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The India Real Estate Outlook (H1 2014) our half yearly, flagship report which analyses the real estate market - office & residential; across top 6 cities in India. This version is a comprehensive one, specific to the Bengaluru market.
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BENGALURU INDIA REAL ESTATE OUTLOOK REPORT
(January – June 2014)
For queries on data, contact Sangeeta Sharma Dutta, Research
For any other query, contact Bertilda Fernandes, Marketing
Launches (units)
Absorption (units)
Weighted Avg Price (`per sq.ft.)
Jan-June 2014 35,545 -16% Y-o-Y
July – Dec 2014 (E) 36,568 1% Y-o-Y
2014 Year End (E) 72,113 -8% Y-o-Y
Jan-June 2014 27,256 -14% Y-o-Y
July – Dec 2014 (E) 32,044 26% Y-o-Y
2014 Year End 59,300 3% Y-o-Y
June 2014 4,473 11% Y-o-Y
2014 Year End (E) 4,540 6% Y-o-Y
Residential
Market Overview
New Completions (mn. sq.ft.)
Absorption (mn. sq.ft.)
Vacancy %
Jan-June 2014 3.0 76% Y-o-Y
July – Dec 2014 (E) 4.5 -18% Y-o-Y
2014 Year End (E) 7.5 4% Y-o-Y
Jan-June 2014 6.0 29% Y-o-Y
July – Dec 2014 (E) 3.8 -22% Y-o-Y
2014 Year End (E) 9.8 3% Y-o-Y
June 2014 11% Y-o-Y
2014 Year End (E) 11% Y-o-Y Office
Weighted Average Rent (` per sq.ft. per month)
Jan-June 2014 47 -4% Y-o-Y
2014 Year End (E) 48 1% Y-o-Y
Market Overview
Residential
Launches
Absorption
Bengaluru has been witnessing a
steady upward trend in absorption
and launches since 2012
While the demand for homes
increased by 13% in 2013, it is
expected to rise by a marginal 3% in
2014
The total number of units to be absorbed is expected to increase from
57,366 in 2013 to 59,300 in 2014
8000
9000
10000
11000
12000
13000
14000
15000
16000
17000
18000
Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14
No
. o
f u
nit
s
Demand & Supply Trend - 2014
Residential Market
Unsold Inventory Level - QTS
105,359 units remain unsold as of
June 2014 which will take
approximately 7 quarters to absorb
Developers have tried to adjust new launches, thus reflecting a 14% decline
during H2 2013 compared to H1 2013, and a further 2% decline in H1 2014
as compared to H2 2013
3
4
5
6
7
8
9
No
. o
f Q
uart
ers
Long term
The QTS ratio moved up by one notch since
Sept 2013, signifying a slight weakening of
buyer sentiments in the market
Residential Market
H2 2014 Forecast
Half-yearly Launches and Absorption Trend
Election results, revival of manufacturing, higher salary growth in IT/ITeS and various measures announced in the Union Budget seem to have induced a positive change in the home buyer sentiment
Sales volume to increase by 18% in H2
2014 compared to H1 2014
30
,53
7
37
,23
6
42
,15
5
36
,14
5
35
,54
5
36
,56
8
22
,93
5
27
,75
7
31
,84
4
25
,52
2
27
,25
6
32
,04
4
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
No
. o
f u
nit
s
Launches Absorption
Sales volume expected to recover
in H2 2014
Residential Market
Weighted Average Price Trend
Half-yearly Weighted Average Trend
` 4,020/ sq ft The weighted average price has
increased by 11%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
INR
/sq
.ft.
The weighted average prices are forecasted to increase nominally by
1.5 % in H2 2014 to INR 4,540/ sq. ft. on the back of a moderate recovery
in sales volume
` 4,473/ sq ft
Price levels in the city continue to
move upwards, albeit at a controlled
pace
Residential Market
N
Central M.G. Road, Lavelle Road, Langford Town,
Vittal Mallya Road, Richmond Road
East Whitefield, Old Airport Road, Old Madras
Road, K.R. Puram, Marathahalli
West Malleswaram, Rajajinagar, Yeshwanthpur,
Tumkur Road, Vijayanagar
North Hebbal, Bellary Road, Hennur, Thanisandra,
Jakkur, Yelahanka, Banaswadi
South
Koramangala, Sarjapur Road, Jayanagar, J.P.
Nagar, Electronics City, Kanakapura Road,
Bannerghatta Road
EAST
SOUTH
NORTH
WEST
CENTRAL
New Launch Analysis
Micro-Market Split of Units Launched
East and West witnessed an increase in the
share of new launches in H1 2014
0% 19%
25% 47%
9%
H1 2013
0%
23%
20% 45%
12%
H1 2014
Central M.G. Road, Lavelle Road, Langford Town, Vittal Mallya Road,
Richmond Road
East Whitefield, Old Airport Road, Old Madras Road, K.R. Puram,
Marathahalli
West Malleswaram, Rajajinagar, Yeshwanthpur, Tumkur Road,
Vijayanagar
North Hebbal, Bellary Road, Hennur, Thanisandra, Jakkur, Yelahanka,
Banaswadi
South Koramangala, Sarjapur Road, Jayanagar, J.P. Nagar, Electronics
City, Kanakapura Road, Bannerghatta Road
South consistently witnessed a
majority of new launches in both H1
2013 and H1 2014, although its share
decreased slightly in H1 2014
A preferred destination due to the
presence of several IT hubs -
Electronics City and Sarjapur Outer
Ring Road
North saw a decline of 20%
42,155 35,545
Residential Market
Ticket Size Analysis
Ticket Size of Launched Units by Micro Markets
Central East
West North
South
During H1 2014, 71% of the units launched in South were within `2.5–5.0 mn
0%
20%
40%
60%
80%
100%
<2.5 mn. 2.5-5 mn. 5-7.5 mn. 7.5-10 mn. >10 mn. >20 mn.
Majority of the locations in North have already breached the psychological price
point of `4,500/sq.ft., thereby bringing down the sales volume
Residential Market
Absorption Analysis
Micro Market Split of Units Absorbed
Locations like Whitefield and Electronics City are witnessing renewed traction since
H2 2013
Residential projects along the Outer Ring Road continue to do well
North and West observed the steepest fall in absorption due to apprehension among
buyers regarding majority of projects being located beyond established areas
0%
23%
25%
42%
10%
H1 2013
0%
26%
19%
48%
7%
H1 2014 Central
M.G. Road, Lavelle Road, Langford Town, Vittal Mallya
Road, Richmond Road
East Whitefield, Old Airport Road, Old Madras Road, K.R.
Puram, Marathahalli
West Malleswaram, Rajajinagar, Yeshwanthpur, Tumkur Road,
Vijayanagar
North Hebbal, Bellary Road, Hennur, Thanisandra, Jakkur,
Yelahanka, Banaswadi
South Koramangala, Sarjapur Road, Jayanagar, J.P. Nagar,
Electronics City, Kanakapura Road, Bannerghatta Road
31,844 27,256
Residential Market
Micro Market Health
Age of Inventory compared to QTS
Central East
West North
South
5
6
7
8
9
10
2 7 12 17
Ag
e o
f In
ve
nto
ry
QTS
Despite a large unsold inventory,
East is the healthiest with one of the
lowest QTS and the lowest minimum
age of unsold inventory
The health of East is relatively better
as the increment in unsold inventory
was matched by an increase in
absorption
Due to excess unsold inventory from projects
launched almost two years ago, South
Bengaluru’s health is the poorest
Residential Market
Price Movement
Price range in H1 2014 (per sq.ft.) 12-month change 6-month change
CENTRAL
Langford Town 15,000 - 18,000 7% 0%
Lavelle Road 21,000 - 29,000 7% 0%
EAST
KR Puram 4,000 - 6,000 12% 5%
Whitefield 4,500 - 7,500 15% 6%
Marathahalli 4,500 - 6,800 12% 5%
Indiranagar 9,000 - 12,000 8% 0%
WEST
Yeshwanthpur 6,500 - 9,500 12% 5%
Malleshwaram 9,000 - 12,000 8% 5%
Rajajinagar 8,500 - 13,500 15% 6%
Tumkur Road 3,950 - 4,500 9% 6%
Residential Market
Price Movement
Price range in H1 2014 (per sq.ft.) 12-month change 6-month change
NORTH
Yelahanka 4,500 - 7,000 13% 6%
Hebbal 5,000 - 9,000 10% 5%
Hennur 4,200 - 5,500 8% 5%
Thanisandra 4,000 - 7,000 10% 7%
SOUTH
Sarjapur Road 4,200 - 7,000 12% 5%
Electronics City 4,000 - 6,000 8% 2%
Kanakapura Road 4,250 - 5,500 10% 3%
Bannerghatta Road 4,200 - 7,000 12% 4%
Residential Market
Key Takeaways
Absorption to see a marginal increase with drop in number of new
launches by 8% to 72,113 units during 2014
Sales volume to increase by 26% to 32,044 units in H2 2014, compared
to H2 2013
The QTS ratio moved from 6 to 7 since September 2013, signifying a
slight weakening of buyer sentiment
Bengaluru market to offload its excess unsold inventory in the next 6-9
months
Residential Market
Office
Vacancy Trend
Office Space Stock and Vacancy Level
Total office stock
109.5 mn.sq.ft. Occupied
97.9 mn.sq.ft
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
20
40
60
80
100
120
Mn
. S
q.f
t.
Stock Occupied Stock Vacancy (RHS)
Bengaluru has seen consistent
absorption over the last 3 years, with
vacancy rates dropping steadily
every year
This healthy demand in the past
years has been responsible for
restricting vacancy within 11–18%
The vacancy level during H1 2014
was 11%, down from 14% in H1
2013 and H2 2013
Office Market
New Completion and Absorption
Absorption during H1 2014
was around 6 mn. sq.ft. of
leased deals, while only
3 mn.sq.ft. of new projects
were completed
4.1
3.3
1.7
5.5
3.0
4.5
6.0
3.4
4.7
4.9
6.0
3.8
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Mn
. S
q.f
t.
New Completion Absorption
The absorption in H1 2014 reflects a 23% growth over H2 2013,
and an increase of 29% over H1 2013
Office Market
H2 2014 Forecasts
Office Space Stock and Vacancy Level
The absorption in H2 2014 is
expected to slacken - Estimated at
around 3.8 mn sq ft.
Total absorption in 2014 to be 9.81
mn sq.ft which will be a 3% increase
over the total absorption in 2013
Consistent demand over the next six months will be matched by a higher increase in new
completions of 4.5 mn sq ft, thereby ensuring steady rentals
Vacancy to be constricted to 11% by the end of 2014
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
20
40
60
80
100
120
Mn
. S
q.f
t.
Stock Occupied Stock Vacancy (RHS)
Office Market
Weighted Average Rents
Weighted average rental in H1 2014
dipped by 4% and 1% compared to
H1 2013 and H2 2013 respectively,
though an improvement of 7% over
H1 2012
Appreciation of 2% projected in H2 2014 with weighted average rentals to increase from
`47 per sq.ft. per month in H1 2014 to ` 48 per sq.ft. per month
Large quantum of Grade A office space to become operational in the coming months
coupled with steady demand
30
35
40
45
50
55
60
INR
/sq
.ft.
/mo
nth
Office Market
Sectoral Analysis of Demand
Share of the IT/ITeS
sector has fallen to 54%
in H1 2014 from 71% in
H2 2013
Other services sector has
increased to 24% in H1 2014
from 13% in H1 2013 and can
be partly attributed to the rising
e-commerce sector
IT/ITeS Financial Services Manufacturing Other Services
H1 2013 64% 1% 22% 13%
H2 2013 71% 3% 12% 14%
H1 2014 54% 6% 15% 24%
Absorption in Manufacturing
has increased by 25% in H1
2014 over H2 2013, however
it lagged behind H1 2013 by
32%
Office Market
Deal Analysis
Average Deal Size and Number of Deals
H1 2014 touched the high of H1 2012 in
the number of deals transacted, though
H1 2012 had the lowest average deal
size
0
40
80
120
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014
Nu
mb
er
Sq
.ft.
Average Deal Size (Sq.ft.) Number of Deals (RHS)
H1 2013 and H1 2014 experienced
similar deal sizes
H1 2013 saw the lowest number of
deals
The average size of transactions has
increased to 71,500 sq ft in H1 2014
from 30,035 in H1 2012
30,035
71,500
Office Market
Business District-wise Analysis
Micro Market Split of Absorption
CBD and off-CBD office markets
are preferred by non-IT
companies primarily, who look for
smaller office configurations
The dearth of quality space in
CBD and SBD have led
companies to take up space in
PBD markets like Whitefield and
the Outer Ring Road (ORR),
which have large quantum of new
office space
4% 9%
71%
13%
3%
H1 2014
4%
9%
70%
16%
1%
H1 2013
ORR
SBD
PBD East
PBD South
CBD & Off CBD
Office Market
4.7 mn.
sq.ft.
6.0 mn.
sq.ft.
Business District-wise Analysis
The Outer Ring Road (ORR) from Hebbal in the North to Silk Board
Junction in the South, has emerged as the leading IT growth corridor in the
city
The ORR office market has witnessed transactions of over 5 mn sq ft till
June 2014, surpassing the other office markets and maintaining its share at
70% in H1 2013 and 71% in H1 2014
Whitefield continues to remain on the occupiers’ radar with 13% of share of
total office space absorption in H1 2014
Office Market
Business District-wise Rents
Average rental movement across different micro-markets has been relatively marginal
over the last year
Rentals remained constant for most part, witnessing changes between 1–8% during
last 6 months, and 3–9% in the last 12 months
The ORR office projects saw the highest appreciation in rentals
Business
District
Rental Value Range in H1
2014
(per sq.ft. per month)
12 month change 6 month change
CBD & Off-CBD 72 - 85 - 5% - 3%
SBD 47 - 78 3% 5%
PBD East 30 - 45 6% 5%
PBD South 30 - 45 3% 1%
ORR 45 - 55 9% 8%
Office Market
Key Takeaways
With inventory of around 109.5 mn sq. ft. Bengaluru remains one of the
most favoured office space destinations in the country
Healthy demand in the past has restricted vacancy levels within
11–18%
Jan-June 2014 saw demand from eCommerce and manufacturing
sectors
Global economic recovery has boosted in the IT/ITeS sector even
further and Bengaluru being the IT hub, will reap the benefits
Adequate supply in all markets will ensure steady rentals and consistent
demand over the next six months,
Office Market
BENGALURU INDIA REAL ESTATE OUTLOOK REPORT
(January – June 2014)
For queries on data, contact Sangeeta Sharma Dutta, Research
For any other query, contact Bertilda Fernandes, Marketing
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