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Office real estate transactions across India declined by 37 per cent YoY in the first half of 2020, to 1.6 million sq m, the lowest in 10 years, according to a report from real estate consultancy Knight Frank India.
The segment witnessed a historic decline in terms of both transactions and new completions in the top eight cities. New completions were lower by 27 per cent YoY to 17.3 million sq ft.
Despite the low volume of transaction and supply, the weighted average rental for the eight cities grew 4 per cent YoY in H1 2020 to Rs 896/ sq m/ month (Rs 83/ sq ft/ month).
The Information Technology sector dominated with 43 per cent of the overall sector-wise transactions in the Indian office market.
Home sales drop
After two years of steady demand, home sales in the top eight cities declined by 54 per cent YoY to a decadal low of 59,538 units during H1 2020, with sales mostly concentrated in the first quarter of the calendar year.
About 47 per cent of sales were in residential properties priced below Rs 50 lakh.
New home launches also reported a sharp drop of 46 per cent YoY to 60,489 units in the period. The unprecedented disruption caused by the pandemic stalled the economy in Q2 2020.
The lockdown resulted in a complete shutdown of all activity in the real estate industry and caused sales to fall a massive 84 per cent YoY to 9,632 units in Q2 2020, as against 49,905 units in Q1 2020. New home launches in Q1 2020 were at 54,905 units; whereas, the number saw a sharp drop to 5,584 units in Q2 2020.
Knight Frank India Chairman and Managing Director Shishir Baijal said, “With the economic uncertainties creating significant headwinds, we expect the office space take up to remain cautious. For the office market, it will be a wait and watch till a more permanent solution to this pandemic is found.”
In H1 2020, the Mumbai and Chennai markets saw the most supply come online, accounting for 40 per cent of the total 1.6 mnsq m (17.3 million sq ft) delivered during the period. The sharpest fall in supply was seen in the NCR and Pune markets at 86 per cent and 87 per cent YoY respectively.
IT dominated with 43 per cent of overall transactions, followed by BFSI at 16 per cent. Two sectors – Co-working and Other services -- got a 14 per cent share each. Manufacturing got a 16 per cent share.
Home launches across the top eight cities declined by 46 per cent YoY to 60,489units in H1 2020. The impact of the pandemic induced lockdown on the real estate market can be gauged by the fact that across the top eight markets, new launches plummeted by 90 per cent YoY in Q2 2020.
Unsold inventory across the top eight markets dropped marginally in H1 2020, registering a 1 per cent decline to 446,787 units.
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