Tag: Dr. Samantak Das

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Resolution 2.0 measure by RBI to provide relief to real estate linked SME stakeholders

May 6, 2021 by Rekha Nair 0 Comments #Chief Economist and Head of Research & REIS, #Dr. Samantak Das, #JLL India

RBI has proactively stepped in to address the financial challenges arising due to the second wave of the pandemic. The Central Bank has announced a COVID loan book to support those directly involved in addressing the pandemic (healthcare sector) with on-tap liquidity of INR 50,000 crore to banks. RBI has also recognised the hardships faced by individuals, small businesses and medium and small enterprises due to the lockdown and provided Resolution 2.0 measures for restructuring loans to small borrowers up to Rs 25 cr. Other than individual borrowers, this will provide major relief to real estate linked SME players especially suppliers of input material for the sector. The working capital review will also help these stakeholders to tide over their liquidity issues as their cash flows have been partly impacted due to the recent lockdown restrictions in various states

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Residential sales recover over 90% to pre-Covid levels in Q1, 2021: JLL

Mar 25, 2021 by Neel Achary 0 Comments #Chief Economist and Head Research & REIS, #Dr. Samantak Das, #JLL, #Residential Market Update

Mumbai, March 25, 2021: Residential sales in Q1 (Jan-March) 2021 recovered to more than 90% of the volumes witnessed in Q1 2020 (pre-Covid) across the top seven cities, according to JLL Q1 Residential Market Update – Q1 2021 released today. The cities including Chennai, Hyderabad, Kolkata, and Pune surpassed the sales volumes of Q1 2020. Overall sales increased by 17% on a sequential basis. Importantly, sales either improved or stayed at similar levels (in Q1 2021 when compared to Q4 2020) in majority of the residential markets under consideration. Mumbai has consistently been the largest contributor to sales in the last four quarters. In Q1 2021, Mumbai accounted for 23% of the sales, followed by Delhi NCR with a share of 21%.

However, Kolkata saw the maximum increase in sales activity in Q1 2021 in comparison to the fourth quarter of 2020. In Kolkata, the offtake of residential units in Q1 2021 was driven by South Suburbs (Joka, Kasba, Behala, Jadavpur, Tollygunje) and East Suburbs (EM Bypass, Rajarhat, Topsia) with a combined contribution of more than 70%.

Residential market reached more than 90% of pre-Covid sales

Q1 2020

(in units)

 Q1 2021

(in units)

 Recovery

Sales in Q1 2021 as a proportion of sales in Q1 2020
Bengaluru           4,186           2,382 57%
Chennai           2,453           3,200 130%
Delhi NCR           5,941           5,448 92%
Hyderabad           3,027           3,709 123%
Kolkata           1,259           1,320 105%
Mumbai           6,857           5,779 84%
Pune           3,728           3,745 100%
Total        27,451        25,583 93%

Mumbai includes Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai

Source: Real Estate Intelligence Service (REIS), JLL Research

Chennai – sales was driven by Southern Suburbs (Perungudi, Pallavaram, Medavakkam, Navalur, Thalambur, Nanganallur) which accounted for nearly 60% of the total offtake during the quarter.

Hyderabad – the Western Suburbs (Gachibowli, Manikonda, Kukatpally) submarket accounted for more than 65% of the sales during the quarter.

Pune – North East (Viman Nagar, Kharadi, Wagholi) and North West (Hinjewadi, Wakad, Baner) accounted for 67% of the sales during the quarter.

 

Sales volume increased across most markets

Q2 2020

(in units)

 Q3 2020

(in units)

 Q4 2020

(in units)

 Q1 2021

(in units)

 Growth (%)

Q1 2021 over Q4 2020
Bengaluru 1,977 1,742 2,535           2,382 -6%
Chennai 460 1,570 2,500           3,200 28%
Delhi NCR 2,250 3,112 4,440           5,448 23%
Hyderabad 1,207 2,122 3,570           3,709 4%
Kolkata 481 390 438           1,320 201%
Mumbai 3,527 4,135 5,026           5,779 15%
Pune 851 1,344 3,323           3,745 13%
Total 10,753 14,415 21,832        25,583 17%

Mumbai includes Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai

Source: Real Estate Intelligence Service (REIS), JLL Research

“The sustained growth in sales presents clear signs of demand and buyer confidence coming back to the market. This has been on the back of historically low home loan interest rates, stagnant residential prices, lucrative payment plans and  freebies from developers and government incentives such as the reduction of stamp duty in states like Maharashtra and Karnataka (for affordable housing). The ease of lockdown restrictions and the commencement of the vaccination drive have further aided in bringing buyers back to the market,” said Dr. Samantak Das, Chief Economist and Head Research & REIS, JLL.

“In the fourth quarter of calendar year 2020, India’s economy returned to growth territory, recording a 0.4% rise in GDP. In tandem with the GDP growth, the pace of recovery in the residential market intensified with sales increasing by 51% when compared to the previous quarter. In Q1 2021, sales of residential units continued an upward trajectory. Sales, at the overall level, increased by 17% on a sequential basis,” he added

The Covid-19 pandemic tilted the scale further in favor of established developers. As the sector shows signs of recovery, prominent developers are expected to be at an advantage and capture a greater share of the market. Homebuyers have become even more cautious in their home purchase decisions. There is an increased preference for investing in projects by developers with an established track record. Only credible developers, who have execution capability as well as quality products, and conduct their business in a transparent manner will be able to operate in the post-covid era in a sustainable manner. Ultimately, this will lead to greater transparency and improved consumer sentiment in the market.

“The Government is committed to boost affordable housing. The recent Union Budget has extended the benefit of additional interest deduction on home loans for first-time homebuyers in the affordable segment. Further, there is a time extension to claim the tax holiday on profits from affordable housing projects until March 2022. The housing loan going below 7% for the first time in the last decade also triggered sales in all segments in the residential real estate. The buoyancy in the market manifested in the form of low mortgage rates and stable prices are expected to continue and attract fence-sitters and serious end users,” said Siva Krishnan, Managing Director, Residential Services (India), JLL

 

RBI is leading the way to recovery by holding policy rates at historically low levels to initiate a cycle of consumption led growth. As concerns related to jobs and a stable flow of income are alleviated, buyers are coming back to the market to make the most of this ‘great time to purchase a house’.

 

New Launches scale up, focus on affordable homes continues

Q2 2020

(in units)

 Q3 2020

(in units)

 Q4 2020

(in units)

 Q1 2021

(in units)

 Growth (%)

Q1 2021 over Q4 2020
Bengaluru 6,135 1,074 4,335           5,469 26%
Chennai 182 1,487 2,892           5,036 74%
Delhi NCR Negligible 699 2,244           4,734 111%
Hyderabad 5,034 5,396 10,313           8,591 -17%
Kolkata Negligible Negligible 638               583 -9%
Mumbai 2,294 2,242 3,223           4,616 43%
Pune 1,135 1,756 3,140           4,924 57%
Total 14,780 12,654 26,785        33,953 27%

Mumbai includes Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai

Source: Real Estate Intelligence Service (REIS), JLL Research

The first quarter of 2021 witnessed new launches of 33,953 residential units, a jump of 27% over the last quarter of 2020. Hyderabad continued to dominate new launches and accounted for more than a fourth of the overall launches during the quarter. Bengaluru, which formed more than 16% of the new launches followed. The markets of Delhi NCR and Chennai witnessed a substantial increase in launch activity during the quarter. New launches are still at 84% when compared to the pre-Covid levels of Q1 2020. Developers across the markets under review remain focused on the completion of under construction projects and clearing their existing inventory.

Development focus on mid and affordable segments continues in Q1 2021 with 69% of the new launches in the sub INR 10 million categories. In the coming quarters, the focus on these price segments is expected to continue with developers trying to reap the benefits of strong pent up demand in these segments. Most of the new launches in the markets of Bengaluru, Hyderabad, and Pune were in the sub INR 10 million category Bengaluru – 77%, Hyderabad – 76%, Pune – 100%.

Unsold inventory increases marginally

Q4 2020

(in units)

 Q1 2021

(in units)

 Growth (%) – Q4 2020 over Q3 2020
Aggregate (7 cities) 462,380 470,750 2%

Top 7 cities include Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkata

Mumbai includes Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai

Source: Real Estate Intelligence Service (REIS), JLL Research

As new launches outpaced sales, unsold inventory at various stages of construction across the seven markets under review increased marginally from 462,380 units to 470,750 units. Mumbai, Delhi NCR, and Bengaluru together account for 70% of the unsold stock. An assessment of years to sell (YTS) reveals that the expected time to liquidate this stock has increased from 4.2 years in Q4 2020 to 4.6 years in Q1 2021.

It’s a “buyer’s’ market with price continuing a downward trend

 

Residential prices in the majority of India’s residential markets have remained stagnant in the past few years. In Q1 2021, prices remained largely stagnant when compared to the previous quarter, across all the seven markets under review. This being said, it is important to point out that few developers in certain markets are providing moderate price discounts to boost sales. Moreover, developers are offering attractive freebies including payment schemes such as no EMIs for a year, no stamp duty and so on to attract homebuyers who pressed ‘pause’ in the last few months. This has led to a reduction in ‘effective prices. This rationalisation combined with reduced home loan rates has further improved affordability in the residential market.

As developers continue to focus on recovering the volumes lost amidst the pandemic and gaining a foothold in their respective markets, prices are expected to be largely range-bound across most of the markets in the short-term.

Sustained growth of the sector expected in 2021

Guided by the expected economic growth trajectory, the uncertainty around the stability of jobs and incomes is only expected to reduce in the coming quarters. This is likely to have a direct positive impact on the housing sector with enhanced buyer confidence.

Business World

With 10.6 million sq. ft, Bengaluru leads in flex space stock in the country: JLL

Nov 26, 2020 by Neel Achary 0 Comments #Chief Economist and Head of Research & REIS, #Dr. Samantak Das, #JLL India

Bengaluru: Bengaluru leads the flex space stock in the country at 10.6 million sq. ft according to JLL report – Reimagine Flexspaces A 360⁰ view. The city also has a higher penetration of flex space in the country at 4.8% as compared to the national average of 3%. Market penetration basically represents flex space as a proportion of total office stock. Bengaluru and Delhi NCR together account for more than 50% of the flex space stock in India, with Bengaluru housing around 10.6 million sq ft of such spaces.

The demand for flexible spaces in large cities such as Bengaluru is likely to grow, with businesses having a greater need for such spaces to accommodate portfolio expansion and contraction along with crisis support to flex their space needs as necessary.

Rahul Arora, JLL

“Bengaluru has one of the best ecosystems for the development and evolution of flex spaces in the country. Therefore, it is no wonder that today, the city almost leads in flex apace absorption owing to its large numbers of startups and IT/ITES companies, “said Rahul Arora, Managing Director, Bengaluru, JLL.

The country is expected to witness deeper penetration, throughout 2021 and beyond, the flex space market is forecast to grow at a slower pace and more organically. Irrespective of several short-term disruptions and challenges, increased demand from large enterprises, will support the growth of the flex space market to more than 50 million sq. ft. by 2023. It is anticipated that flexible space will grow by an average of around 15-20% per annum over the next three-to-four years, although this trajectory will not be linear. Previously expected levels of new investment are unlikely to be seen, as operators look to solidify their existing operations and it is likely that certain operators will not be able to weather the storm.

As corporates return to the workplace, they are likely to further leverage flexible space to reduce capital expenditure and create cost savings, while allowing for split teams and de-densification requirements. Developments that initially drove the growth of the flex market, like the focus on utilizing workplaces to boost productivity and drive dynamic work cultures, enhance emphasis on employee health etc., will continue to influence the next phase in India.

“While the flex-space market more than tripled in the last 3 years, the momentum going ahead will be relatively slower. Players are likely to tread cautiously, and the overall market is expected to expand 1.5 times from the current size. At the same time, demand for flexible space is likely to remain resilient and we expect the size of the flex space market to cross 50 mn sq. ft. by 2023 led by increased demand from larger enterprises,” Dr. Samantak Das, Chief Economist and Head of Research & REIS, JLL India.

In the commercial real estate space, flex spaces have become synonymous with adaptability. As preferences evolve, a range of flexible space options have taken shape to suit changing business needs, including remote working. To respond to the current disruption, and to lay the groundwork to deal with what may be permanent changes for the industry, flex space operators have been agile and are recalibrating their business strategies. They are now laying a greater emphasis on profitability and evolving strategies to ensure stable occupancy levels in their flex space centres.

Large enterprises to drive demand

The densification trend that had emerged over the last decade will likely reverse with enterprises leaning on flexible office space to relax space density. Large enterprises might also look at splitting up their offices to reduce commute times and dependence on public transport. However, with expected economic uncertainty, companies will be hesitant to commit large capital to real estate. In terms of strategy, leasing directly to a third-party flexible space operator is the most widely adopted model. A partnership model allows both landlords and operators to leverage each other’s strengths. There are several ways to implement a partnership, with revenue shares and management contracts being the most common. Under the revenue share option, both parties split the upside. In the case of a management contract, the operator gets a fixed payment, while the landlord assumes all the leasing risk and enjoys the upside. Despite the benefits of this approach, partnerships are relatively less common in India for now.

What the future holds

The entry of more than 300 flex space operators into the country helped commoditize the market. Prior to the pandemic, most of these operators were focused on attaining scale and capturing market share. However, the availability of capital, in the current scenario, will be a challenge. Players who have embarked on aggressive growth so far will find themselves strapped for capital. In such a scenario, the market is likely to witness consolidation activity driven by larger operators with financial wherewithal acquiring smaller ones. Flexible workplaces will continue to be a major influence on the future direction of the Indian office market. There will be an even greater focus on providing customized office space solutions and demand for flexible space will not only return but increase, as occupiers embrace the core plus flex model more widely. Despite the massive disruption from the impact of COVID-19, the future of flexible workspaces will remain optimistic.

Business World

Monetizing real estate assets can help corporate India retire long term debt of USD 341 billion: JLL

Nov 19, 2020 by Gouri Achary 0 Comments #corporate India, #Dr. Samantak Das, #JLL, #real estate, #real estate assets

Monetizing real estate assets can help corporate India retire long term debt of USD 341 billion according to JLL Research. However, banks have an overhang of non-performing loans for the last few years. RBI data on India’s economic-financial position in FY 2018-19 reveals that the value of land stood at USD 52 billion and building stood at USD 89 billion. This total of USD 141 billion is 41% of the outstanding long-term debt of USD 341 billion. One of the probable reasons for this situation is lower profits generated from the assets invested in.

An uncertain economic scenario has forced corporate finance heads to reimagine real estate assets as sources of funds to reduce debt. The aggregate financials of approximately 2.45 lakh non-government, non-financial companies indicate that debt accounts for less than 50% of their net worth.

The current pandemic has further worsened asset utilization and profitability. Though real estate assets are required for setting up business operations, they do not contribute directly to the products and services delivered. If these assets are monetized, it can help reduce substantial debt. Land values are recorded at historical prices in the balance sheet, while their market value could be substantially higher. Similarly, the sale value of the buildings would be higher than stated in the books of accounts. Funds generated through the sale of these assets could be high enough to cover the entire debt. The sale and leaseback of these assets will result in no impact on business operations.

 

image004

Source: RBI database of Indian Economy latest data and JLL research

 Speaking on the development, Dr. Samantak Das, Chief Economist and Head of Research & REIS India, JLL said, “With the fall in economic activity, COVID-19 has impacted asset utilization and profitability tremendously. In the current unprecedented circumstances, sale and lease-back of assets are likely to provide long term steady rental yields for funds with patient long term capital as monetization of these assets could reduce substantial debt, and funds generated through the sale of these assets could be high enough to cover the entire debt.”

One of the biggest challenges is the mindset of corporates, who feel that owning real estate is of utmost importance. In many cases, since land is allocated under various state industrial policies, the option of sale and leaseback is not considered. However, in today’s uncertain economic environment, corporate finance heads are likely to look at options using real estate as a source of liquidity. Investors may face challenges on account of ownership titles and valuation. Such deals could take longer time to close due to documentation and taxation issues.

The current pandemic has challenged our take on value, consistency, certainty and quality, which apply for investment decisions too. Investors will gain new lessons and thrive with the latest opportunities in the Indian real estate.

Business World

India’s flexible space market to cross 50 million sq. ft. by 2023: JLL

Nov 10, 2020 by Gouri Achary 0 Comments #Dr. Samantak Das, #JLL, #Ramesh Nair

JLL today launched a report titled JLL’s “Reimagine Flexspaces A 360⁰ view” which highlights that the current market penetration of flex spaces into India’s total office stock stands at 3.0%. The country is expected to witness deeper penetration, throughout 2021 and beyond, the flex space market is forecast to grow at a slower pace and more organically. Irrespective of several short-term disruptions and challenges, increased demand from large enterprises, will support the growth of the flex space market to more than 50 mn sq. ft. by 2023. It is anticipated that flexible space will grow by an average of around 15-20% per annum over the next three-to-four years, although this trajectory will not be linear.

Previously expected levels of new investment are unlikely to be seen, as operators look to solidify their existing operations and it is likely that certain operators will not be able to weather the storm.

“Flex space operators have changed the face of commercial real estate with their innovative offerings. This market is projected to grow at a steady pace throughout 2021 and beyond. Resultantly, the market penetration of flex spaces into total office space is likely to see a gradual increase from the current 3.0% to 4.2% by 2023. We expect this growth to continue, driven by demand, profitability and return-profile for investors, albeit at a slower pace resulting from the impact of COVID-19.” said Ramesh Nair, CEO & Country Head (India), JLL. “Technology is advancing at an exponential pace and will play a major role in the future of workplaces. In this era, operators that utilize technology to enable the creation of a safer and better work experience will have a competitive edge” he further added

As corporates return to the workplace, they are likely to further leverage flexible space to reduce capital expenditure and create cost savings, while allowing for split teams and de-densification requirements. Developments that initially drove the growth of the flex market, like the focus on utilizing workplaces to boost productivity and drive dynamic work cultures, enhance emphasis on employee health etc., will continue to influence the next phase in India.

“While the flex-space market more than tripled in the last 3 years, the momentum going ahead will be relatively slower. Players are likely to tread cautiously, and the overall market is expected to expand 1.5 times from the current size. At the same time, demand for flexible space is likely to remain resilient and we expect the size of the flex space market to cross 50 mn sq. ft. by 2023 led by increased demand from larger enterprises,” Dr Samantak Das, Chief Economist and Head of Research & REIS, JLL India.

At present, Bengaluru and Delhi NCR together account for more than 50% of the flex space stock in India, with Bengaluru housing around 10.6 mn sq. ft. of such spaces. Hyderabad with 4.5 mn sq. ft. and Mumbai with 4.3 mn sq. ft. of flex office stock follow. According to JLL, Hyderabad and Pune are currently among the fastest-growing markets in the country.

In the commercial real estate space, flex spaces have become synonymous with adaptability. As preferences evolve, a range of flexible space options have taken shape to suit changing business needs, including remote working. To respond to the current disruption, and to lay the groundwork to deal with what may be permanent changes for the industry, flex space operators have been agile and are recalibrating their business strategies. They are now laying a greater emphasis on profitability and evolving strategies to ensure stable occupancy levels in their flex space centres.

Large enterprises to drive demand

The densification trend that had emerged over the last decade will likely reverse with enterprises leaning on flexible office space to relax space density. Large enterprises might also look at splitting up their offices to reduce commute times and dependence on public transport. However, with expected economic uncertainty, companies will be hesitant to commit large capital to real estate.

In terms of strategy, leasing directly to a third-party flexible space operator is the most widely adopted model. A partnership model allows both landlords and operators to leverage each other’s strengths. There are several ways to implement a partnership, with revenue shares and management contracts being the most common. Under the revenue share option, both parties split the upside. In the case of a management contract, the operator gets a fixed payment, while the landlord assumes all the leasing risk and enjoys the upside. Despite the benefits of this approach, partnerships are relatively less common in India for now.

What the future holds

The entry of more than 300 flex space operators into the country helped commoditize the market. Prior to the pandemic, most of these operators were focused on attaining scale and capturing market share. However, the availability of capital, in the current scenario, will be a challenge. Players who have embarked on aggressive growth so far will find themselves strapped for capital. In such a scenario, the market is likely to witness consolidation activity driven by larger operators with financial wherewithal acquiring smaller ones.

Flexible workplaces will continue to be a major influence on the future direction of the Indian office market. There will be an even greater focus on providing customized office space solutions and demand for flexible space will not only return but increase, as occupiers embrace the core plus flex model more widely. Despite the massive disruption from the impact of COVID-19, the future of flexible workspaces will remain optimistic.

Business World

Indian real estate sector likely to register USD 4.8 bn institutional flow of funds in 2020: JLL

Nov 4, 2020 by Gouri Achary 0 Comments #Capital Markets Update | Q3 2020, #Dr. Samantak Das, #Indian real estate sector, #investors, #JLL, #Ramesh Nair, #real estate, #REIT

India’s real estate market attracted USD 235 mn in the capital in the third quarter of 2020 (Q3,2020), growing by 52% quarter-on-quarter (QOQ), according to JLL’s ‘Capital Markets Update | Q3 2020’ report released today. The India real estate sector is expected to draw USD 4.8 bn of capital in 2020, representing an 8% decline on 2019’s total transactional volume of USD 5.3 bn.

According to JLL, investors are most attracted to the country’s office sector, with interest remaining strong throughout the pandemic and the partial relaxation of the lockdown with USD 200 mn invested during Q3 2020. Concurrently, global investors actively sought asset portfolio opportunities, with two landmark portfolio transactions amounting to a total of USD 3.6 bn in investment value likely to be concluded in Q4 2020. In the primary markets, Mindspace Business Parks REIT- India’s second REIT issue of USD 600 mn was oversubscribed by 13 times in August 2020. The strong response to this REIT indicates a preference for cash flow opportunities in private and public markets.

“We’re expecting a broad-based ‘V-shape’ recovery in the Indian real estate market, but depending on the economic recovery and pandemic response, our estimates have substantial scope for an upward revision. We have already witnessed very positive signs of recovery in the office segment in Q3 with gross leasing at 13.8 mn sq. ft. The REITs market has done exceedingly well with the combined market cap of the India REITs at USD 6 bn accounting for 33% of the market cap of listed real estate companies,” said Ramesh Nair, CEO and Country Head (India), JLL.

Office assets remain the preferred choice

USD mn
Asset Class Q1 Q2 Q3 Q3/ Q2 growth rate Total
Residential 102 48 35 -28% 185
Office 505 66 200 202% 771
Warehousing 54 41        – -100% 93
Hotels 130             –        –                     –             –
Grand Total 791 155 235 52% 1180

Source: JLL Research

The review of investments in the first nine months of 2020 reveals that out of the USD 1.2 bn investments, Bengaluru, Chennai and Mumbai together accounted for 71% share. Bengaluru led the pack with 33% share of real estate investments.

“The impact of COVID-19 on the India real estate market has been unprecedented, but investors have remained bullish on the long-term prospects and voted with their deployments in the third quarter. Though we expect 2020 investments level to be marginally lower than 2019, the recovery will not be broad-based given that two large transactions slated to be concluded this year would account for 76% of the total investments estimated for 2020,” said Dr Samantak Das, Chief Economist and Head of Research & REIS (India), JLL.

Lessons from past and looking ahead

Post the Global Financial Crisis (GFC), investments in Indian real estate declined by 71% during Q1-Q3 2009 as compared to the same period in 2008. However, investors after the brief wait came back with lessons learnt. Investments during Q1-Q3 2010 saw a recovery of 92%. This year, a similar pattern has panned from Q1-Q3 2020 wherein investments declined by 73% although on a higher base.

Green shoots of recovery like a strong response to REITs, large office and retail asset portfolio deals in progress and robust office sector fundamentals indicate that a similar pattern which was witnessed in 2010 could unfold shortly. Indian real estate has come a long way, post the global financial crisis due to structural transformation as well as regulatory reforms introduced in the last decade.

REITs: Redefining investments in Indian real estate

According to JLL, increased awareness of REITs will ensure acceptability and lead to a gradual increase in retail interest and deeper institutional involvement in this segment. Brookfield Asset Management has filed for India’s third REIT with an expected issue size of USD 600 mn. As the market matures, JLL expects global funds are looking for an established track record, an ability to remain transparent and deliver predictable returns, which were demonstrated by India’s two listed REITs.

Business World

Pune witnessed 55% rise in new residential launches in Q3; sales grew 58% sequentially: JLL

Oct 30, 2020 by Gouri Achary 0 Comments #Dr. Samantak Das, #JLL Research., #realty, #Sanjay Bajaj

Pune witnessed 1,756 new unit launches in Q3 2020, an increase of 55% over the previous quarter, according to JLL Research. This strong growth was on a low base of Q2 2020 which was significantly impacted owing to the severe lockdown restriction in the wake of an ongoing pandemic. Prominent locations such as Kharadi, Hinjewadi, Wakad and Hadapsar saw increased momentum and accounted for more than 50% of the launches during the quarter.

With economic activities gradually getting back on track, the city is likely to see a strong recovery in sales after the slump in Q2 2020. Housing sales grew by 58% on a sequential basis clocking about 1,344 units. Homebuyers preferred projects from developers who have an established track record and which are closer to prominent office locations.

There are also a higher number of enquiries for completed and nearing completion projects as compared to those which have recently launched. There is growing acceptance of digital platforms amongst homebuyers to complete their home purchase process from raising an enquiry to making the payment through the developer’s online window.

Q2 2020 Q3 2020 Growth (%) – Q3 2020 over Q2 2020
Launches (units) 1,135 1,756 55%
Sales (units) 851 1,344 58%

Source:  Real Estate Intelligence Service (JLL), 2020, JLL Research

“Pune witnessed a growth of 55% in terms of new launches over the last quarter. Developers continued to align new supply with demand and the majority of these launches were in affordable and mid segments. Further, the city has also witnessed healthy traction in the luxury segments which was earlier not visible ” said Sanjay Bajaj, Managing Director, Pune, JLL India.

“In the subsequent quarters, the translation of demand into sales will primarily hinge on enhanced consumer confidence, which in turn depends upon the continued implementation of progressive government policies amidst the gradual revival of the Indian economy at large.” “Pertaining to residential, the scenario for Pune has improved significantly in the last few months, sales has certainly increased owing to a reduction in the stamp duty by the government, low bank intrest rates, attractive schemes by builders, and competitive rates.

The onset of the festive season will help drive sales, and in addition to the reasons stated above we have reached approximately 75% of sales of pre-COVID levels and this quarter will see steady growth as well. Recent trends indicate projects that are near completion stage are witnessing larger traction. Buyers are purchasing assets from more renowned developers with a proven track record, added product value and ability to deliver,” he added.

Residential market activity all over India is also being supported by renewed interest from NRIs in Q3 2020,  resulting in more pent up demand in the market and increased enquiries received by developers.

“The further easing of lockdown restrictions and the upcoming festive season might help in bringing buyers back to the market. An assessment of years to sell reveals that the expected time to liquidate stock has increased from 3.6 years in Q2 2020 to 4 years in Q3 2020. While the residential space remains unpredictable, favourable supply dynamics could deliver potential upside for both homebuyers and developers in the medium-term,” said, Dr. Samantak Das, Chief Economist and Head of Research & REIS, India, JLL.

 Focus on mid and affordable segment continues in the country

New launches were restricted with 12,654 units launched in the third quarter, a decline of 14% quarter-on-quarter. Developers focused on completion of under-construction projects and clearing their existing inventory. Hyderabad and Mumbai accounted for over 60% of the total new launches in the quarter. The drop in new launches was driven by Bengaluru, which witnessed a substantial decline of over 80% as compared to Q2 2020. Development focus on mid and affordable segments continued in Q3 2020 with nearly 75% of the new launches in the sub INR 1 crore category. Moving ahead, the focus on these price segments is expected to continue with developers focusing to reap the benefits of strong pent up demand.

Q2 2020 (in units) Q3 2020 (in units) Growth (%) – Q3 2020 over Q2 2020
Bengaluru 6,135 1,074 -82%
Chennai 182 1,487 717%
Delhi NCR Negligible 699 –
Hyderabad 5,034 5,396 7%
Kolkata Negligible Negligible –
Mumbai 2,294 2,242 -2%
Pune 1,135 1,756 55%
Total 14,780 12,654 -14%

Mumbai includes Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai

Source: Real Estate Intelligence Service (REIS), JLL Research

Unsold inventory dips across the country

Q3 2020 witnessed sales outpacing new launches as unsold inventory across the seven markets (Mumbai, Delhi NCR, Bengaluru, Hyderabad, Chennai, Pune and Kolkata ) decreased marginally from 459,378 to 457,427 units. Mumbai and Delhi NCR together account for more than 50% of the unsold stock which are at various stages of construction.

Q2 2020 (in units) Q3 2020 (in units) Growth (%) – Q3 2020 over Q2 2020
Aggregate (7 cities) 459,378 457,427 -0.4%

Top 7 cities include Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkata

Mumbai includes Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai

Source: Real Estate Intelligence Service (REIS), JLL Research

Over the last few years, residential prices in most markets have remained stagnant. Developers have been operating with low margins and the chances of a significant reduction in prices is unlikely. In Q3 2020, prices remained largely stable across all the seven markets when compared to the previous quarter.

However, it is important to note that developers in certain markets are providing moderate price discounts to kickstart sales, thereby facilitating cash flows to tide over the crisis in the short term. Moreover, developers are offering flexible payment schemes such as no EMIs for a year and other schemes to attract prospective homebuyers who pressed ‘pause’ in the last few months. This could be the first signs of a broader recovery of the residential market in the country.

NOTE: *The comparison pertains to only last two quarters since the current crisis has no parallel and has infused uncertainty which we have not witnessed in the past decades.

Business World

Office absorption up 64% in Q3 vs Q2 2020, new completions increase 59%: JLL

Oct 6, 2020 by Gouri Achary 0 Comments #Dr. Samantak Das, #JLL Research., #Ramesh Nair

Mumbai, October 2020: India’s office market witnessed a net absorption of 5.4 million sq. ft. in the quarter ending September 2020 (Q3), an increase of 64% versus quarter ending June 2020 (Q2). This is an encouraging trend especially after net absorption dipped almost at a similar rate in the second quarter, according to JLL Research.

The third-quarter office rebound growth was led by Bengaluru and Hyderabad, which together accounted for nearly 80% of the net absorption in Q3 2020. The heightened activity in Bengaluru indicates a gradual resurgence in take-up of spaces coupled with the translation of pent up demand from Q2 this year.

Net absorption1 gaining pace

  Q2 2020 (mn sq ft) Q3 2020 (mn sq ft) Growth (%) – Q3 2020 over Q2 2020
Bengaluru 0.45 2.72 504%
Chennai 0.10 0.21 110%
Delhi NCR 0.50 0.20 -60%
Hyderabad 1.18 1.54 31%
Kolkata Negligible 0.02 –
Mumbai 0.45 0.28 -38%
Pune 0.64 0.46 -28%
Total 3.32 5.43 64%

Source: Real Estate Intelligence Service (REIS), JLL Research

“While we continue to see the impact of the pandemic on various businesses, there is a significant surge in activity across most office markets under consideration. This is seen in gross leasing which more than doubled from the previous quarter at 13.8 million sq ft. At the same time, it is important to note that large and mid-sized occupiers across major markets continue to review their real estate portfolios in a bid to optimise cost, higher emphasis is being given to sustainability and employee well-being as well as the adoption of flexible working practices.” said Ramesh Nair, CEO and Country Head, India, JLL.

While the share of IT/ITeS occupiers in gross leasing2 dipped to 43% in Q3 2020 from 61% in Q2 2020, e-commerce and manufacturing sectors gained significant shares during the third quarter forming 16% (negligible in Q2 2020) and 17% (5% in Q2 2020) respectively, owing to the surging demand of e-commerce during COVID19.

Confidence in new completions

New completions during Q3 2020 increased by 59% quarter-on-quarter with 9.2 million sq ft of new stock coming to market. “With lockdown restrictions being relaxed in the third quarter in most of the markets under review, office projects

1 Net absorption refers to net office space take-up during the quarter.

2 Gross leasing refers to total office space take-up and includes precommitment in upcoming office buildings and excludes renewals

in the final stages of construction or pending receipt of occupancy certificates came onboard. This resulted in an increase in the supply of office space, even surpassing 8.6 million sq. ft. witnessed in Q1 2020,” said Dr. Samantak Das, Chief Economist and Head of Research & REIS, India, JLL.

New completions rebound

  Q2 2020 (mn sq ft) Q3 2020 (mn sq ft) Growth (%) – Q3 2020 over Q2 2020
Bengaluru 0.0 4.70 –
Chennai 0.0 0.0 –
Delhi NCR 1.94 0.22 -89%
Hyderabad 2.38 3.33 40%
Kolkata 0.0 0.0 –
Mumbai 1.45 0.30 -79%
Pune 0.0 0.63 –
Total 5.77 9.18 59%

Source: Real Estate Intelligence Service (REIS), JLL Research

In sync with net absorption, Bengaluru and Hyderabad led the increase in new completions accounting for 87% of the total new completions in Q3 2020. Notably, new completions in both these markets even went past the average new completion levels witnessed in the four quarters of 2019.

Vacancies go up in Grade A offices

Increased office space consolidation and optimisation strategies of corporate occupiers resulted in subdued net absorption levels, which could not keep pace with new completions. This resulted in overall vacancy increasing from 13.1% in Q2 2020 to 13.5% in Q3 2020. Despite the rise in vacancy levels in southern markets, Bengaluru, Chennai and Pune continued to hover in single digits. This augurs well for a strong rebound in these markets when economic and business conditions improve in the coming quarters.

Vacancy in Grade A office

  As of Jun 30 2020 (%) As of Sep 30 2020 (%)
Bengaluru 5.3% 6.5%
Chennai 7.9% 7.6%
Delhi NCR 28.0% 27.9%
Hyderabad 9.2% 11.3%
Kolkata 26.4% 26.3%
Mumbai 13.4% 13.4%
Pune 4.4% 4.7%
Total 13.1% 13.5%

Source: Real Estate Intelligence Service (REIS), JLL Research

Rentals across markets remain stable

Except for Bengaluru which witnessed a marginal increase in rents, office rents in Q3 2020 vs Q2 2020 remained stable across all markets under review. With stable rental values and low vacancy levels, the office market in India continues to be landlord favourable. However, it is important to note that landlords across markets have become more flexible in providing increased rent-free periods, reduced rental escalation and fully furnished deals to prominent occupiers which reduces their net outgo.