TheNFAPost Podcast
6

Bengaluru, NFAPost: Real estate sector reels under the Covid-19 crisis in Q2 2020 with office space absorption in top 5 cities observing the decline of 54% y-o-y while residential new launches in 4 cities see a dip of 71% y-o-y.

The Vestian report ‘Connect Q2 2020’ presents a comprehensive analysis of the office and residential market performance of the five tops cities of the country – Bengaluru, Mumbai, Hyderabad, Chennai and Kolkata, showcasing market trends during Q2 2020 as well as summarising H1 2020, along with future perspectives for the industry.

Key takeaways:  

Office Market

  • The five major cities of Bengaluru, Mumbai, Chennai, Hyderabad and Kolkata saw absorption of approximately 4.42 million sqft of office space during Q2 2020, depicting a steep decline of 54% over the absorption observed in Q2 2019.
  • During the quarter, Bengaluru led the way with 45% share of the total absorption in these five cities, followed by Mumbai at 30%, while Hyderabad accounted for 12% share. Chennai and Kolkata accounted for 10% and 2% share respectively, of the total absorption.
  • Comparing on a half yearly basis, the total office space absorption for H1 2020 added upto 13.6 million sqft for the five cities, the positive traction in the first quarter softening the decline to 31% YoY.
  • The new office space completions for Q2 2020 was recorded at 6.84 million sqft in the five cities, depicting a significant dip of 41% as compared with the new supply in Q2 2019. Total supply for H1 2020 was recorded at 14.34 million across the five cities, depicting a decline of 32% YoY.
  • The weighted average rentals of the five cities remained stagnant in Q2 2020 in the absence of major leasing activity during the period.
Quarterly Office Market Summary
CitiesAbsorption Q2 2020(mn sqft)YoY Change (%)Supply Q2 2020(mn sqft)YoY Change (%)
Bengaluru2.00-43%1.45-53%
Chennai0.45-68%1.79198%
Hyderabad0.55-77%3.1-52%
Mumbai1.32-37%0.5-64%
Kolkata0.1-60%00%
Grand Total4.42-54%6.84-41%
Half Yearly Office Market Summary
CitiesAbsorption H1 2020(mn sqft)YoY Change (%)Supply H1 2020(mn sqft)YoY Change (%)
Bengaluru5.53-32%5.35-31%
Chennai1.92-26%2.3959%
Hyderabad2.19-52%4.1-51%
Mumbai3.71-6%2.5-11%
Kolkata0.25-58%0-100%
Grand Total13.60-31%14.34-32%

Residential Market

  • Approximately 5,186 new residential units were launched overall in the cities – Bengaluru, Chennai, Hyderabad and Kolkata, during Q2 2010, signifying a sharp decline of 71% YoY.
  • On a half yearly basis, H1 2020 saw 21,504 units launched in the four cities, indicating a dip of 41% as against the number of launches in H1 2019.
  • Residential demand has been substantially impacted with people postponing their buying decisions owing to mounting fears of job loss and pay cuts, while developers have refrained from launching new projects.
  • However, with several measures announced by the government to create momentum in the market as well as the lockdown being lifted in phases, the market saw some activity towards end-May and June.
  • Bengaluru led the way with the maximum number of units launched amongst the four cities in Q2 2020, its share recorded at 49% of the total new launches. Hyderabad accounted for 30% share while Chennai and Kolkata accounted for 14% and 6% share of the total new residential launches in the four cities.
Quarterly Residential Market Summary
CitiesNew Launches (units)YoY Change (%)
Bengaluru2537-66%
Chennai750-75%
Hyderabad1565-65%
Kolkata334-87%
Grand Total5186-71%
Half Yearly Residential Market Summary
CitiesNew Launches (units)YoY Change (%)
Bengaluru10737-33%
Chennai4470-39%
Hyderabad4729-49%
Kolkata1568-59%
Grand Total21504-41%

City highlights:

Bengaluru

  • Bengaluru struggled with office space absorption of 2 million sqft in Q2 2020 depicting 43% decline YoY; new completions suffered as construction activity slowed down.
  • Residential market saw 2,537 units launched in Q2 2020 signifying steep fall of 66% YoY; majority of launches were in the affordable and mid segment categories.

Chennai

  • Office market faltered with just 0.45 million sqft of office space absorption – 68% decline YoY; substantial growth in new supply observed during the quarter.
  • Residential market remained subdued with 750 units launched in Q2 2020 – 75% decline YoY; mid-segment housing continued to remain in the spotlight.

Hyderabad

  • City’s office market saw 0.55 million sqft of office space absorption in Q2 2020 – 77% decline YoY; improvement in new supply during Q2 2020 but falls short when compared with Q2 2019.
  • Approx. 1,565 residential units launched in Q2 2020 – 65% decline YoY; majority of the new launches during the quarter observed in the western zone of the city.

Mumbai

  • City observes 1.32 million sqft of office space absorption in Q2 2020 – 37% decline YoY; however, total absorption in H1 2020 holds relatively steady when compared with H1 2019.

Kolkata

  • Kolkata saw dismal office space absorption of 0.10 million sqft in Q1 2020 – 60% decline YOY; no new completion during the period.
  • Around 334 residential units launched in Q2 2020; growth momentum stymied by COVID-19 impact.

Speaking about the findings, Vestian CEO APAC Dr. Shrinivas Rao said with the COVID-19 crisis leading to a stringent nationwide lockdown starting March-end, it was only a matter of time before the realty industry was impacted adversely, along with all other economic activities.

“The effects of the pandemic are quite apparent today – the downward shift perceptible in every asset class. However, the real estate industry is ruled by strong fundamentals and even at this critical stage it holds the potential to bounce back, sooner rather than later, given the various measures introduced to confront the perturbing situation,” said Vestian CEO APAC Dr. Shrinivas Rao.

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