INDIA REAL ESTATE OVERVIEW

PROPERTY INSIGHTSIndia Quarter 4, 2019

Introduction

Economy

The Indian economy grew by 4.5% during the July-September quarter, slowing further from the 5.0% growth recorded in the

previous quarter. The economy continued to decelerate since reaching a peak growth rate of 8.2% in Q1 FY 2018-19 due to weak

private consumption, anemic investment demand and manufacturing contraction. Agriculture growth remained tepid and the

vulnerable external demand conditions adversely affected exports. However, growth in key service industries such as tourism,

transport, financial and professional services held up. A 15.6% growth in government expenditure cushioned the economy

amidst slowdown in other sectors. Growth in private consumption recovered marginally to 5.1% in the second quarter of the

current financial year, compared to 3.1% in the previous quarter. Gross fixed capital formation (GFCF), a measure of investment

demand, expanded by just 1.0% compared to a growth of 4.0% in the previous quarter. Retail inflation moved up from 3.2% in July

to 3.9% in September due to higher food prices but remained within the RBI’s target rate of 4%. Industrial output witnessed a

sharp contraction of 4.3% in September, compared to a 4.6% expansion in the same period of the previous year, due to a sharp

deceleration in manufacturing, including in capital goods and consumer durables.

Acknowledging the ongoing economic slowdown, the Reserve Bank of India (RBI) revised its GDP forecast for FY 2020

downwards from 6.1% in the October policy review to 5.0% at present. Muted private consumption and manufacturing

activity, along with the weak global economy might have an adverse economic impact in the short term. However, gradual

economic recovery is expected in the second half of 2020 due to various government initiatives. Recapitalization of banks

and liquidity support to non-banking finance companies (NBFCs) will improve lending to industry, including real estate.

Creation of a ‘Special Window’ Fund for stalled affordable and mid-segment housing will facilitate faster recovery of the

stressed housing sector. Lower corporate taxes and interest rates will incentivize fresh manufacturing investments. Higher

public infrastructure spending will support economic activity and job creation.

Introduction

GDP growth rate & Repo Rate

POLICY UPDATES

GDP Growth Repo rate

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: World Bank, RBI

Note: GDP numbers for Q2 2019 correspond to the July - September quarter

Q12019

Government unveils fund for stalled residential projects

In November 2019, the government announced that a ‘Special Window’ Fund of INR 250 billion will be created to

finance completion of stalled housing projects. The government will contribute INR 100 billion with banks and the

Life Insurance Corporation (LIC) contributing the remaining INR 150 billion. The Fund will also cover projects

which have become non-performing assets (NPAs) and are facing bankruptcy proceedings, i.e. NCLT projects,

provided these projects have positive net worth.

Funding will be available for stalled affordable and mid-income housing projects across India, but city and

developer-specific caps will be imposed. Projects will be screened depending on their risk profile and other

criteria. Preference will be accorded to RERA registered projects which are very close to completion. The new

Fund is expected to provide crucial liquidity support to the housing sector and enable completion and delivery of

projects to homebuyers over the next few years.

RBI Monetary Policy review

The Reserve Bank of India’s Monetary Policy Committee reduced the repo rate by 25 bps in the October policy

review meeting and kept policy rates unchanged in the subsequent December review. The repo rate currently

stands at 5.15% and the central bank has maintained its accommodative stance with a possibility of further rate

cuts depending on economic developments. Flagging concerns about the sharp economic slowdown, the RBI cut

the growth forecast for FY 2019-20 to 5.0% in the December policy review compared to 6.1% in the previous

review. At the same time, the upward trajectory of retail inflation and breach of the 4% target inflation rate

impeded any repo rate cut in December. Inflationary pressures will continue to be monitored going forward.

Q22019

Introduction

Despite a 135 basis points (bps) reduction in the repo rate in 2019, the transmission mechanism of lower interest

rates has been relatively slow. For instance, transmission of the cumulative repo rate cuts over February – October

this year currently stands at 44 bps on fresh rupee loans. However, bank lending rates are expected to fall further

due to implementation of the external benchmarking system for new floating rate loans. Most banks have already

linked their lending rates to the repo rate, and this will lower home loan rates over the next few quarters. Cheaper

loans will drive demand for new apartments and spur revival of the housing sector. The RBI has also stated that

monetary and fiscal policies must work in tandem to boost economic growth. To this effect, announcements in

Union Budget 2020-21 will provide further clarity on the government’s policy direction.

Real Estate ‘Special Window’ Fund– Impact on the Housing Sector

In a major development for the real estate sector, the government has announced the creation of a ‘Special

Window’ Fund to finance completion of stalled housing projects. The announcement carries significant

importance given that residential sales and prices have been stagnant across the country. Housing projects have

suffered from a prolonged liquidity crisis with banks cutting back loans and lending from non-bank finance

companies (NBFCs) falling sharply in 2019. The new Fund is a welcome step to open the liquidity tap and make it

easier for the housing sector to access financing going ahead.

The new announcement comes on the back of previous measures which provided additional liquidity support to

banks and housing finance companies (HFCs) and made cheaper home loans available for new homebuyers. The

salient features of the new Fund are:

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

A ‘Special Window’ Fund of INR 250 billion to provide last mile funding to developers for the completion of

stalled residential projects

The Fund will be professionally managed by SBICAP Ventures and the government will contribute INR 100

billion out of the total corpus

Banks and Life Insurance Corporation (LIC) will contribute INR 150 billion

The projects must be RERA registered and very close to completion

The Fund will also finance stalled housing projects which have turned into non-performing assets (NPAs) and

are undergoing bankruptcy resolution (NCLT projects)

NPA and NCLT projects must have positive net worth to receive funding

Around 90% of the stalled housing projects fall in the affordable and mid-income housing category. This implies

that proper resolution of the liquidity challenges in the sector can lead to a virtuous cycle of higher consumer

demand, housing sales and price appreciation. The new Fund seeks to achieve this objective but in a calibrated

manner by prioritizing projects which are RERA registered and can be completed soon.

Industry estimates show that, currently there are around 1509 stalled housing projects comprising 458,000

housing units. This clearly implies that the new Fund will not be able to finance all projects and eligible projects will

have to be screened properly depending on the project risk profile. However, the Fund will help money to circulate

within the sector as and when some projects get completed. Over time, access to finance will get easier and revival

will gain momentum. The key parameters for project selection are:

Eligible stalled projects in the affordable and mid-income housing sector

Housing units should not exceed 200 sq.m carpet area

Housing units priced upto INR 20 million in Mumbai Metropolitan Region, upto INR 15 million in Delhi NCR,

Chennai, Kolkata, Pune, Hyderabad, Bengaluru, Ahmedabad and upto INR 10 million in rest of India

Maximum funding for any single project will be INR 4 billion with caps for a single developer and any single city

Fund will drive housing sector revival

Inclusion of net-worth positive NPA and NCLT projects in the Fund is welcome news for thousands of homebuyers.

It may be noted that in a previous announcement in September 2019, NPA and NCLT projects were excluded from

ambit of the Fund.

The ongoing liquidity crisis has affected project deadlines for a number of projects along with numerous

homebuyers. The government has stated that most of the stalled housing projects are solvent and have positive

net worth. However, liquidity remains a key challenge for developers which the new Fund will look to address and

enable project completion.

Homebuyers will benefit from faster project resolutions

Ÿ For NCLT projects which are not eligible for any financial assistance from the Fund, homebuyers will depend on

resolution through the Insolvency and Bankruptcy Code (IBC). Bankruptcy proceedings under the IBC are

underway in many of the stalled projects. Homebuyers will be able to influence the bankruptcy resolution

process for specific developers due to their status as financial creditors. This will enable them to recover their

money or hand over the stalled project to another developer, thereby expediting completion and delivery

IBC will remain a key support for homebuyers

Real Estate ‘Special Window’ Fund– Impact on the Housing Sector

Real Estate Market Snapshot

Residential

Increase (y-o-y) in new unit

launches during 2019

55.8%

Share of mid segment in overall

unit launches in 2019

53%

Contribution of Mumbai, Pune

& Bengaluru in new launches

during 2019

63%

Total retail transactions

in 2019

Completed malls inventory as

of 2019

9.9 msf 83.9 msf

Retail

Pan-India vacancy in malls

in 2019

11.8%

Office

Gross leasing in 2019,

39.7% growth y-o-y

69.3 msf

New supply in 2019,

47.2% growth y-o-y

50.6 msf

Net absorption in 2019,

55.5% growth y-o-y

44.8 msf

Indian Residential Sector Overview

Mumbai and Ahmedabad witness maximum

units launched in 2019

Affordable Segment

Mumbai, Pune and Bengaluru contributed nearly

73% of total launches in 2019

Mid Segment

Mumbai, Delhi NCR and Hyderabad contributed

68% of new launches in 2019

High-end Segment

Hyderabad, Ahmedabad and Chennai had a

79% share in luxury segment new launches

during 2019

Luxury Segment

5.4%

1%1.1%2.3% 0.2%1.8%

New Launches in 2019 (in units)

Affordable Mid High-end Luxury

Ahmedabad Bengaluru Chennai Delhi-NCR Hyderabad Mumbai Pune

Unit launches across the top 7 cities (Delhi-NCR, Bengaluru, Mumbai, Chennai, Hyderabad, Pune, and Ahmedabad)

increased by 9.2% q-o-q during Q4 2019. New launches in 2019 increased by 57.5% over the previous year. During

2019, Mumbai had the largest share (32%) in new launches, followed by Pune (20%) and Bengaluru (15%). Apart

from Chennai and Bengaluru, all other cities witnessed y-o-y rise in new launches during 2019. Ahmedabad

witnessed the maximum y-o-y growth in new launches in 2019, followed by Pune and Mumbai.

The share of mid segment in new launches further declined in Q4 2019 to 47%, whereas the affordable

segment's share continued to rise and reached 44%. In absolute terms, the affordable segment was the only

category that witnessed a 26% q-o-q increase in launches during Q4 2019, while there was a 7% q-o-q decline in

mid segment launches.

Mid segment had the maximum share (53%) in new launches in 2019, followed by affordable segment at 36%.

Mumbai, Pune and Bengaluru contributed the most towards new launches in the mid segment. Affordable

segment launches were the highest in Mumbai (31%) and Ahmedabad (28%) during the year.

Growth in new launches and stable demand resulted in a marginal increase in unsold inventory across all cities

during the quarter. A major proportion of the new launches are in peripheral and suburban locations across all

cities, indicating rising housing demand in these locations. These localities across cities are expected to drive the

supply and demand in the near future as well.

Completed or nearing possession homes and newly launched projects by reputed developers continued to drive

the overall demand across all cities.

Key Trends

1Ahmedabad, Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune.

40.6%35.5%

7.2%1.7%

63.2%

45.1%

26%

67.6%

66.9%

26.1%

5.4%4.7%

47.2%47.2%

33.3%

57.4%

15.3%

20.1%

56.1%

8.2%

53%

4.4%

3.3%

Mumbai ...................................................................................... 1

Delhi-NCR .................................................................................. 4

Bengaluru .................................................................................. 7

Index

Residential Overview

Mumbai

New launches during Q4 2019 increased by 9.5%

compared to the previous quarter with total supply

of 14,563 units during the quarter. On a yearly basis,

new launches increased by 51% compared to 2018,

with the launch of 59,457 units.

During Q4 2019, Extended suburbs had a 38%

share in new launches, followed by Navi Mumbai at

21%.

For the second consecutive quarter, share of

affordable segment in new launches continued to

grow and stood at 41%. However, mid segment had

the maximum share (49%) in new launches in Q4. On

an annual basis, mid and affordable segments

together had a 91% share in new launches.

The share of units launched in the INR 7,501 –

25,000 price segment has continued to increase

successively in Q4 2019. Majority of the projects in

this category were launched in Extended suburbs,

Navi Mumbai and Eastern Suburbs.

Share of launches in price segments

Share of affordable continued to grow

Source: Cushman & Wakefield Research

1

South

South Central

Far North

Central

North East

North

Location 2017

40.0 - 50.0

45.0 - 58.0

10.0 - 16.0

23.0 - 45.0

10.0 - 14.0

20.0 - 30.0

2018

40.0 - 50.0

45.0 - 58.0

10.0 - 16.0

23.0 - 45.0

10.0 - 14.0

20.0 - 30.0

2019

40.0 - 50.0

45.0 - 58.0

10.0 - 16.0

23.0 - 45.0

10.0 - 14.0

20.0 - 30.0

Source: Cushman & Wakefield Research

The values in the legend are in INR/sf.

< 7,500 7,501 - 25,000 25,001 - 40,000 > 40,000

Average Capital Values – Mid Segment (INR '000/sf)

2018 20192017

South

South Central

Far North

Central

North East

North

Location

48.0 - 75.0

46.0 - 83.0

12.5 - 20.0

27.0 - 61.0

15.0 - 24.0

28.0 - 50.0

2017

48.0 - 75.0

46.0 - 83.0

12.5 - 20.0

27.0 - 61.0

15.0 - 24.0

28.0 - 50.0

2018

Average Capital Values – High-End (INR ‘000/sf)

2019

48.0 - 83.0

46.0 - 83.0

27.0 - 61.0

30.0 - 60.0

12.5 - 20.0

15.0 - 24.0

16%

72%

11%

2%

19%

69%

8%

4%

51%

45%

4%

Launches – segment-wise across submarkets (%)

Submarkets Affordable Mid High-end Luxury Total (Number of units)

Eastern Suburbs

Western Suburbs

South Central

Thane

Navi Mumbai

2%

0%

0%

0%

58%

77%

54%

27%

97%

42%

21%

46%

73%

3%

0%

0%

0%

0%

0%

0%

2,882

1,318

242

1,439

3,113

Completion activity during the quarter was seen

across key locations in all major submarkets.

Locations like, Mulund and Ghatkopar in Eastern

Suburbs, Mira Road in Extended Western Suburbs,

Andheri and Goregaon in Western Suburbs and

Lower Parel in South Central Mumbai submarket

have seen major completions during the quarter.

Western Suburbs, Extended Eastern and Western

Suburbs along with Navi Mumbai and Thane will see

majority of the project completions during the next

1-2 years.

The quoted average capital values remained

steady across all submarkets and price categories

during the quarter. However, select projects that got

completed recently have witnessed marginal price

appreciation of 3-5% during the quarter. Developers

continued to offer limited period offers like zero EMI,

no GST, no floor rise and premium view charges, cash

back offers, free furnishings, etc. during the festive

season to push sales. Rental values across all

submarkets also remained range-bound during the

quarter.

Source: Cushman & Wakefield Research

KEY TO SUBMARKETS:

% indicates proportion of unit launches in different segments within a submarket.

Eastern Suburbs: Sion, Wadala, Kurla, Chembur, Ghatkopar, Vikhroli, Powai, Chandivali, Kanjurmarg, Bhandup, Mulund

Western Suburbs: Andheri, Jogeshwari, Goregaon, JVLR, Malad, Kandivali, Borivali, Dahisar

South Central: Worli, Prabhadevi, Lower Parel / Parel, Dadar, Matunga

Thane: Thane, Ghodbunder Road

Navi Mumbai: Airoli, Ghansoli, Rabale, Koparkhairane, Vashi, Turbhe, Sanpada, Nerul, Belapur, Kharghar, Panvel

2

New supply of 5.21 msf was added during 2019. Malad–Goregaon, Thane-Belapur Road and BKC submarkets saw majority of the new supply addition during the year. Overall vacancy fell to a seven-quarter low of 18.7% in Q4 backed by a strong demand momentum during the year. This resulted in healthy occupancy levels in new, prominent projects as well.

A total of nearly 20.10 msf of upcoming supply is in the pipeline by end-2022 with Thane-Belapur Road (Navi Mumbai), Lower Parel-Worli and Malad-Goregaon submarkets expected to contribute a larger share towards this projected supply. In the coming 12-18 months, we expect occupiers from the IT-BPM, captive centres of BFSI and professional services firms, BFSI and flex space operators to aid the demand momentum. Key submarkets such as Malad-Goregaon, BKC, Lower Parel-Worli as well as in Thane-Belapur Road and Central Suburbs corridors will benefit from rising demand for office spaces.

Select submarkets-Thane-Belapur Road, Powai, Malad-Goregaon, Lower Parel, BKC and Andheri-Kurla witnessed marginal rental growth during the quarter, driven by robust demand in key projects in these corridors.

RentalsVacancyAbsorption

Office

Outlook

Residential

Launches Buyer sentiment Price

With gradual improvement in buyers’ sentiments and increased sales activity during 2019, we expect higher new launches and sales activity in the coming 12-18 months in Mumbai. Affordable and mid-segment projects are expected to be launched in peripheral and suburban locations in the coming quarters .

Suburban and peripheral locations are expected to witness improved demand, especially for affordable and mid-segment projects. Also, we expect notable sales activity for new project launches by reputed developers in the coming year.

Average capital values across most of the submarkets are likely to remain range-bound in coming quarters.

The overall mall leasing activity during 2019 remained healthy, mainly on the back of term renewals across all major malls and fresh leasing in select malls. Also, the upcoming mall in Navi Mumbai, Seawoods Grand Central Phase II, which is expected to get operational during first quarter of 2020, witnessed transactions by family entertainment centres (FEC) and departmental stores during Q4 2019. This resulted in improved leasing activity during the quarter.

Going forward, we expect the rents in prominent malls and main street locations to rise marginally. However, the upcoming luxury malls in BKC will drive the overall mall rental growth in the coming quarters.

Prominent main street locations like Link Road, Colaba Causeway, Lokhandwala Andheri along with Powai main street are expected to drive leasing activity in the near future.

Leasing Vacancy Rentals

Retail

3

Residential Overview

Delhi-NCR

The city recorded a 1.5X increase in new unit launches in 2019, which stood at 11,843 units, thereby denoting a gradual recovery in market sentiments and

greater focus on launches. Around 5,021 units were

launched under the Haryana Affordable Housing Policy separately, predominantly in the micro-market of Dwarka Expressway. Majority of the projects were launched by well-known developers during the year.

The fourth quarter also recorded a 60% q-o-q rise

in launches at 2,254 units. A key project in the quarter was launched by the developer upon completion. Additionally, 1,035 units were launched under the

Haryana Affordable Housing Policy.

New unit launches during the year were distributed equally between Gurugram and Noida with a 48%

Source: Cushman & Wakefield Research

The values in the legend are in INR/sf.

New launch activity improves in 2019

Share of launches in price segments

< 3,500 3,501 - 8,000 8,001 - 20,000 > 20,000

share each. Launches in core city markets of Delhi stood at 4% and remained a highlight of the year in the wake of lack of much developable space in the city. Dwarka Expressway followed by Golf Course Extension Road saw activity in Gurugram during the year. Noida Expressway (primarily sector 150) followed by Greater Noida West saw majority

of the launches in 2019.

Mid segment had a majority share of 63% in the total unit launches during the year. This segment, which has the highest demand especially by end-users, also saw the maximum (73%) launches in the fourth quarter as well.

South-East

South-Central

Gurugram*

Noida*

Location 2018

20.0 – 25.0

23.8 – 33.3

4.5 – 9.0

4.0 - 6.5

2017

4.5 - 9.0

20.0 – 25.0

23.8 – 33.3

4.0 - 6.5

20.0 – 27.0

24.0 – 35.0

4.5 – 9.0

4.0 - 6.5

2019

Average Capital Values – Mid Segment (INR '000/sf)

Source: Cushman & Wakefield Research

South-West

South-East

Gurugram High-End

South-Central

Noida

Central

Location

32.0 – 51.0

24.0 - 35.0

*10.0 – 16.2

25.0 - 45.0

7.0 – 9.0

60.0 - 95.0

2018

32.0 – 49.0

24.0 - 35.0

10.0 – 16.2

25.0 - 43.0

7.0 – 9.0

60.0 - 90.0

2017

33.0 – 53.0

24.0 - 35.0

28.0 - 45.0

63.0 - 98.0

10.0 – 16.2

7.0 – 9.0

2019

Average Capital Values – High-End (INR ‘000/sf)

4

2018 2017 2019

2%

63%

35%

60.5%

37.8%

31%

52%

1.7%

17%

Launches – segment-wise across submarkets (%)

0%

0%

0%

0%

67%

100%

0%

33%

0%

Delhi

Gurugram

Noida

0%

0%

0%

0

1802

452

Submarkets Affordable Mid High-end Luxury Total (Number of units)

Source: Cushman & Wakefield Research

KEY TO SUBMARKETS:

Gurugram: Excludes Manesar, Sohna

Noida: Excludes Greater Noida, Noida Extension

% indicates proportion of unit launches in different segments within a submarket.

Capital and rental values for Delhi NCR remained

unchanged during the quarter for both mid and high-

end segments across all submarkets. However, South

Delhi submarket recorded a 3 – 4% y-o-y increase in

capital and rental rates with limited supply amidst

steady demand. The high unsold inventory has kept

prices largely range-bound even though the market is

witnessing a gradual pick-up in demand, especially by

end-users. Infact, there have been instances of a few

developers giving limited period discount offers with

an aim to increase traction for their projects. Buyers

continued to prefer projects nearing completion with

no execution risks in a market that has sufficient

inventory for such projects.

The micro-markets of Dwarka Expressway, Golf

Course Extension Road, Noida Expressway, Noida

Sectors 75 – 78, Greater Noida (West) and Greater

Noida recorded new completions during the year.

More projects are scheduled for completion in these

corridors in the upcoming quarters with projects in

advanced stages of construction.

Under the Insolvency and Bankruptcy Code,

insolvency proceedings are being initiated against

developers with even a single consumer complaint

for project delays. This is further worsening the

situation of project execution in the city, which may

not be necessarily due to bankruptcy in all cases.

Therefore, developers struggling with tight liquidity

along with slow sales have demanded that the

homebuyers’ complaints pertaining to delay in

possession of projects should first be taken to the

regulatory authority before any insolvency

proceedings being initiated under the Insolvency

and Bankruptcy Code.

*Capital values have been recalibrated historically

5

Outlook

The next 6 months are likely to see infusion of ~5 msf of new office space in Delhi NCR in office corridors

including Golf Course Extension Road, MG Road, Sohna Road and NH8 in Gurugram as well as Noida Expressway.

Leasing is expected to maintain the momentum it picked in 2019 reaching historic peaks in office leasing.

Sectors including IT-BPM, flexible space operators and professional services firms are likely to drive demand in

the coming quarters. Golf Course Extension Road and Southern Peripheral Road in non-CBD region of

Gurugram are likely to garner further interest of occupiers.

Overall market rents are likely to remain range-bound in the upcoming quarters with an upward pressure in

core markets with limited availability.

RentalsVacancyAbsorption

Office

Retail

Leasing Vacancy Rentals

Apparel and lifestyle along with F&B retailers will continue to drive demand for retail space. The market, which

received a welcome response from international retailers in 2019 will continue to find their favor as new

retailers plan to make foray or expand in the city. Salons were another retailer category that continued to

expand during the year (though not a sizeable share of the total leasing), and this expansion is likely to be

carried forward in the coming quarters also.

With 2019 witnessing completion of a robust 2.3 msf of new supply, 2020 is likely to be a little thin on new supply

addition in Delhi NCR. The first half of 2019 is expected to see addition of 0.3 msf of mall space in Gurugram.

Steady demand from retailers coupled with availability of space (with an exception of some prime malls)

is likely to keep rentals across malls and main streets largely unchanged. Superior malls with limited

space availability are likely to see an upward pressure in rents.6

Launches Buyer sentiment Price

New unit launches are likely to be steady in the upcoming quarter.

Sales are expected to pick up pace gradually with continued improvement in buyer sentiment. The various

reform measures, which are making the sector more organized and transparent, will also play a part in this.

However, the high unsold inventory in the city is likely to keep capital prices largely stable across most

submarkets. Prices of ready projects from well-known developers might witness a gradual increase in

the medium term with the increased inventory offtake for such units.

Residential

< 2,800 2,801 - 8,000 8,001 - 20,000 > 20,000

Residential Overview

Bengaluru

Bengaluru recorded a y-o-y decline of 1.4% in total

units launched during 2019. A decline was also recorded

q-o-q, with a total of 5,866 units getting launched in Q4 2019. Mid-segment continues to account for the highest share in total launches and has recorded a 15% increase

in its share of total launches, between 2018 and 2019.

Affordable sector even though recorded a marginal fall

in its quarterly share of launches, has together along with mid-segment accounted for 94% of the total unit launches in 2019, an increase of 14% compared to 2018.

Rental and capital values across the city although

steady over the last few quarters, are expected to see an appreciation with gradual revival in demand.

During Q4 2019, Northern corridor of the city alone accounted for around 95.2% of the total unit launches

across affordable and mid categories. Throughout

2019, these categories contributed 53% of total unit launches.

Mid segment unit launches continue to dominate

Source: Cushman & Wakefield Research

The values in the legend are in INR/sf.

Source: Cushman & Wakefield Research

Average Capital Values – Mid-End (INR '000/sf)

4.5 – 6.75

7.0 – 10.0

4.5 – 6.5

5.0 – 7.0

7.0 – 11.0

6.5 – 8.5

6.5 – 7.5

10.0 – 12.5

4.3 - 6.0

2018

4.5 – 6.75

7.0 – 10.0

4.5 – 6.5

5.0 – 7.0

7.0 – 11.0

6.5 – 8.5

6.5 – 7.5

10.0 – 12.5

4.3 - 6.0

2017

5.0 – 6.75

8.0 – 11.0

5.5 – 7.5

5.5 – 7.5

8.0 – 11.5

7.5 – 9.5

6.5 – 7.5

9.5 - 14.5

4.6 - 6.6

2019

Central

South East

North

East

South

Off Central I

South West

Off Central II

North West

Location

Average Capital Values – High-End Segment (INR '000/sf)

2017

7.5 - 11.5

18.0 - 21.0

7.5 – 11.5

8.5 - 12.0

6.5 - 10.0

2018

7.5 - 11.5

18.0 - 21.0

7.5 – 11.5

8.5 - 12.0

6.5 - 10.0

Central

South

Off Central

North

East

Location 2019

18.5 - 21.0

9.0 - 12.5

9.0 -13.0

7.5 - 11.5

8.5 - 12.5

7

Share of launches in price segments

2018 20192017

28%

52%

13%

80%

1%2%

19%

26%

68%

5%1%

5%

Submarkets Affordable Mid High-end Luxury Total (Number of units)

Launches – segment-wise across submarkets (%)

19.7%

0%

0%

0%

0%

0%

0%

0%

80.3%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

100%

0%

3,414

0

0

0

0

0

172

0

North

East

North East

North West

South

Central

South East

South West

While policy disruptions like RERA, GST and

demonetization impacted the way in which the

residential sector worked, they have also paved the

way for the sector’s transformation resulting in its

gradual revival over the last few quarters. Increasing

transparency within the sector has driven

consolidation with smaller developers merging with

the bigger ones. Higher transparency has also led to an

increase in the developer and buyer confidence,

thereby having a positive impact on the sales

momentum. Bengaluru, which had earlier gained

reputation as one of the most preferred options for real

estate investment, is gaining momentum in terms of

higher residential demand and launches. While smaller

developers are mostly restricting themselves to

affordable sector launches in the peripheral areas of

the city like southern parts of Mysore Road and

Electronic City, the prominent micro-markets like

Sarjapur, Whitefield, Thanisandra Road, Hebbal and

Kanakapura Road have continued to see mid-segment

launches by reputed developers like Sobha,

Puravankara, Prestige Group, Godrej Properties,

Assetz Property Group and L&T Realty among others

during the year.

Burgeoning growth of the commercial office

sector in the city supported by a rapid increase in

demand among occupiers, particularly the IT-BPM

sector, which continues to account for the highest

proportion of total leased space in the city, has

resulted in creation of employment opportunities for

many and has been ably supported by the start-up

sector as well. Consequent increase in working

population within the city has contributed to for

higher housing demand and supply, mainly in the mid-

segment category.

The mid-segment has been witnessing steady

growth in its launches over the last few quarters

with a 74% share in total unit launches being

recorded during the fourth quarter and a 68%

share during entire 2019. Capital values have,

however, not showed significant growth. Locations

such as Whitefield and Kanakapura Road are likely

to witness some price revision based on the

upcoming metro connectivity. Increased demand

among buyers and positive traction within the

sector are also likely to result in some upward

movement of property prices in the city.

KEY TO SUBMARKETS

North: Hebbal, Bellary Road, Yelahanka, Doddaballapur Road, Hennur Road, Thanisandra Road, Jakkur, Devanahalli

East: Marathahalli, Whitefield, Old Airport Road, Old Madras Road

North-west: Malleshwaram, Rajajinagar, Tumkur Road, Yeshwantpur

South: Koramangala, Jakkasandra

Central: Brunton Road, Artillery Road, Ali Askar Road, Cunningham Road, Lavelle Road, Palace Cross Road, Off Cunningham Road, Ulsoor Road, Richmond Road

South-east: Sarjapur Road, Outer Ring Road (Marathahalli- Sarjapur), HSR Layout

South-west: Jayanagar, J P Nagar, Kanakapura Road, Bannerghatta Road, BTM Layout, Banashankari

% indicates proportion of unit launches in different segments within a submarket.

Source: Cushman & Wakefield Research

8

Outlook

Affordable sector is expected to witness further increase in launches with most of the projects being announced in the peripheral locations, on the back of favourable government policy reforms.

Mid-segment records most of the traction with sustained increase in its share out of the total unit launches in the city and steady demand for this segment based on increasing affordability and purchasing power of the buyers. The trend is likely to remain dominant in the upcoming quarters.

With gradual revival in the sector in terms of greater demand momentum backed by timely completions and positive buyer sentiment, capital values are likely to witness some increase in the short to medium term.

Launches Buyer sentiment Price

Residential

Retail

Leasing Rentals

Tightening of vacancy in superior grade malls to continue in the short to medium term due to inadequate supply and steady demand for quality retail space across the city. Main streets shall thereby continue to remain the centers of retail activity.

Fashion, Apparel and F&B sector though continue to account for a majority share of the total leased space. Going ahead, wellness, spa, salon and Home decor and furnishing brands are likely to expand their footprint in the city.

Though the lease rentals remain stable across most of the malls, upcoming mall supply due for completion by 2020 is likely to impact retailer demand and create traction in the retail sector, thereby resulting in rental movement.

Vacancy

With demand for Grade A office space continuing to be on an upward trajectory, steady fall in vacancy levels is also likely to follow, thereby indicating an increasing demand for office space in the city. With a high proportion of the supply pipeline in years 2020 & 2021 being pre-leased, occupier demand is expected to witness steady growth.

An additional supply of 9.21 msf and 9.72 msf of office space is expected to get added to the city’s Grade A stock by end 2020 and 2021 respectively. While ORR and Peripheral East would contribute the highest share in the upcoming supply during these years, a revival in demand for the latter is also being witnessed among occupiers at present as indicated from the highest project completion volume recorded here during 2019.

Office rental growth observed at the city level and in the prominent submarkets of ORR, Peripheral East and CBD/Off CBD along with declining vacancy levels in these submarkets is expected to result in a healthy rental appreciation in the coming quarters.

RentalsAbsorption

Office

Vacancy

9

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