Home sales, office space absorption decline in Kolkata

Poor home sales, high vacancies in commercial real estate, and a slowdown in launches paint a not-so-rosy picture of Kolkata’s real estate sector.

The focus of developers have mostly been on clearing their unsold residential inventory . Estimates suggest that unsold units have declined around 2-11 per cent. However, there hasn’t been many completed office space project in the first six months of 2019, market sources point out.

While elections in 2019 was expected to have some impact on home sales; the commercial real estate has been going slow because of a volatile political scenario in West Bengal, uncertainty in business ecosystem and worries over an economic slowdown.

According to Anuj Puri, Chairman, Anarock Property Consultants, housing sales and new launches usually reduce before general elections. “Going forward, with a stable government, residential activity is likely to pick up momentum,” he said.

Commercial real estate

Swapan Dutta, Branch Director, Kolkata at Knight Frank India, pointed out that the office space demand in Kolkata is largely driven by small sized space take-ups (of around 18,000–20,000 sq ft). Transactions above 4,645 sq m (50,000 sq) ft are low.

“Tenants remain hesitant because of uncertainty in the business ecosystem and in the absence of large IT sector occupiers, it is difficult to attract companies despite low rentals,” he said.

In fact, Knight Frank in its recent report has maintained that there has been a spurt in transactions in the office space (to 0.63 mn sq ft in the first six months of 2019 from 0.22 mn sq ft in H1 2018. But at the same time there has been an increase in vacancy rates which stood at 32 per cent and that there are no new completed projects during this period.

Developers tell BusinessLine that many of them were forced to defer construction because of poor demand and high vacancies across existing projects. Office rentals in Kolkata continue to be on the lower side, when compared nationally, sources say. According to Knight Frank there has been a one per cent year-on-year growth in rentals in H1, 2019 to approximately ₹37 per sq ft per month.

Dismal home sales

The slow down in home sales is apparent as separate studies – one by Knight Frank and another by Anarock – show decline in Kolkata on a year-on-year basis (between H1 2019 and the year-ago-period) and as well as on a quarter-on-quarter basis (between Jan-Mar period and April-June quarter of 2019).

Knight Frank India in its report has pointed out that new launches in the city has seen a 90 per cent drop. A mere 627 projects were launched during this period as against 6,393 in H1 2018. Sales during this period saw a 30 per cent dip with 4,588 units being sold in January to June period (as against 6,591 in H1 of 2018).

Meanwhile, Anarock, in its report said Kolkata witnessed a 12 per cent decline in home sales on a quarter-on-quarter basis. In Q2 of 2019 or in the April to June period there was 3,540 units that were sold; as against the 4,020 units being sold in the January to March period.

Home prices also saw a minor dip, of 2 per cent, and hovered between ₹3,227 per sq ft and ₹4,375 per sq ft.

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