Tag: Chairman – ANAROCK Property Consultants

Gamechanger – Model Tenancy Act Approved

At long last, The Union Cabinet has approved the long-pending Model Tenancy Act. India’s States and Union Territories can now accordingly adapt and enact new laws or amend their current rental laws to dovetail with the Act.

The Model Tenancy Act will help bridge the trust deficit between tenants and landlords by clearly delineating their obligations and will eventually help unlock vacant houses across the country. To ensure speedy redressal of disputes, the Act also proposes to establish separate Rent Court and Rent Tribunal in every state/UTs to hear appeals for matters connected to rental housing.

This Act can fuel the rental housing supply pipeline by attracting more investors, and more rental housing stock will help students, working professionals and migrant populations to find urban accommodation (especially in COVID-19-like exigencies). Once implemented in all fairness across states, it will go a long way in formalising and stabilising the rental market. It would also revive the fortunes of not just the rental market but the housing sector at large.

However, even while the Model Tenancy Act is a step in the right direction (providing a clear roadmap for states to follow) it will remain to be seen to what extent the states will toe the central government’s line.

Price Difference of Ready and Under-construction Homes Lowest Ever at 3-5% in Q1 2021

Mumbai: The price gap between ready and ‘off plan’ or under-construction housing has been narrowing y-o-y since 2017 across the top 7 cities. Latest ANAROCK data reveals that the price gap between ready-to-move-in (RTM) and under-construction (UC) homes reduced to a mere 3-5% by Q1 2021. In 2017, the difference between the two categories was anywhere between 9% to 12% across cities, while in 2018 it was 5-8%.

Cities with Least & Highest Price Difference in Q1 2021:

NCR and MMR recorded the least price difference between RTM and UC homes at 3%. The average prices of RTM homes in NCR were INR 4,650 per sq. ft. while for UC homes it was INR 4,500 per sq. ft.; in MMR it stood at INR 10,700 per sq. ft. and INR 10,350 per sq. ft. respectively.

Pune, Hyderabad and Chennai have the highest RTM/UC price difference at approx. 5%

In Bengaluru and Kolkata, the difference is just 4%

Anuj Puri“Previously, buyers of under-construction homes had one major advantage,” says Anuj Puri, Chairman – ANAROCK Property Consultants. “Their patience and willingness to court construction risk were rewarded by notably lower prices. However, construction delays and stalled projects had a predictable outcome and risk-aversion set in, with demand tilted heavily towards ready properties. While the fact that RTM homes do not attract GST has been an added attraction, even the price gap between RTM and UC homes has eroded substantially – from 9-12% in 2017 to just 3-5% by Q1 2021.”

The shrunk price gap works well for end-users as well as investors. End-users can see what they buy and save rent by moving in immediately, while investors focused on steady rentals can start earning right away. In the past four years, developers have been reluctant to increase the prices of ready homes as they need to clear their inventory. Not surprisingly, ready homes are the ‘in’ thing.

Av. Price Difference b/w RTM and UC Homes – 2017 vs Q1 2021:

• MMR has seen the highest reduction in the gap over the last four years. In 2017, the gap b/w RTM and UC homes in MMR was 12% – among the highest. Now, in Q1 2021, it has reduced to just 3% – the lowest.
• Bengaluru comes next – in 2017, the price gap b/w RTM and UC homes was 12%; as of Q1 2021 it has shrunk to 4%
• In Pune, the price gap in 2017 also stood at 12% while in Q1 2021, it has reduced to 5%
• In NCR, the price gap in 2017 was 9%; as of Q1 2021, it is just 3%
• In Hyderabad, the price gap was 10% in 2017 while in Q1 2021, it is down to 5%
• In Chennai, the price gap in 2017 was 9%; in Q1 2021, it has come down to 5%
• In Kolkata, the price gap between the two categories reduced from 10% in 2017 to 4% in Q1 2021

Source: ANAROCK Research

Source: ANAROCK Research

MMR & Bengaluru – Maximum RTM/UC Price Gap Reduction

• MMR – 12% to 3% – The avg. prices of RTM homes were INR 10,365 per sq. ft. in 2017, and those of UC homes INR 9,251 per sq. ft. In Q1 2021, the prices were INR 10,700 per sq. ft and INR 10,350 per sq. ft. respectively.
• Bengaluru – 12% to 4% – In 2017, the average prices of RTM homes were INR 4,889 per sq. ft. while those of UC was INR 4,365 per q. ft. In Q1 2021, it is at INR 5,130 per sq. ft. and INR 4,910 per sq. ft. respectively.

MMR Unsold Housing Stock Falls 8% Y-o-Y Despite New Launches

Mumbai: Even as the region’s COVID-19 case count continued piling up, MMR emerged as one of the most buoyant residential markets in Q1 2021. It saw the highest yearly decline (8%) in total unsold housing stock by the ed of this quarter – from 2,13,180 units as on Q1 2020-end to 1,97,040 units as on Q1 2021-end. It was the highest y-o-y decline of unsold housing inventory in the last 7 years. In previous years, MMR’s stock either increased y-o-y or declined by no more than 3%.

Notably, the overall stock fell despite ample new supply hitting the market during this and the preceding quarter. MMR saw 14,820 new units added in Q1 2021 – the highest among the top 7 cities – yet robust sales in Q1 2021 and Q4 2020 significantly dented the overall unsold stock in the region. Housing sales are driven by bottomed-out property prices, limited-period stamp duty cuts, developer discounts and lowest-best home loan rates.

Approx. 20,350 units were sold in MMR in Q1 2021, of which 68% (approx. 13,750 units) were sold in Mumbai, 18% (approx. 3,650 units) in Navi Mumbai and 14% (approx. 2,950 units) in Thane.

“Mumbai is one of the most expensive real estate markets in the world,” says Anuj Puri, Chairman – ANAROCK Property Consultants. “A reduction in overall acquisition cost by anything between 5-15% made a huge difference in buyer sentiments. Low home loan interest rates and developer discounts, and timely intervention of the government by ways of stamp duty reductions and a 50% cut in premium charges also helped the region get its mojo back even during COVID-19.”

Source: ANAROCK Research

City-wise Analysis

While overall unsold stock in MMR declined by 8%, individually, Thane reported the highest yearly decline of 14% in Q1 2021 against the corresponding period in Q1 2020, followed by Navi Mumbai with 12% and Mumbai with a 5% reduction. Mumbai saw the least decline among the three despite increased housing sales is because it was the only city in MMR that added ample new supply in the first quarter this year and the preceding quarter.

Thane currently has approx. 28,000 unsold units. It was 32,740 units a year ago. The city saw total housing sales of approx. 2,950 units in Q1 2021- increasing by 26% against Q1 2020. In new supply, the city added just 800 new units in Q1 2021 – a decline of 61% against the corresponding period in 2020 (when 2,070 new units were launched).
Navi Mumbai saw its unsold inventory decline by 12% in the year – from 40,850 units in Q1 2020 to approx. 35,800 units as on Q1 2021-end. Housing sales in the first quarter rose by 49% y-o-y with 3,650 units sold. It was 2,450 units in Q1 2020. In new supply, the city added just 1,110 units in Q1 2021 against 2,850 units last year, thus declining by 61% on yearly basis.
Mumbai saw its unsold stock decline by 5% in the year – from 1,39,590 units in Q1 2020 to approx. 1,33,240 units as on Q1 2021. The city recorded robust sales in Q1 2021 of 13,750 units against 9,120 units year ago – increasing by 51% in a year. As for new supply, in contrast to other cities in the region, Mumbai saw a massive 132% yearly jump – from 5,560 units in Q1 2020 to 12,920 units in Q1 2021.

Source: ANAROCK Research

Source: ANAROCK Research

Studio apartments’ growth curve hits reverse gear for 1st time in 7 years

Mumbai: Until recently, millennials were consistently driving up the demand for studio apartments in the top 7 cities – to such an extent that, over the last 7 years, developers customarily offered this configuration in their projects. In fact, studio apartments’ share in new launches had been rising y-o-y since 2013. However, the COVID-19 pandemic year of 2020 saw a sudden reversal of this trend.

Latest ANAROCK research reveals that out of the total 884 projects launched in 2020 across the top 7 cities, about 130 projects offered studio apartments (a 15% share). In contrast, of the 1,921 projects launched in 2019, around 368 (19%) offered studio apartments.

A studio apartment fundamentally consists of a single large room multitasking as living room and bedroom, with a small kitchenette. Only the bathroom is separated by a wall. Studio apartments have traditionally been favoured by bachelors, students, newly married couples beginning their homeownership journey with a ‘starter’ home, and business travellers who frequently visit a city for work.

Their small size and no-frills presentation notwithstanding, studio apartments became the favoured option for those with constrained budgets who nevertheless saw wisdom in living close to key employment hubs.

Anuj Puri, Chairman – ANAROCK Property Consultants says, “The studio apartments trend so far can be clearly plotted. Out of the total 2,102 projects launched in 2013 in the top 7 cities, just 75 projects (or 4%) offered studio apartments. The share increased to 5% in 2014, followed by a y-o-y increase in the overall share of projects offering this configuration. This growth trend remained consistent till 2019, when the share was highest at about 19%.”

“In 2020, the COVID-19 pandemic hit, bringing with it the uniquely new WFH and study at home compulsions requiring larger homes,” says Puri. “The onus also suddenly shifted from expensive central locations to the more cost-effective suburbs and peripheries. In a single year, studio apartments’ new supply share dipped to 15%.”

City-wise Trends

The studio apartments phenomenon was historically strongest in West India, with MMR and Pune predominantly driving the trend. Of the total projects with studio apartments launched in the top 7 cities between 2013-2020, MMR and Pune together accounted for a massive 96% share.

The average size of studio apartments (on built-up area) was highest in NCR (400 sq. ft.) and lowest in MMR (300 sq. ft.).

In contrast, the southern cities of Bengaluru, Chennai and Hyderabad had never caught the studio apartment bug – just 34 projects in these three cities had this compact configuration in the same period.

Rising Y-o-Y Supply

The top 7 years displayed a clearly-defined growth trend in terms of the number of projects offering studio apartments in the last seven years. Unsurprisingly, MMR has the highest supply share among all top 7 cities in this period. Of 5,442 projects launched in MMR between 2013 and 2020, at least 25% offer the studio apartment option. The numbers are less spectacular in other cities.

• In 2013, out of a total of 2,102 projects launched in the top 7 cities, just 75 projects offered studio apartments – a mere 4% share
• In 2014, the overall share increased to 5% – of 2,812 projects launched, almost 151 projects offered studio apartments
• In 2015, the top 7 cities saw nearly 2,635 projects launched, of which 190 projects (or roughly 7%) included studio apartments
• In 2016, nearly 1,911 projects were launched in top cities, of which 128 projects (7%) incorporated studio apartments
• In 2017, a total of 1,826 projects were launched across the top cities, and 197 (11%) had studio apartments
• In 2018, the total share increased to 18% – of 2,477 projects launched, about 446 offered studio apartments. In terms of the number of project launches in a year, 2018 had the highest saturation of studio apartments.
• 2019 saw approx. 1,921 projects launched, of which 368 projects (19%) offered studio apartments

Finally in 2020, out of a total of 884 projects launched throughout the year, just 130 projects had studio apartments – a 15% share. 2020 kick-started a trend reversal wherein larger homes – spacious enough to accommodate home offices and online study spaces for children – began to be in higher demand, and developers accordingly amended their new supply configurations.

Source: ANAROCK Research

Rental Appreciation Trumps Capital Price Growth in Top Luxury Markets Since 2014

Mumbai: Amidst various industry reforms in the last seven years, multiple new trends emerged in the Indian residential real estate market. Strikingly, housing rentals in key luxury markets saw better y-o-y growth between 2014-2020 than average capital prices in the same localities.

Anuj Puri, Chairman – ANAROCK Property Consultants says, “The average rentals for a house of minimum 2,000 sq. ft. size in the top 7 cities’ key luxury hotspots rose anywhere between 17% to 26% in 2020, as compared to 2014. In the same period, average capital prices in these micro-markets saw a maximum rise of 15% – and some even saw a marginal dip.”

To illustrate – ANAROCK data indicates that the average monthly rentals in Gurugram’s Golf Course Road increased by 17% in 2020 over 2014, while average property prices in the same period declined marginally – from INR 13,167 per sq. ft. in 2014 to INR 13,150 per sq. ft. in 2020.

Among the top 7 cities, Hyderabad’s HITECH City saw the highest rental appreciation of 26% between 2014 and 2020; in the same period, average property prices saw a 12% jump.

“ANAROCK data also reveals that from 2014 to 2020, rental prices in the top luxury markets saw consistent y-o-y growth – averaging between 3-6% annually,” says Mr Puri. “In contrast, capital appreciation in this period either remained range-bound or varied each year. Some years saw a decent yearly rise, even as high as 7%, while prices dropped by approx. -5% in other years – particularly in 2017, when many micro-markets saw capital prices plunge against the preceding year.”

In 2017, various structural reforms like RERA and GST were implemented. After this period, most localities only saw a marginal capital price rise averaging between 1-3% – while rental markets continued their growth run.

Due to the pandemic, 2020 was an outlier year for Indian rental markets, with most luxury localities recording either no change in average monthly rentals (compared to the preceding year) or seeing some decline. Without a doubt, COVID-19 impacted luxury rental markets amidst the growing WFH culture. Average property prices showed little or no change in 2020 over 2019.

Top Luxury Hotspots – Rental vs Capital Price Changes

The luxury residential rental market saw a setback due to COVID-19, but now appears to have recovered with demand for rental luxury properties back almost to pre-COVID levels. Monthly rentals in some of the localities have begun heading north. With vaccinations now rolling out and positivity returning, these rental market will pick up new momentum.

Some of the prominent luxury markets in the top 7 cities that performed well between 2014 and 2020 may see further short to mid-term boosts:

In Bengaluru, the luxury residential hotspot JP Nagar saw avg. monthly rentals appreciate by 24% in 2020 over 2014, while capital prices in the period rose by 8%. Likewise, Rajajinagar saw rental prices rise by 22%, and capital prices by 15%.

In MMR, luxury rentals in Tardeo rose 23% in this period, while capital prices increased by 8%. Similarly, in Worli, the average monthly rentals for a minimum 2,000 sq. ft. area home rose by 21%, while capital prices rose by 6%.
In NCR, rentals in luxury hotspot Golf Course Road increased by 17% while capital prices saw a meagre decline. In contrast, Golf Course Extension Road saw rentals increase by 18% and capital prices by 7% in this period.

In Chennai, luxury rentals in Anna Nagar rose 17% in this period, while capital prices increased by 10%. Similarly, in Kotturpuram, the average monthly rentals rose by 19% while capital prices rose by 7%.

In Hyderabad, the luxury residential hotspot Jubilee Hills saw avg. monthly rentals appreciate by 15% in 2020 over 2014, while capital prices in this period rose 10%. HITECH City saw the maximum rental price rise of 26%, while capital prices increased by 12%.

In Pune, the rentals in Koregaon Park rose 19% in this period, while capital prices increased by 14%. Similarly, in Prabhat Road, the average monthly rentals rose by 23% while capital prices rose by just 5%.

In Kolkata, luxury home rentals in Alipore rose 20% in 2020 against 2014, while capital prices increased by 13%. Similarly, in Ballygunge, the average monthly rentals rose 19% while capital prices rose by 13%.

Source: ANAROCK Research

Source: ANAROCK Research

Luxury Housing Sales in Delhi-NCR Rise in 2020, Supply Decreases…

Despite the pandemic, luxury housing (priced >INR 1.5 Cr) in Delhi-NCR performed reasonably well in 2020. Of the total housing sales of ~23,220 units that NCR saw last year, luxury housing comprised over 4% share – increasing marginally over 2019, when it was 3% (of 46,910 units). Noida witnessed total housing sales of ~3,240 units in 2020 of which luxury comprised a 9% share. Gurgaon sold a total of ~7,240 units of which luxury homes comprised a 5% share.

While there was a marginal rise in overall sales, new supply of luxury homes dropped to 9% of total 18,540 units in 2020 (from 12% or 35,280 units in 2019. Noida, Gurgaon and Ghaziabad were the only cities in NCR that saw new luxury supply in 2020.

“Affordable and mid segment housing continued to drive homebuyer demand in 2020, but luxury sales also saw some momentum in NCR despite the pandemic,” says Anuj Puri, Chairman – ANAROCK Property Consultants. “This is also because the impact of the pandemic on this buyer-class was not as significant as other budget categories. The discounts doled out by developers further made such properties more lucrative especially for the ‘real’ buyers who are prioritizing their home bases and willing to spend accordingly. Moreover, we are also seeing good traction from the NRIs amidst good deals and discounts and favourable rupee vs dollar value.”

Demand-Supply Dynamics

As per ANAROCK research, NCR in 2020 saw total housing sales of more than 23,220 units of which nearly 4% was in the luxury segment priced >INR 1.5 crore onwards. Back in 2019, NCR saw total housing sales of 46,910 units of which luxury units comprised just 3% overall share.

• Gurgaon saw maximum housing sales of approx. 7,240 units in entire 2020 of which luxury sales comprised 5% share. In 2019, of the total 13,240 units sold, luxury sales comprised 4% share.
• Greater Noida saw housing sales of approx. 6,950 units in 2020 of which luxury segment consisted of 2% share. In 2019, total sales here was 15,150 units of which luxury share was just 3%.
• Noida witnessed housing sales of approx. 3,240 units in 2020 of which luxury comprised 9% share. Back in 2019 the region saw sale of 6,620 units of which luxury sales had same 9% share.
• Ghaziabad saw housing sales of 3,780 units in 2020 of which luxury share was just 1% while in 2019 the city saw total sales of 7,860 units of which there were no luxury sales reported.
• Faridabad too saw limited sales in luxury segment. Of the total sales of 970 units in 2020 luxury comprised just 1% share while in 2019 of the total 1,630 units sold luxury had just 1% share.

From the supply perspective, NCR saw new launches of approx. 18,540 units in 2020 of which just 9% was within the luxury segment priced >INR 1.5 Cr. While in 2019, as many as 35,280 units were launched of which luxury comprised 12% share.

• Gurgaon saw maximum housing launches of approx. 11,180 units in entire 2020 of which luxury segment comprised 10% share. In 2019, of the total 19,350 units launched, luxury comprised 14% share.
• Greater Noida saw housing launches of approx. 1,820 units in 2020 of which luxury segment saw no new launches. In 2019, total launches here was 4,090 units of which luxury share was whopping 16%.
• Noida witnessed housing launches of approx. <1000 units in 2020 of which luxury comprised whopping 28% share while back in 2019 the region saw supply of 2,950 units of which luxury had 18% share.
• Ghaziabad saw housing supply of <500 units in 2020 of which more than half was in the luxury segment while in 2019 the city saw total supply of 2,430 units of which there was no new supply in the luxury category.
• Faridabad saw no new launches in the luxury segment in both 2019 and 2020. The total launches in 2020 were 3,050 units while in 2019 it was 2,860 units.