Residential Property Launches Down 20%, Sale Marginally Up 3% in 2015

The launch of new residential projects was down 20% in 2015, while the sale increased marginally by 3%, the global property market and research firm Knight Frank India’s report revealed on Thursday. The report says that the glut in the realty market of the Mumbai Metropolitan Region will continue. The reform in the housing sector has failed to revive the market.

According to report, in 2015, new launches were down by 23% compared to 2014. The demand has shrunk by 6%. The property prices are stagnant. It has registered a marginal increase of 3%. This is the good time to buy the new home, says the report. Interestingly, the budget housing between Rs.30 lakh to Rs.60 lakh are always in demand, now reported in distress in Navi Mumbai, and peripheral of the central and western suburbs. While demand in Thane has slightly up by the 13%. The premium South Mumbai market witnessed a 108% jump in new project launches to 208 units in 2015.

The residential market in the MMR has been experiencing a steady fall in new launches. There was a 23% decline in the new launches in 2015, compared to 2014. During the second half of 2015, sale of housing units dropped by 6% year to year. For the first time since 2008, the demands for office space has exceeded than supply in MMR; office absorption is at 130%of supply in 2015. The information technology industry emerged as the top occupier of office space in the MMR, contributing 46% of the demand in 2015.

We have witnessed a robust office space demand with 7.5million sq.ft. of annual absorption in 2015. The overall market observed big deals across IT and Pharmaceuticals space, some of the largest office deals ever seen in Mumbai. There is a shortage of quality office space in the city; however it is not visible in the peripheral areas. Outlook for 2016 is a further decline in supply making it a favourable landlord market. However, in next 6 months we do see a gap in terms of expectations of tenant and landlord given the corporate earnings is sluggish and rents are likely to increase gradually in select micro markets due to declining supply.

Mumbai Continues To Be The Most Preferred Property Investment Point!

The Indian real estate marketing is heading for a steady revival in 2016, with over 70% of investors expecting improvement in sales in the next 12 months. The report Peering Into 2016: Taking Pulse of Investor Preference says there is a spike in investor interest in the real estate market as around 43% of respondents saying that the number of successful exits will increase this year. 

While Mumbai and Bengaluru will continue to be the most preferred destinations for investment, commercial office and mid-segment residential property will be the top two preferred assets classes by investors. After relatively muted calendar year 2013 and 2014, private equity investors significantly increased their bets on the Indian real estate sector in 2015. This report examines the motivations and expectations of PE funds who are now actively ramping up their exposure to this sector. 

As per report, a majority of exits over the last 12-18 months has been characterized by refinancing or buyback. A significant number of investors who participated in the survey believe that the refinancing theme is set to continue beyond the next 12 months.  The report said proposed regulatory initiatives such as the relaxation of foreign direct investment rules in real estate and passage of real estate regulatory bill will enhance investment in smaller projects and positively impact sentiment by boosting buyer confidence.

Today there are several financing options available. Driven by the need to increase returns and a desire to diversify, investor’s interest in international property markets is once again on the rise and India definitely seems to be leading that interest. According to the report, newer sources of capital from Japan & China are expected to enter the Indian real estate market in 2016 while pure equity investments are likely to make a comeback this year.

For the report, JLL carried out a survey of seasoned investment professionals across a number of issues like market fundamentals, successful exits, distressed deals as well as top three asset classes and top three cities for investment over the next 12 month period. Few of the challenges in the market have bottomed out. So definitely the market is reviving but it is going to be a slow one. There is a going to be greater balance between demand and supply. Investor sentiments have improved. However, it is a cautious one where investors are now more focused on good quality and locations.