H1 2016, a recap

- A recovery predictedINDIA

REAL ESTATEJULY – DECEMBER 2016

CHENNAI

CHENNAIREAL ESTATE

H1 residential recap

LAUNCHES CRASH 36%, SALES FALL BY 7% YoY IN H1 2016

We further predicted a 9% fall in launches and 1% growth in sales for

H2 2016, but Chennai suffers a setback as launches & sales

tumble in H2 2016

New launches drop 18%; while sales decline by 12%

Half yearly trend in launches and sales

H2 2011 H2 2012 H2 2013 H2 2014 H2 2015 H2 2016 -

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

14,

724

16,

747

8,0

15

7,3

18

5,8

54

4,8

00

Launches

H2 2011

H2 2012

H2 2013

H2 2014

H2 2015

H2 2016

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

12,

682

14,

961

10,

424

10,

343

8,7

92

7,7

37

Sales

-18%

-12%

Overall, the city witnessed a fall in new launches –

West Chennai experiences maximum dip in share

All micro-markets except the South lose share YoY

Zone wise half yearly share of launches

Central North South West0%

10%

20%

30%

40%

50%

60%

4%

13%

29%

54%

2%

10%

52%

36%

H2 2015 H2 2016

Units launched

H2 2015 - 5850

H2 2016 - 4800

While demand slackens in the city, Central Chennai sees a

growth in share

Central micro-market sees increase in demand due to supply spike in early 2016

Zone-wise split of sales during H2 2016

Central North South West0%

10%

20%

30%

40%

50%

60%

70%

7%2%

59%

32%

11%4%

58%

28%

H2 2015 H2 2016

Sales

H2 2015 - 8790

H2 2016 - 7740

Pronounced fall in H2 2016 has pulled the annual numbers to

below 2015 performance

New launches plummet 29%; Sales witness a relatively restrained decline of 9%

Yearly trend in launches and sales

LAUNCHES

-29%

SALES

2010 2011 2012 2013 2014 2015 2016 -

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

28,

741

37,

041

37,

079

24,

846

18,

695

14,

956

10,

615

2010 2011 2012 2013 2014 2015 2016 -

5,000

10,000

15,000

20,000

25,000

30,000

35,000

19,

936

28,

013

29,

422

24,

444

20,

556

17,

882

16,

187

-9%

A little less than 2 years to offload the unsold inventory

Chennai market health – Quarters to sell and unsold inventory

Unsold inventory stands at 30,926 units

Jun-1

4

Aug-14

Oct-14

Dec-14

Feb-15

Apr-15

Jun-1

5

Aug-15

Oct-15

Dec-15

Feb-16

Apr-16

Jun-1

6

Aug-16

Oct-16

Dec-16

4.0

5.0

6.0

7.0

8.0

9.0

10.0

6.8 6.7 7.0

7.6 7.9

7.7 7.6

6.9 7.4

6.8 7.3

Impact of Demonetisation

New launches grow by 15% in Q4 2016 YoY; Sales decline by 31%Quarterly trend of new launches and sales

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 -

1,000

2,000

3,000

4,000

5,000

6,000

7,000

5,311

6,066

2,435

4,882

3,986

5,116

4,391

1,464

2,326

3,489 3,120

1,680

4,515

5,697

5,087 5,256

3,929

5,162 5,451

3,341

5,070

3,380

5,416

2,321

New Launches Absorption

No o

f uni

ts

Q4 revenue loss for both State exchequer and industry

Average # units sold in Q4 2014 & Q4 2015 4,299

# Units sold in Q4 2016 2,321

46% fall in sales

Notional REVENUE LOSS to real estate industry

INR 1,100 cr

State government notional LOSS ON STAMP DUTY

INR 50 cr

Key takeawaysLaunches go downhill, sales weaken YoY in H2 2016

Price growth could enter negative territory, especially in the premium segment

Demonetization brings residential market to a standstill

Uncertainty likely to continue for the next quarter

Reduction in home loan interest rates, RERA, GST and ‘possible’ tax benefits in the upcoming budget likely to bring in a ‘feel good factor’

among buyers

Office market

CHENNAI OFFICE MARKET SCALES NEW HEIGHTS IN H2 2016

2016 remains strong at par with 2015 transaction levels

Yearly transactions & new completion

2010 2011 2012 2013 2014 2015 20160

1

2

3

4

5

6

7

8

4.6 4.5

7.5

6.5

4.2

2.1

0.5

5.1 5.6

3.3 3.5 4.0

5.1 5.3

New Completions Transactions

H2 2016 sees transaction volumes at five-year highs; contrastingly, new completions

at a 5 year lowHalf yearly transactions & new completion

2012 H2 2013 H2 2014 H2 2015 H2 2016 H2 -

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0 4.4

3.2

2.0

1.2

0.2

2.1 2.4

2.2

3.1 3.3

New Completions Transactions

Vacancy on a steady decline with SBD at 4% - Transaction activity strong and

new completions on a constant declineHalf yearly vacancy rate

2013 H2 2014 H2 2015 H2 2016 H20.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

25.7% 24.4%

19.3%

12.4%

Vacancy

mn

sq ft

Rentals gain momentum owing to space crunch

Half yearly weighted average rental trend

2013 H2 2014 H2 2015 H2 2016 H2 42

44

46

48

50

52

54

56

47.0

49.5

51.7

54.5

Wt. Avg. Rent

mn

sq ft

IT/ITeS sector continues to hold the fort in H2 2016

IT/ITeS leads with big ticket transactions while manufacturing sector sees increase in share

Sector wise transactions

BFSI IT/ITES Manufacturing Other Service sectors0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

27%

36%

18% 19%

13%

43%

26%

18%

H2 2015 H2 2016

The OMR is the biggest gainer as both business districts on this stretch had the only viable options

available for occupiers during H2 2016Micromarket-wise transactions

CBD SBD PBD Ambattur SBD OMR PBD OMR & GST0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

9%14%

26%

20%

31%

10%13%

2%

35%

40%

H2 2015 H2 2016

% S

hare

Key takeaways

H2 2016 transaction levels hit a five-year high

New completions plummet, leading to rise in rentals in key markets

The PBD OMR and GST business district sees vacancy levels nearly halve YoY to 26% in H2 2016

Download the complete report from the link below:bit.ly/IREH216-SS