Per Sq ft)**





Notes:




In 2015, Chennai’s residential property market showed signs of demand revival as enquiries for micro markets such as Velachery, Sholinganallur and Mount-Poonamallee High Road (MPR) gained momentum. Demand from end-users concentrated primarily for projects nearing completion or available for immediate possession. However, developers refrained from introducing any new schemes as they waited for fence-sitters to rethink home purchasing decisions with the arrival of the new year. Select micro markets faced a momentary dip in capital values in the aftermath of recent floods. Nearly 12,000 new units were launched in 2015 as several locations along Old Mahabalipuram Road (OMR) witnessed launches in mid segment. Almost 40% of total units launched in 2015 were concentrated in the post-Sholinganallur toll plaza belt consisting of locations such as Kelambakkam, Navalur and Padur. Most projects launched in this belt were in the price range of INR 3,500 – 5,000 per sq ft. More than 95% of total units launched in 2015 catered to the mid-end segment indicating the change in developer’s product segmentation owing to the demand in this category. Nungambakkam and Kotturpuram witnessed limited launches in high-end segment in the price range of INR 14,500 – 21,000 per sq ft.*

Market Indicators


Capital Rate

New Projects

Construction

Rental Rate

MICRO MARKETS CAPITAL VALUES* (INR Per sq ft )

% CHANGE

QoQ YoY

Market Trends

CHENNAI | RESIDENTIAL








Limited number of ready to move in units came to the

market as only a handful of projects witnessed

completion in locations such as GST Road, Porur,

Navalur and Thoraipakkam amongst others. Prominent

high-end completions included “Atlantic” by Ceebros

(Egmore) and “Luz Amor” by Appaswamy Real Estates

Limited (Mylapore) both of which offered units in the price

range of INR 14,000 -16,000 per sq ft.

Capital values in Nungambakkam and Adyar dropped by

9-15% as landlords/developers reduced pricing to attract

buyers for these premium locations. Capital values in

Sholinganallur, Besant Nagar and Alwarpet, too,

witnessed an annual 2-3% downtick due to dwindling

demand and low enquiries. Rental values in Adyar and

Besant Nagar dipped by 17% annually from peak values.

Corporation of Chennai has finalized T Nagar for “Smart

City Challenge Mission Proposal”. This may push capital

values upwards as the project aims to decongest and

resolve traffic and parking woes for residents.

Colliers View

Demand for residential real estate is expected to remain

stable during the first half of 2015 due to the upcoming

Tamil Nadu Assembly elections. However, the second

half of 2016 may witness demand revival owing to the

impending budget and positive macro economic

indicators. Expansion by corporate occupiers and

strengthening office leasing coupled with fast-tracking of

Metro Rail Phase II construction may give a fillip to

residential pockets along these corridors. Micro markets

such as Nungambakkam and Alwarpet/R A Puram may

witness moderate capital value appreciation due to

steady demand over the year. Rental values are

expected to remain stable in 2016.






Possession*

Rate

(INR Per Sq ft)**


Notes:






During 2015, Bengaluru’s residential property market witnessed the launch of nearly 22,000 new residential units. Nearly one third of the total units launched were concentrated in the southern and south-eastern belt comprising locations such as Sarjapur Road, Electronic City and Bannerghatta Road. All launches in these locations catered to the mid segment category as developers launched new projects due to increased enquiries from both end-users and investors. Additionally, the high office absorption by IT-ITeS sector is another factor which boosted the demand for new residential supply near these prime commercial hubs. Locations in North Bengaluru, such as Hebbal, Hennur Road and Thanisandra Road accounted for 15% of total launched this year, out of which 70% belonged to the mid segment category. Hebbal witnessed the launch of a high-end township from a reputed developer comprising more than 1000 units in totality. Projects in mid segment were launched in the range of INR 3,900 – 6,500 per sq ft and are expected to complete by 2018. Prominent project completions in 2015 included, Nitesh Ceasers Palace on Kanakpura Road and Purva Midtown Residences on Old Madras Road. Both these projects cater to mid segment apartment formats.

Market Indicators


Capital Rate

New Projects

Construction

Rental Rate


% CHANGE

QoQ YoY

Market Trends

BENGALURU | RESIDENTIAL








Capital values in Sadashivnagar appreciated annually by

14% annually due to lack of land parcels for future

development. Kormangala and Bannereghatta Road too

witnessed an uptick of 3-4% in capital values due to

availability of good social infrastructure and connectivity

to various IT parks. Rental values remained stable across

micro markets.

Bangalore Metro Rail Corporation (BMRCL) is planning

to raise INR 12,000 crore from domestic and foreign

financial institutions to fund the second phase of Metro

project. Phase II will include both extension of current

route as well as two new lines between RV Road -

Bommasandra and between Gottigere - Nagawara. For

the second phase, the corporation has also started land

acquisition on Mysore Road, Kanakpura Road and

Whitefield for extension of east-west and north-south

corridors.

.

Colliers View

Availability of quality residential products coupled with

steady demand from end-users and investors, will auger

well for the residential sector in 2016. Emerging micro

markets in North Bengaluru such as Hebbal, and

Thanisandra Road coupled with Panathur-Varthur Road

in eastern quadrant of the city are expected to lead the

influx of new residential supply. Whitefield, Outer Ring

Road and Sarjapur Road will continue to witness high

residential demand. Capital values in these locations

may appreciate marginally over the year. However,

capital values in other micro markets may remain stable

due to availability of abundant supply in both primary

and secondary markets.






Possession*

Rate

(INR Per Sq ft)**


Notes:






% CHANGE

QoQ YoY

Capital Values

PUNE | RESIDENTIAL

Market Indicators


Capital Value

New Projects

Project Completions




Rental Value

Year 2015 concluded on a cautious note in Pune, especially from the sales side. The transaction volumes declined, and there was a marginal decline in new launches as well. Premium projects were unable to attract buyers this year and large share of overall transaction volume was contributed by mid range and affordable category projects. Micro markets such as Baner, Hinjewadi and Wakad have witnessed good traction. An increased office uptake from IT/ITeS occupiers and improved connectivity via Mumbai Pune expressway made a strong case for West Pune micro markets for residential properties. This year about 32,000 new units were launched, which was about 4% less than the last year’s new launches. In the premium residential category, majority of the projects were launched in micro markets such as Koregaon Park, Sopan Baug, Baner and Kothrud in the price range of INR 9,000 - 16,000 per sq ft. ; in the mid-segment projects were launched in locations such as Kharadi, Hinjewadi, Viman Nagar, Wakad, Tathawade, NIBM and Mundhwa, in the price range of INR 5,000 – 8,000 per sq ft. Emerging locations such as, Dhanori, Undri and Tingere Nagar witnessed project launches in the range of INR 4,000 to 4,700 per sq ft.





This year a number of mid range projects saw completion

located in Hadapsar, Kondhwa, Balewadi, Baner, Pisoli,

Wakad, Sus, Undri, Handewadi, Mohammadwadi,

Wanwarie, Pimple Nilakh and Pimple Saudagar micro

markets.

The capital values on an average posted a decline of 3%

on a yearly basis, however, a few micro markets like

Magarpatta, Hadapsar, Baner, Hinjewadi, Wakad,

Pashan, Kothrud, Bavdhan and Wajre were remained

stable.

In 2016, Pune witnessed various private equity

investments and exits such as, HDFC PMS exited from

seven projects; various projects of Marvel Realtors and

ASK Property Investment Advisors exited from two

residential projects in Pune, namely ‘Serano’ by Amit

Enterprises at Baner and ‘Skyone’ by Paranjape

Scheme's at Model Colony. Apart from this, in an

another transaction, Xander Advisors India has invested

around INR 280 crore in Kumar Urban Development’s

residential proposed project at Karve Road in central

Pune.




Colliers View

We expect, increased demand in residential market in

2016. The strong office uptake from IT/ITeS sector in

2015 is expected to bring more employment to the city

and will result in demand creation for the residential

properties. Developers will continue to supplement

demand via launching more new projects and

completing their existing ventures. Capital values are

likely to remain stable in almost all the micro markets,

due to huge supply in the pipeline.


Possession*

Rate

(INR Per Sq ft)**





Notes:




About Colliers International

colliers.com

67 countries on 6 continentsUnited States: 140 Canada: 31 Latin America: 24

199 EMEA: 108

$2.3billion in annual revenue

1.7billion square feet under management

16,300professionals

Colliers InternationalTechnopolis Building, 1st Floor, DLF Golf Course Road, Sector 54, Gurgaon - 122 002TEL +91 124 456 7500

502

2016

Primary Authors:

Surabhi Arora Associate Director | Research [email protected]

Sumit JainNational Director | Residential Services & Corporate [email protected]

[email protected]

Arvind KapoorDirector |India Operations, Residential [email protected]

Sachin Sharma Manager | [email protected]

Divya GroverSenior Manager | [email protected]

Amit Oberoi National Director | Valuation & Advisory Services & Research

For Residential Services:



