Prices of residential properties in eight major cities of India have seen a major decline in the first half of the year, with eight metro cities reporting 10-year low in housing units sales, a Knight Frank India report said. "After two years of steady demand, the home sales in top eight cities of India declined by a significant 54% YoY to a decadal low of 59,538 units during H1 2020 with sales mostly concentrated in the first quarter of calendar year," the report said.
These cities -- Mumbai, National Capital Region (NCR), Bengaluru, Pune, Chennai, Hyderabad, Kolkata and Ahmedabad -- also saw sales and new launches decline 84 per cent and 90 per cent, respectively, during the April-June period amid the coronavirus pandemic. "NCR, Chennai and Hyderabad had near-zero sales during this period, while developers were forced to postpone launches across markets due to labour unavailability and the well-anticipated drop in demand," the report said.
Not just residential but office real estate market has also seen a similar trend, the report suggests. Office demand and sale was negligible in the quarter ending June; overall transactions and project completions fell 79 per cent year-on-year and office vacancy in these metros is near four-year high.
In H1 2020, office transactions declined by 37% YoY to 1.6 mnsq m, the lowest in the last 10 years. New completions were lower by 27% YoY to 1.6 mnsq m. Despite the low volume of transaction and supply, the weighted average rental for the eight cities reported a growth of 4% YoY in H1 2020 to Rs 896/sq m/month, the report said, adding that information technology dominated with 43% of the overall sector-wise transactions in the Indian office market.
Shishir Baijal, Chairman and Managing Director at Knight Frank India, says the recovery in the residential markets is not visible in the near future. The office markets' revival will depend on the coronavirus situation. "With the economic uncertainties creating significant headwinds, we expect the office space take up to remain cautious. Most occupiers are expected to hesitate in committing to expansion in the current market scenario and may delay their leasing decisions for later. Occupiers are also devising the best formula for office occupancy for their near - term future to accommodate the impact of COVID - 19 and lockdown such as social distancing, restriction in movement etc. For the office market, it will be a wait and watch till a more permanent solution to this pandemic is found," Baijal said.
With the coronavirus cases rising every day and companies choosing to allow work from home for most of their employees, many companies are saving cost by letting go of the leased spaces. This has also resulted in a major fall of around 8.8 per cent in rentals and aggregate combined vacancy levels have risen by 14.1 per cent in H1 2020.