India Real Estate 3494

RESEARCH
INDIA REAL ESTATE

RESIDENTIAL AND OFFICE
JULY - DECEMBER 2015
AHMEDABAD | BENGALURU | CHENNAI | HYDERABAD | KOLKATA | MUMBAI | NCR | PUNE

INDIA REAL ESTATE RESEARCH
CONTENT
04 INDIA
12 AHMEDABAD
21 BENGALURU
41 CHENNAI
59 HYDERABAD
76 KOLKATA
88 MUMBAI
105 NCR
124 PUNE
2 3
RESIDENTIAL MARKET
RESIDENTIAL MARKET LAUNCHES, ABSORPTION AND
PRICE TRENDS
2015 ended with the
FIGURE 1
HALF-YEARLY LAUNCHES AND ABSORPTION TRENDS (TOP EIGHT CITIES) lowest number of new
LAUNCHES ABSORPTION
launches and sales
volumes across the top
Hetal Bachkaniwala 180,000
Vice President - Research eight cities of India since
INDIA
160,000
2010. While the sales
volume during the year
Number of units
was similar to that in 2014,
140,000
new launches fell sharply,
by 22%
120,000
100,000
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
Source: Knight Frank Research

Note: The top eight cities are Mumbai, NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata
and Ahmedabad
• 2015 ended with the lowest was followed by NCR and Mumbai
number of new launches and sales at 24% and 23%, respectively.
volumes across the top eight cities
• However, cities such as Pune,
of India since 2010. While the sales
Hyderabad and Ahmedabad have
volume during the year was similar
bucked the trend with a growth of
to that in 2014, new launches fell
9%, 11% and 50%, respectively,
sharply, by 22%.
in H2 2015 compared to H2 2014.
• However, H2 2015 witnessed a The sharp rise in Ahmedabad’s
marginal recovery in both launches new launches could be attributed
and absorption as compared to H1 to the low base in H2 2014, when
2015. The festive season seems to new launches had come to a
have aided the market in gradually complete standstill on the back of
recovering from one of the worst poor demand.
periods in the Indian residential
• Going forward, Mumbai and NCR
market.
will continue to witness fewer new
• New launches and the sales launches in H1 2016. However,
volume have recovered from their new launches in Bengaluru are
low of 113,500 units and 121,050 projected to jump by more than
units, respectively, in H1 2015 to 21%, as the steady sales volume
126,860 units and 140,210 units, has encouraged developers to
respectively, in H2 2015. push new projects in the coming
months.
• Bengaluru witnessed the sharpest
drop in new launches, at 26% in
H2 2015, compared to the same
period in the preceding year. This
4 5
the ticket size of `10 mn. The witnessing better traction than all leaves the mid-segment as the only
CITY-WISE SPLIT OF RESIDENTIAL LAUNCHES corresponding figures for NCR the other segments since the last feasible option.
and Bengaluru are 8% and 20%, two years. The primary reason
• In terms of affordability, the
FIGURE 2 respectively. for this trend is that homebuyers
Ahmedabad and Kolkata markets
HALF-YEARLY NEW LAUNCHES (TOP EIGHT CITIES) are averse to buying in peripheral
• The maximum number of are leading, as the total new
H1 2015 H2 2015 H1 2016 E locations despite the availability
new launches in H2 2015 was launches in H2 2015 below the
of affordable housing, as poor
40,000 witnessed in the mid-segment, ticket size of `2.5 mn in these
access to employment hubs and
with a ticket size of `2.5 – 7.5 cities stand at 45% and 33%,
35,000 underdeveloped infrastructure
mn. This segment has been respectively.
render them unattractive. This
30,000
Number of units
25,000 FIGURE 4
TICKET-SIZE SPLIT OF LAUNCHED UNITS IN H2 2015
20,000
<`2.5 MN `2.5-5 MN `5-7.5 MN `7.5-10 MN `10--20 MN >`20 MN
15,000 100%
10,000 90%
80%
5,000
70%
0
MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD KOLKATA AHMEDABAD 60%
50%
40%
30%
CITY-WISE SPLIT OF RESIDENTIAL SALES 20%
10%
FIGURE 3
0
HALF-YEARLY ABSORPTION (TOP EIGHT CITIES) MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD KOLKATA AHMEDABAD
H1 2015 H2 2015 H1 2016 E
40,000
35,000
30,000
PREMIUM RESIDENTIAL MARKET LAUNCHES AND ABSORPTION TRENDS
Number of units
25,000
• The premium segment had taken
20,000
FIGURE 5 a hard hit in sales volume in 2014
15,000 HALF-YEARLY LAUNCHES AND ABSORPTION TRENDS IN and H1 2015. This led to the
PREMIUM MARKETS (TOP EIGHT CITIES) developer community taking a
10,000
cautious stand before launching
LAUNCHES ABSORPTION
5,000 new projects in this segment. New
5,000 launches in H2 2015 fell drastically,
0 by 33% compared to the same
MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD KOLKATA AHMEDABAD
period in the preceding year.
Source: Knight Frank Research 4,000
• In contrast to the sharp fall in
Number of units
new launches, the sales volume

• The sales volume in H2 2015 in 2015. The unprecedented floods the sales volume in Bengaluru is remained steady in H2 2015.
3,000 The steady growth in cities
most of the cities has shown a in the city during the second half estimated to grow by 28% in H1
positive trend, with NCR and of the year impacted homebuyer 2016, it is projected to grow by such as Hyderabad, Kolkata
Kolkata growing at the fastest sentiments adversely, thereby 42% in Kolkata during the same and Ahmedabad has helped in
pace. While NCR witnessed a 15% resulting in lower sales. period. 2,000 maintaining the sales momentum
jump in sales, Kolkata saw it grow in the premium segment.
• Going forward, other than • Mumbai continues to remain the
by 29%.
Bengaluru and Kolkata, the cities most unaffordable market in India,
0
• Chennai recorded the sharpest fall will continue to observe a tepid with more than 26% of the new H1 2014 H2 2014 H1 2015 H2 2015
in the sales volume, at 15% in H2 growth in the sales volume. While launches in H2 2015 being above
6 7
UNSOLD INVENTORY LEVELS (TOP EIGHT CITIES) OFFICE MARKET

FIGURE 6
RELATIVE HEALTH OF THE RESIDENTIAL MARKETS (TOP EIGHT CITIES) OFFICE MARKET STOCK, NEW COMPLETIONS, ABSORPTION AND VACANCY TRENDS
20
(TOP SIX CITIES)
Based on the sales
• Absorption surpassed new
momentum of the FIGURE 1
completions for the second NEW COMPLETIONS, ABSORPTION AND VACANCY LEVEL (TOP SIX CITIES)
preceding eight quarters, HYDERABAD straight year across the top six
NEW COMPLETIONS ABSORPTION VACANCY (RHS)
15 cities of India, pushing vacancy
it will take around 11
Age of inventory in quarters
MUMBAI levels to an eight-year low.

quarters to exhaust the NCR Vacancy levels reached 15.6% in 25 20%
H2 2015, significantly lower from

current unsold inventory CHENNAI
the peak of 21% in 2012. 20
AHMEDABAD
available in the top eight 10 18%
• While 41.1 mn sq ft of space was
cities of India PUNE absorbed in 2015, only 34.5 mn 15
mn sq.ft.
BEGALURU KOLKATA
sq ft of new supply came online. 16%
The trend is similar to what was
10
5 observed in 2014, when 38.3
5 10 15 20 mn sq ft of space was absorbed 14%
against a supply of 34.9 mn sq ft. 5
QTS
Source: Knight Frank Research • H2 2015 witnessed a 14% growth
Note: The size of the bubble indicates the quantum of unsold inventory. QTS is the quarter to in transactions at 23.2 mn sq 0 12%
sell unsold inventory. H1 2014 H2 2014 H1 2015 H2 2015 H1 2016E
ft, compared to 20.4 mn sq ft
• Fewer new launches have helped in residential markets in the country, recorded in H2 2014. Strong Source: Knight Frank Research
bringing down the unsold inventory with low quarters to sell unsold demand from the IT/ITeS and The top six cities are Mumbai, NCR, Bengaluru, Pune, Chennai and Hyderabad
level in India during the last year. inventory and minimal ages of manufacturing industries has
unsold inventory. pushed the transaction volume to amount of occupied space, at 113 the last six months.
Unsold inventory decreased by
this level. mn sq ft.
3%, from 714,970 units in H2 2014 • Among the top six cities of India,
• NCR continues to be the worst
to 691,700 units in H2 2015. • The combined office space stock • During H2 2015, while Bengaluru Bengaluru currently has the
performing market in India, as
it will take more than four years in the top six cities of India has and Mumbai observed the highest lowest vacancy level at 7.5%,
• Based on the sales momentum of
to exhaust the existing unsold currently reached 560 mn sq ft, of absorption at 5 mn sq ft each, NCR followed by Pune and Hyderabad
the preceding eight quarters, it will
inventory of 206,000 units. This which 473 mn sq ft is occupied. recorded the maximum delivery at 10.8% and 14.6% respectively.
take around 11 quarters to exhaust
is significantly higher than the While NCR leads in terms of total of new space at 6 mn sq ft. Other Mumbai and NCR have the highest
the current unsold inventory.
average time of less than three office space stock, at 138 mn sq ft, than NCR, transactions in all the vacancy levels at 20% and 21.5%
• Pune and Bengaluru continue to Bengaluru accounts for the highest cities surpassed new supply during respectively.
years that the other cities will take.
be among the best performing
OUTLOOK FOR THE NEXT SIX MONTHS FIGURE 2

OFFICE STOCK AND OCCUPIED STOCK (AS OF DECEMBER 2015)
H1 2015 H1 2016E Growth
STOCK OCCUPIED STOCK
Launches (units) 113,499 118,402 4% 160
140
Absorption (units) 121,051 133,556 10%
120
• The improvement in the overall massive 28% growth. • Prices are estimated to remain 100
mn sq.ft.
economic sentiment and the stagnant in the coming six months, 80

• In terms of new launches, H1
subdued growth in price are as the existing unsold inventory
2016 will remain at a similar level 60
set to improve the sales volume will keep them in check. However,
as H1 2015. While Mumbai, NCR, 40
marginally in H1 2016. While the none of the cities are expected
Chennai and Hyderabad will
growth in sales volume across to witness a fall in prices, as the 20
continue to record negative growth
most of the cities is expected new supply entering the market 0
rates in new launches, Bengaluru
to remain in the range of 4-5%, will be considerably lower than the MUMBAI NCR BENGALURU PUNE CHENNAi HYDERABAD
and Pune will surge ahead.
Bengaluru is set to lead with a demand for housing.
8 9
• The IT/ITeS sector continued

FIGURE 3 FIGURE 5
to lead in terms of absorption
CITY-WISE NEW COMPLETIONS, ABSORPTION AND DEAL SIZE ANALYSIS
The Bengaluru residential
across the top six cities in H2 VACANCY LEVELS IN H2 2015
2015. While one-third of this space H2 2014 H2 2015
market strove to recover
was transacted in Bengaluru, it NEW COMPLETIONS ABSORPTION VACANCY (RHS)
100,000 from the setback that it
is surprising to note that Mumbai 8 25%
accounted for more than 20%
had suffered in the first
7 80,000
of the total. Since Mumbai has 20.0% 21.5%
20% half of the year (H1 2015).
6
historically been identified with
the banking, financial services 5 15.4%
60,000 While the number of new
15%
mn sq.ft.
14.6%
sq.ft.
and insurance (BFSI) sector, such 4 launches continued to
10.8% 40,000
a large number of transactions in
the IT/ITeS space is contrary to the
3 10% fall in H2 2015 compared
7.5% 20,000
popular belief that the city is not 2
5%
to H2 2014, the rate of
conducive for IT/ITeS occupiers. 1
0 decline was relatively
• The development of Navi Mumbai 0 0 MUMBAI NCR BENGALURU PUNE CHENNAi HYDERABAD
and Thane as IT/ITeS hubs at MUMBAI NCR BENGALURU PUNE CHENNAi HYDERABAD restrained at 26%. The
the periphery of Mumbai, along Source: Knight Frank Research city’s sales volume, on
with the shortage of quality office
OUTLOOK FOR THE NEXT SIX MONTHS the other hand, remained
space in other cities, seems to total space absorbed in H2 2015. • Bengaluru continues to lead in
be drawing occupiers to the city. NCR and Hyderabad recorded terms of average deal size, as
H1 2015 H1 2016E Growth steady
Additionally, the sharp appreciation the maximum transactions in this compared to the rest of the cities
in rental values across cities sector. in India. The average deal size in New completions (mn sq ft) 15.7 17.0 8%
such as Bengaluru, Pune and Bengaluru stood at 80,000 sq ft
• The manufacturing sector Absorption (mn sq ft) 17.9 18.8 5%
Gurgaon over the last two years in H2 2015, significantly higher
witnessed a phenomenal recovery
has enabled Navi Mumbai and than the 21,000-39,000 sq ft
in terms of office space demand, Vacancy 17% 15%
Thane to emerge as attractive IT/ recorded in the rest of the cities.
as its share in the total space
ITeS destinations on the back Consolidation of space within the Source: Knight Frank Research
went up from just 9% in H2 2014
competitive rental values. IT/ITeS sector, along with strong • New completions are set to get will continue to remain strong and • Rents in most of the cities have
to more than 18% in H2 2015.
demand from the ecommerce a marginal boost in the coming is projected to grow by 5% in H1 increased steadily since the last
• The other services sector, which The uptick in demand from
segment, seems to have pushed six months, as cities such as 2016 from 17.9 mn sq ft to 18.8 two years. Going forward, this
constitutes ecommerce, media, manufacturing was observed
the average size of deals in Mumbai, Bengaluru, Chennai and mn sq ft. This will exert further trend is expected to continue in
consulting and telecom, among across all the six cities, with
Bengaluru to this level. Hyderabad will witness the delivery pressure on the vacancy levels, the coming six-month period, with
others, accounted for 23% of the Mumbai and NCR leading the way.
of multiple projects. which are expected to drop to 15% Pune and Bengaluru projected to
by the end of H1 2016. grow at the fastest pace.
• However, demand for office space
FIGURE 4
SECTOR-WISE ABSORPTION SPLIT IN H2 2015
FIGURE 6
IT/ITeS BFSI ( Including support service) MANUFACTURING OTHER SERVICES CITY-WISE NEW COMPLETIONS, ABSORPTION AND VACANCY
LEVELS FORECASTED FOR H1 2016
100%
NEW COMPLETIONS ABSORPTION VACANCY (RHS)
80%
8 25%
7
60% 21.5%
mn sq.ft.
19.7% 20%
6
40% 5
15%
mn sq.ft.
13.4% 14.4%
4
20%
3 10%
8.1%
0 2 6.8%
5%
MUMBAI NCR BENGALURU PUNE CHENNAI HYDERABAD 1
Source: Knight Frank Research 0 0

MUMBAI NCR BENGALURU PUNE CHENNAi HYDERABAD
10 11
RESIDENTIAL MARKET H2 2015 brings offers

RESIDENTIAL MARKET LAUNCHES, ABSORPTION AND some cheer, with a
PRICE TRENDS positive sales volume
growth compared to
FIGURE 1
AHMEDABAD MARKET TRENDS the same period in the
LAUNCHES ABSORPTION WT. AVG. PRICE (RHS) previous year. Fuelled by
12,000 3,000 the festive season during
Hetal Bachkaniwala
Vice President - Research 10,000 the second half of the year,
AHMEDABAD
2,800
8,000
demand pushed the sales
2,600
volume up by 13%.
` / sq ft
Number of units
6,000
2,400
4,000
2,200
2,000
0 2,000
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
• The situation in Ahmedabad’s worsened the oversupply situation

residential markets deteriorated in the city.
in 2015. While its sales volume
• However, H2 2015 offers some
continued to fall, new launches
cheer, with a positive sales volume
made a quick recovery.
growth compared to the same
• The sales volume in Ahmedabad period in the previous year. Fuelled
fell by 9% during 2015, to 16,800 by the festive season during the
units from 18,500 in the year second half of the year, demand
before. This is the city’s lowest pushed the sales volume up by
sales volume in the last six years 13%, from 8,020 units in H2 2014
and has nearly halved from its to 9,075 in H2 2015.
peak of 30,000 units in 2012.
• The weighted average price rise
• New launches recovered by 11% has remained muted at 2-3% in the
during 2015, to 15,500 units from last six months, and we expect it
14,000 in 2014. This has increased to increase in the same range over
the stress in the market and the next six months.
MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES

• North Ahmedabad, with locations 2015, 78% of the new launches in market.
such as Gota, New Ranip, Tragad, this market were below the ticket
• New launches in East and West
Chandkheda and Motera, has size of `5 mn.
Ahmedabad have dropped in the
witnessed the maximum number
• Central Ahmedabad is another last year, as developers are still
of new launches during H2 2015.
market that witnessed a significant trying to sell the residential units in
With prices in West and Central
jump in new launches during their previously-launched projects
Ahmedabad breaching the
H2 2015. Given the dismal price that remain unsold despite nearing
homebuyers’ affordability level,
performance in the rest of the completion.
North Ahmedabad has emerged
city since the last two years,
as the most preferred destination
developers seem to have shifted
for affordable housing. During H2
their focus back to the Central
12 13
FIGURE 2
MICRO-MARKET-WISE RESIDENTIAL SALES
With the dismal price MICRO-MARKET SPLIT OF LAUNCHED UNITS
performance in the rest H2 2014 H1 2015 H2 2015 MICRO-MARKET LOCATIONS

40%
of the city since the last 35% 35%
Central Paldi, Vasna, Navrangpura, Maninagar, Dudheshwar, Ambawadi
35%
two years, developers 30% 29% East Naroda, Vastral, Nikol, Kathwada Road, Odhav
26%
seem to have shifted their 25% 23% 23%22%
22% North Gota, New Ranip, Tragad, Chandkheda, Motera
focus back to the Central 20% 19% 19%
15% South Narol, Vatva, Vinzol, Hathijan
market. 15%
12% West S G Highway, Prahlad Nagar, Bopal, Thaltej, Science City Road
10% 8%
5% 6%
5%
0
CENTRAL EAST NORTH SOUTH WEST
H2 2015
7,490
units
H2 2014
4,990
units
H1 2015
8,060
units
FIGURE 3
TICKET SIZE SPLIT OF LAUNCHES DURING H2 2015
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
-
< `2.5 MN `2.5 - 5 MN `5 - 7.5 MN `7.5 - 10 MN `10-20 MN >-`20 MN
14 15
• The micro-market split of FIGURE 4

absorption has not witnessed MICRO-MARKET-WISE RESIDENTIAL SALES
any significant change in the last STRONG DEMAND FROM HOMEBUYERS BRINGS BACK DEVELOPER FOCUS ON
H2 2014 H1 2015 H2 2015
six months. While the shares of THE CITY CENTRE
40%
Central and North Ahmedabad
36%
have increased marginally since 35% Central Ahmedabad, with locations thereby disappointing homebuyers and more modern apartments in
32%
H1 2015, the shares of the rest of 30% 30% 30%
30% 28% such as Paldi, Naranpura, who had expected a double-digit the vicinity. Sensing this demand,
the micro-markets have reduced
25% Ambawadi and Vasna, has growth. However, the residential the developer community launched
slightly.
20%
witnessed a phenomenal recovery markets in Central Ahmedabad several projects in 2015, resulting
• Central Ahmedabad’s share has 17% 18%17%
in the last year. While the sales continued to witness a steady in a four-fold jump in the number of
been increasing over the last 12 15%
14% 14%14% volume dipped by 37%, from 1,200 appreciation despite the sluggish units launched during the year. A
months. Better connectivity with 10% 8%
9%
units in 2013 to less than 760 units demand. This scenario seems to total of 1,950 units were launched
the city centre, proximity to the 4%
5%
central business district (CBD) and in 2014, there was a trend reversal have revived homebuyer interest in in 2015, compared to less than 480
0 in 2015, when sales jumped by more locations such as Paldi, Naranpura, units in the preceding year.
the presence of a well-developed
retail market continue to attract than 90% to 1,460 units. There are Ambawadi and Vasna, despite
While Central Ahmedabad still
homebuyers to this micro-market Source: Knight Frank Research
several reasons for such a dramatic the high ticket size of the projects
despite its higher pricing. holds an unsold inventory of 6.3
recovery in sales: located there.
quarters, it is considerably lower
Homebuyers in Ahmedabad Another reason for the uptick in than the city’s 7.6 quarters of unsold
consider price appreciation in demand in Central Ahmedabad inventory. Hence, compared to other
H2 2015 property an important variable is the launch of lifestyle projects cities where the residential market
in their purchase decision, even with all the amenities of modern
9,075
of the central zones is suffering due
for properties bought for self- buildings. This has attracted a large to sluggish demand and high unsold
units
consumption. Since 2013, price number of homebuyers residing inventory, Ahmedabad’s Central
H2 2014 growth in most locations in in old buildings within Central zone is a very bright spot.
8,020 Ahmedabad has remained stagnant, Ahmedabad and scouting for bigger
units
H1 2015
PREMIUM RESIDENTIAL MARKET LAUNCHES, ABSORPTION AND PRICE TRENDS
7,750 MICRO-MARKET PREMIUM LOCATIONS
units
Central Ambawadi, Navrangpura, Shahibaug, Nehru Nagar
West Ambli, Bodakdev, Jodhpur, Prahlad Nagar, Satellite, Thaltej, Vastrapur
MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS AS OF DECEMBER 2015 FIGURE 5

PREMIUM MARKET TRENDS
A
CENTRAL 7% • Central Ahmedabad accounts for LAUNCHES ABSORPTION WT. AVG. PRICE (RHS)
B only 7% of the total number of 1,400 6,000

EAST 24% under-construction units in the
C city, as the majority of the new 1,200
NORTH 34% projects are being launched in
5,500
D 1,000
SOUTH 13% other parts of the city. 5,000
Number of units
E • The maximum under-construction 800
B
C WEST 22% units are present in North 4,500
` / sq ft
600
Ahmedabad, with locations such
A D 4,000
as Gota, Tragad, Chandkheda and 400 Note: Premium markets include locations
Motera witnessing a construction
where the average ticket size of a residential
boom since the last three years. 200 3,500
unit is above `15 mn, are in close proximity
E This is followed by East and West to the central business district of the city and
Ahmedabad, with a 24% and 22% 0 3,000
have witnessed new project launches in the
H2 2013 H1 2014 H2 2014 H1 2015 H2 2015
share, respectively. preceding three years
Source: Knight Frank Research Source: Knight Frank Research
16 17
• The premium market of have fallen drastically, by 60% have boosted project prices in
Ahmedabad, which constitutes during the same period. the premium segment, with H2 PRICE MOVEMENT DURING H2 2015
locations such as Ambawadi, 2015 observing a 9% price growth
• Lack of investor interest in the
Bodakdev, Jodhpur, Navrangpura compared to H2 2014. Product WEIGHTED AVERAGE PRICE MOVEMENT IN AHMEDABAD
peripheral markets due to poor
and Prahlad Nagar, among differentiation, extra amenities and
price performance has shifted
others, has observed a positive close proximity to the city centre WEIGHTED AVERAGE PRICE IN H2 2015
the focus back to the premium LOCATION 12 MONTH CHANGE 6 MONTH CHANGE
growth in sales volume, at 30% have helped the newly-launched (`/SQ FT)
locations.
during H2 2015, compared to the projects command a stronger price
same period in the previous year. • Fewer new launches and the growth in these locations. Ahmedabad 2,770 3.3% 1.5%
However, new project launches steady growth in sales volume
Premium markets 5,325 9.0% 3.7%
AHMEDABAD MARKET HEALTH

PRICE MOVEMENT IN SELECT LOCATIONS
FIGURE 6 • The quarters to sell unsold PRICE RANGE IN H2 2015 12 MONTH 6 MONTH
LOCATION MICRO-MARKET
QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS inventory (QTS) is the number (`/SQ FT) CHANGE CHANGE
AHMEDABAD PREMIUM MARKETS of quarters required to exhaust Ambawadi Central 5,500 - 8,500 5% 2%
the existing unsold inventory in Navrangpura Central 5,500 - 8,500 4% 2%
24
the market. The existing unsold
Mani Nagar Central 3,500 - 6,500 2% 1%
inventory is divided by the average
20
sales velocity of the preceding Paldi Central 5,000 - 6,800 2% 1%
eight quarters in order to arrive at Naroda East 2,000 - 3,500 1% 0%
16
No. of Quarters
the QTS number for that particular Vastral East 1,800 - 2,200 2% 1%
quarter. A lower QTS indicates a
12 Nikol East 1,800 - 2,200 1% 0%
healthier market.
Prahlad Nagar West 5,000 - 6,000 6% 3%
8 • The QTS for Ahmedabad has
Satellite West 5,500 - 7,200 1% 0%
been increasing gradually since
4 December 2013 and currently Thaltej West 5,000 - 7,000 5% 2%
stands at 7.6 quarters. However, Vastrapur West 5,500 - 7,500 2% 0%
0 the QTS for the premium markets Bopal West 3,500 - 5,000 2% 1%
DEC-13 MAR-14 JUN-14 DEC-14 MAR-15 JUN-15 SEP-15 DEC-15
in the city has witnessed a much
Chandkheda North 2,500 - 3,800 3% 1%
sharper rise and is currently at 21
quarters. Motera North 2,800 - 3,600 2% 1%
FIGURE 7 Gota North 3,000 - 3,800 3% 1%
• West Ahmedabad is the worst
MICRO-MARKET-WISE QTS VS AGE OF INVENTORY performer among the city’s zones. Source: Knight Frank Research
CENTRAL WEST NORTH SOUTH EAST High ticket sizes and a supply glut • The price growth across most
14
are the primary reasons for the locations in Ahmedabad during H2 The price growth across
poor performance reported by this 2015 has been tepid, despite the
zone. sales volume witnessing a marginal
most locations in
• Central Ahmedabad is currently
recovery. The pressure of the unsold Ahmedabad during H2
inventory has restricted developers
the best performing market, as 2015 has been tepid,
11 from hiking prices in most of the

restricted supply and steady
demand have helped in bringing
newly-launched projects. despite the sales volume
down the quarters to sell unsold • Prices in certain premium witnessing a marginal
inventory there. locations, such as Ambawadi, Prahlad
8 Nagar and Thaltej, have increased by
recovery. The pressure of
• With a poor price appreciation
and a supply glut in the rest of
5-6% during the last 12 months on the unsold inventory has
the back of the restricted supply and
the city’s zones, investor focus
the strong homebuyer preference for
restricted developers from
has shifted back to Central
5 Ahmedabad. This has helped in
these locations. hiking prices in most of the
5 8 11 14 pushing up the sales volume in this newly-launched projects.
zone during the last 12 months.
QTS
18 19
OUTLOOK FOR THE NEXT SIX MONTHS
Projections H1 2015 H1 2016E Growth

South Ahmedabad will
continue to witness a Launches (units) 8,060 9,070 13%
subdued sales volume, as Absorption (units) 7,750 8,080 4%
its great distance from the Weighted average price (`/sq ft) 2,640 2,770 5%
city centre, the presence Source: Knight Frank Research
of a large number of • The positive sentiment in the economic front. Sangeeta Sharma Dutta
manufacturing units and residential market due to the Lead Consultant - Research
BENGALURU
• South Ahmedabad will continue to
revival in manufacturing activity,
poor infrastructure facilities the improving business sentiment
witness a subdued sales volume,
as its great distance from the city
are expected to restrict and the renewed traction Gujarat
centre, the presence of a large
International Finance Tec-City
homebuyer interest in this (GIFT) are expected to usher in
number of manufacturing units and
poor infrastructure facilities are
zone. a double-digit growth in new
expected to restrict homebuyer
launches during H1 2016. We
interest in this zone.
forecast that new launches will
increase by 13% in H1 2016, to • The sales volume in West
9,070 units, compared to 8,060 Ahmedabad is estimated to
units in H1 2015. increase during H1 2016 compared
to H1 2015, albeit at a slower pace
• North and East Ahmedabad will
compared to the other parts of the
continue to dominate in terms of
city. High ticket size and the ample
new launches, as their proximity
availability of relatively cheaper
to GIFT and the availability of
options in other micro-markets of
large tracts of vacant land make
the city could delay a full recovery
these micro-markets attractive to
in the sales volume of this zone.
developers.
• However, the growth in the city’s
sales volume will be limited to
4% during H1 2016 compared
to the same period last year, as
homebuyers are still in a wait-and-
watch mode, expecting further
positive signs on the country‘s
20 21
RESIDENTIAL MARKET MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES
BENGALURU RESIDENTIAL MARKET LAUNCHES, FIGURE 2

MICRO-MARKET SPLIT OF LAUNCHED UNITS
ABSORPTION AND PRICE TRENDS
H2 2014 H1 2015 H2 2015
The Bengaluru residential FIGURE 1
The southern zone of the
40% 37% 38%
market strove to recover BENGALURU MARKET TRENDS city witnessed the majority
35% 34%
from the setback that it LAUNCHES ABSORPTION WT. AVG. PRICE (RHS)
28%
32% of the projects below the
30%
26%
had suffered in the first 40,000 5,000
25%
25% 25% `2.5 mn ticket size in H2
22%
half of the year (H1 2015). 35,000
20% 2015. The expectation
While the number of new 30,000 15% of better connectivity,
Number of units
13% 11%
25,000 9%
launches continued to 10% arising from the planned
` / sq ft
20,000 4,500 5%
fall in H2 2015 compared 0% 0% 0% Bangalore Metro rail in
15,000 0
to H2 2014, the rate of 10,000 CENTRAL EAST NORTH SOUTH WEST its second phase, has
decline was relatively 5,000 Source: Knight Frank Research resulted in these southern
restrained at 26%. The 0 4,000 • The southern market, which had • The southern zone of the city
peripheral locations
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
city’s sales volume, on witnessed a somewhat waning witnessed the majority of the coming up as promising
Source: Knight Frank Research developer interest in H2 2014, projects below the `2.5 mn ticket
the other hand, remained saw a 30% growth in launches in size in H2 2015, accounting for
budget destinations. By
• The Bengaluru residential market price appreciation.
steady strove to recover from the setback H2 2015. This can be attributed almost 88% of the total new contrast, North Bengaluru
• With the market struggling to to the number of residential launches in that segment. A major
that it had suffered in the first half
regain its past composure after the projects that were launched in portion of these launches were in
witnessed the launch
of the year (H1 2015). While the
subdued real estate sentiments the peripheral locations. Besides, the distant peripheral locations of the most number of
number of new launches continued
that had impinged upon the city positive sentiment in the IT/ in South Bengaluru, such as
to fall in H2 2015 compared to residential units priced
since H2 2014, developers have ITeS sector seems to have led Chandapura, Akshaya Nagar,
H2 2014, the rate of decline was
become cautious regarding their to the resurgence of residential Electronics City, Begur and Hosa above the ticket size of
restrained at 26%, compared to
projects, thereby restricting their development in this region. Road. The expectation of better
the steep fall it had witnessed in `20 mn
number of launches. connectivity, arising from the
H1 2015. • North Bengaluru, which had
• On a positive note, an uptick was planned Bangalore Metro rail in
• Significantly, 2015 witnessed witnessed the highest number of
observed in both new launches its second phase, has resulted
the lowest number of launches new launches in H2 2014 and H1
and sales in H2 2015 compared H1 in these southern peripheral
in 5 years, to the tune of 33% as 2015, saw a restricted number of
2015. We expect the market to pick locations coming up as promising
compared to 2014. launches in H2 2015. However, the
up again in the next six months, budget destinations.
region exudes optimism regarding
• The city’s sales volume, on the owing mainly to the large quantum the housing demand in the • By contrast, North Bengaluru
other hand, remained steady. of office space transacted in the forthcoming period, owing to the witnessed the launch of the most
Notwithstanding the decline in city during 2015 as well as the imminent emergence of the office number of residential units priced
launches, the market sentiment projected new office absorption sector there. above the ticket size of `20 mn – to
regarding sales held relatively firm in H1 2016. We estimate new the tune of around 45%. Notably,
and witnessed a marginal dip of launches to increase by 21% in H1 • East and West Bengaluru’s shares,
locations such as Hennur Road,
2% in H2 2015 compared to H2 2016, compared to H1 2015. which had dipped slightly in the
Thanisandra and Hebbal saw a
2014. previous six months, reinstated
• The sales volume is also expected number of new launches in the
their growth potential in H2 2015,
• Meanwhile, the weighted average to improve in the next six months, premium housing segment.
with an increasing trend of new
prices continued to scale to the tune of around 28%, on a launches. The presence of the • Approximately 66% of the total
upwards at a gradual pace and year-over-year (YOY) basis. Bangalore Metro rail towards West number of new launches in
saw an increase of 4% in H2 Bengaluru, operational at several Bengaluru belonged to the ticket
• On the price front, we expect
2015 compared to H2 2014. The key locations, has increased size of `2.5–7.5 mn, making it the
increased growth in H1 2016
increase in construction costs and the location’s attractiveness, segment that witnessed the most
compared to H1 2015. The period
the improvement of infrastructure and we foresee the number of traction in the city.
is estimated to witness a 5%
in select zones of the city have new launches picking up in the
increase in the annual weighted
primarily been responsible for this forthcoming months.
average price.
22 23
H2 2015
24,190
units
H2 2014
32,589
units
H1 2015
21,400
units
FIGURE 3
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
-
< `2.5 MN `2.5 - 5 MN `5 - 7.5 MN `7.5 - 10 MN `10-20 MN >-20 MN
CENTRAL EAST WEST NORTH SOUTH
24 25
MICRO-MARKET LOCATIONS H2 2015

Central M.G. Road, Lavelle Road, Langford Town, Vittal Mallya Road, Richmond Road 27,849
units
East Whitefield, Old Airport Road, Old Madras Road, K.R. Puram, Marathahalli
H2 2014
West Malleswaram, Rajajinagar, Yeshwanthpur, Tumkur Road, Vijayanagar
North Hebbal, Bellary Road, Hennur, Jakkur, Yelahanka, Banaswadi
28,445
units
Koramangala, Sarjapur Road, Jayanagar, J.P. Nagar, HSR Layout, Kanakapura Road, H1 2015
South
Bannerghatta Road
22,234
units
FIGURE 4
MICRO-MARKET SPLIT OF RESIDENTIAL SALES
H2 2014 H1 2015 H2 2015
42%40%
40% 39%
35%
Despite its smaller market MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS AS OF DECEMBER 2015
30% 26% 29%
23% 26% 25%
size, West Bengaluru
25% 23%
witnessed a good growth
20%
15%
in sales in H2 2015. The A
10% perception of the region CENTRAL 0%
10% 8% 8% B
5% being an industrial one is WEST 8%
0% 0% 0% C
0
gradually dissipating, with EAST 25%
good connectivity through D
23%
Source: Knight Frank Research B C NORTH
the Bangalore Metro rail E
D SOUTH 44%
• The micro-market split of along the Outer Ring Road and the availability of
A
absorption was observed to have and in the Whitefield area have
lifestyle projects playing a
undergone a few changes in the contributed majorly to the growth
past year. While the share of the in this region. key role. E
northern and southern regions of
• Despite its smaller market size,
the city saw a marginal decline
West Bengaluru witnessed a good
in the sales volume in H2 2015
growth in sales in H2 2015. The Source: Knight Frank Research
compared to H2 2014, East and
perception of the region being
West Bengaluru saw an increase
an industrial one is gradually
in their share of sales volume in H2
dissipating, with the availability
2015
of lifestyle projects playing a key • South Bengaluru accounts for the cheaper in the peripheral locations
• East Bengaluru saw increased role. Good connectivity through major share of the total number in the south, compared to the
sales, owing largely to the the Bangalore Metro rail is also of units under construction, to the other micro-markets.
employment hubs and social one of the prime factors behind the tune of 44%, given that it has been
• The northern and eastern markets
infrastructure in place in the region’s progress. witnessing large-scale residential
have fairly uniform shares of units
region. The IT/ITeS office projects development in the past years.
under construction, with West
The region is preferred due to its
Bengaluru gradually emerging on
good social infrastructure and the
the residential market scene.
presence of employment hubs,
leading developers to launch
their projects there. Additionally,
property prices are relatively
26 27
PREMIUM RESIDENTIAL MARKET LAUNCHES, ABSORPTION AND PRICE TRENDS BENGALURU MARKET HEALTH
MICRO-MARKET PREMIUM LOCATIONS FIGURE 6

QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS
Central M.G. Road, Lavelle Road, Langford Town, Vittal Mallya Road, Richmond Road
BENGALURU PREMIUM MARKETS
13
East Whitefield, Indiranagar
12
West Malleswaram, Rajajinagar, Yeshwanthpur 11
North Hebbal, Bellary Road 10
No. of Quarters
South Koramangala, Jayanagar, J.P. Nagar 9
West Bengaluru is
8 currently the best
7 performing market of
FIGURE 5
PREMIUM MARKET TRENDS 6 the city, with the lowest
LAUNCHES ABSORPTION WT. AVG. PRICE (RHS)
5
QTS, signifying that
4
2,500 8,800
DEC-13 MAR-14 JUN-14 DEC-14 MAR-14 JUN-15 SEP-15 DEC-15 the market has been
8,600
witnessing substantial
2,000
8,400 FIGURE 5 traction in recent times.
Number of units
1,500
MICRO-MARKET-WISE QTS VS AGE OF INVENTORY The Bangalore Metro
8,200
11
rail being operational at
` / sq ft
8,000
1,000
several key locations and
10
The premium market of 7,800
the availability of lifestyle
500
Bengaluru observed a 7,600 9 projects are some of the

decline of 16% in new 0 7,400 prime factors behind this
8
launches during H2 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015
development.
2015 as compared to 7
Note: Premium markets include locations where the average ticket size of a residential unit
H2 2014. Developers
is above ` 20 mn, are in close proximity to the central business district of the city and have 6
refrained from launching witnessed new project launches in the preceding three years
premium projects in the • The premium market of Bengaluru, period last year.
5
5 6 7 8 9 10 11 12
face of a subdued market, which constitutes locations such
• Generally, the demand for premium QTS
as Lavelle Road, Richmond Road, Source: Knight Frank Research
concentrating, in the Indiranagar and Malleswaram,
units in Bengaluru has always
been lower than in other segments, • The quarters to sell unsold in the city is much higher, at 10.1
meantime, on completing among others, observed a decline
as the city is mainly an end-user inventory (QTS) is the number quarters currently. This is mainly
of 16% in new launches during of quarters required to exhaust due to the relatively slow rate of
their earlier projects. H2 2015 as compared to H2
market, driven by the IT/ITeS and
other services sectors, which the existing unsold inventory in absorption in the premium housing
2014. Developers refrained from the market. The existing unsold segment.
prefer mid-end residences.
launching premium projects in inventory is divided by the average
• Not surprisingly, due to the • West Bengaluru is currently the
the face of a subdued market, sales velocity of the preceding
slackening of the premium housing best performing market of the city,
concentrating, in the meantime, on eight quarters in order to arrive at
market, the weighted average with the lowest QTS, signifying that
completing their earlier projects. the QTS number for that particular
price growth YOY in the premium the market has been witnessing
• While H2 2015 was characterised quarter. A lower QTS indicates a
segment grew at a sluggish pace substantial traction in recent times.
by a constricted number of healthier market.
in H2 2015, at 2%, as compared to The Bangalore Metro rail being
launches in the premium housing • The QTS for Bengaluru has operational at several key locations
H2 2014.
segment, cautious market been increasing gradually since and the availability of lifestyle
sentiments led to a marginal September 2013, and currently projects are some of the prime
decline of 1% in demand for such stands at 7.9 quarters. However, factors behind this development.
properties, as against the same the QTS for the premium markets However, West Bengaluru still does
28 29
not have a sufficient inventory and • North Bengaluru shares almost

sales volume compared to the the same fate as its southern PRICE MOVEMENT DURING H2 2015
other zones of the city. counterpart regarding the age
of inventory, but having evolved WEIGHTED AVERAGE PRICE MOVEMENT IN BENGALURU
• On the other hand, South
later than the South, it enjoys the
Bengaluru is one of the worst
advantage of a smaller unsold
performing markets, with the LOCATION PRICE RANGE IN H2 2015 (`/SQ FT) 12 MONTH CHANGE 6 MONTH CHANGE
inventory size and a lower QTS.
largest quantum of unsold
Thus, we expect this market to
inventory in the city and the
gain momentum once the office Bengaluru 4,780 4% 3%
highest QTS, indicating that the
sector gains prominence in the
pace of absorption in the region is Premium markets 8,515 2% -1%
near future.
considerably slow.
• The premium residential market of • Price appreciation across most • The premium housing segment of 1% in the values in H2 2015 in
• East Bengaluru has a relatively
Central Bengaluru does not have a locations in Bengaluru has been observed a lower rate of growth in premium housing. This decline can
lower QTS and age of inventory
key role to play due to its minimal rather tepid during the last 12 the weighted average price in the be attributed to the large unsold
than the South, thereby having the
unsold inventory size. months, ranging between 2–10%. last 12 months, compared to the inventory that has been building
potential to perform better in the
The growth in price slowed down growth in the city’s overall price. up, owing to the increasing QTS.
forthcoming months.
further in the last six months, While the city’s overall price growth
primarily due to the huge unsold has been pegged at 4%, the
inventory present in the market. premium housing segment saw a
The range of price appreciation price appreciation of 2%. However,
IMPENDING GUIDANCE VALUE INCREASE SETS THE MARKET ABUZZ during the period has been within when compared with the weighted
1–5%. average prices six months prior,
The Bengaluru residential real avail of the benefit, post which there Meanwhile, this hike is not expected there has been a slight decline
estate market is at the cusp of is a lull in the market, till the market to find favour with the realty
witnessing an increase in guidance reconciles to the new values and industry, which is already sitting on PRICE MOVEMENT IN SELECT LOCATIONS
value, the reverberations of which transactions pick up. However, this a huge unsold inventory pile-up. The
PRICE RANGE IN H2 2015 12 MONTH 6 MONTH
may reach far and wide. While in year there has not been any unusual sector has urged the government LOCATION MICRO-MARKET
(`/SQ FT) CHANGE CHANGE
general parlance guidance value spike in property registrations. While to withdraw the revision owing to
Langford Town Central 15,000–21,000 3% 0%
refers to the minimum value at the yearly revision can yield income the slackening sales growth, as well
which a property sale can be for the state, on the other hand, it Lavelle Road Central 22,000–30,000 0% 0%
as the fact that this step will make
registered, in essence, guidance is bound to impact property buyers homes unaffordable for buyers. It K.R. Puram East 4,000–6,750 2% 0%
value strives to bring about sanity adversely, particularly those from remains to be seen whether the new Whitefield East 4,500–8,500 4% 0%
in property values in a market that the mid and low-income segment, guidance values cut ice with the Marathahalli East 4,500–7,100 3% 1%
is strife-ridden with cash-strapped as rates are hiked by factoring in the buyers or lead the market to arrive Indiranagar East 9,000–12,500 2% 0%
developers and vacillating buyers. amount payable to the government. at an impasse. Yeshwanthpur West 6,500–10,750 8% 1%
According to latest rules, these Malleshwaram West 9,000–13,250 6% 1%

In 2015, the government had issued
values are to be revised on a yearly a set of preliminary notifications, Rajajinagar West 8,500–14,000 2% 0%
basis. Till 2011, the government proposing an increase in guidance Tumkur Road West 4,000–5,000 3% 2%
used to revise the values once in value the extent of which ranged Yelahanka North 4,500–7,500 4% 4%
three or four years. The objective from 10% to 200% in some cases. Hebbal North 5,000–9,800 2% 2%
behind putting forth the new annual However, with the slowdown Hennur North 4,500–6,700 10% 5%
revision rules is to bridge the huge witnessed in the realty industry, it Thanisandra North 4,000–7,500 5% 0%
gap between the market rates and decided to put on hold the revision Sarjapur Road South 4,500–7,200 4% 0%
the guidance values. The revision before releasing the values in 2016. Electronics City South 4,000–6,500 2% 0%
is usually adjusted to inflation and A relook was taken into the draft Kanakapura Road South 4,300–6,000 0% 0%
primarily aims to capture the trends rates and the rates were revised
Bannerghatta Road South 4,200–7,200 2% 0%
in market transactions in order to further, resulting in some areas
arrive at a true value. It has been seeing a marginal reduction while
observed that typically there is a a few others ended with increased
frantic scramble for registrations by rates.
buyers before the revision, so as to
30 31
OFFICE MARKET
While H2 2015 has been Projections H1 2015 H1 2016E Growth

BENGALURU OFFICE MARKET STOCK, NEW
a period of cautious Launches (units) 21,400 25,870 21% The Bengaluru office
COMPLETIONS, ABSORPTION AND VACANCY TRENDS
revival, with launches and Absorption (units) 22,234 28,367 28% market continued to lead
FIGURE 1
absorption improving over Weighted average price (`/sq ft) 4,650 4,890 5% the way, with the highest
OFFICE SPACE STOCK AND VACANCY LEVELS
H1 2015, we expect the Source: Knight Frank Research STOCK OCCUPIED STOCK VACANCY (RHS) office space absorption in
first half of the year 2016 • While H2 2015 has been a period traction due to their proximity to the country. With 5 mn sq
140 12%
to remain steady. Market of cautious revival, with launches employment hubs. ft transacted in H2 2015,
and absorption improving over H1
sentiments are likely to be 2015, we expect the first half of the
• South Bengaluru will continue 120
10%
the city recorded a total
to witness new launches, but at
positive, owing primarily to year 2016 to remain steady. Market
locations further away from the
100
8% absorption of 11.10 mn
sentiments are likely to be positive,
the large-scale absorption city centre, thereby creating a sq ft in the year. Vacancy
mn sq.ft.
80
owing primarily to the large-scale
potential for budget housing in the 6%
in the office sector. absorption in the office sector.
peripheral locations. 60 rates, which have been
• The projected new launches and 4% steadily declining over the
• On the price front, we expect 40
absorption in H1 2016 will exceed
the weighted average price in
those of H1 2015 by 21% and 28%, 2% years, continued to remain
Bengaluru to increase reasonably, 20
respectively, since the decline in at 8% in H2 2015.
by 5% in H1 2016 compared to H1
H1 2015 had been quite significant. 0 0%
2015, on the back of an improved
Integrated developments in H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
sales volume.
locations with good connectivity Source: Knight Frank Research
are likely to see good traction in H1
2016. • The Bengaluru office market occupied stock in the country.
continued to lead the way, with the
• West and North Bengaluru are • Vacancy rates, which have been
highest office space absorption
expected to witness increased steadily declining over the years
in the country. With 5 mn sq ft
developer and buyer interest, owing to the consistent absorption
transacted in H2 2015, the city
chiefly due to infrastructure and relatively restrained new
recorded a total absorption of
development, while East completions, continued to remain
11.10 mn sq ft during the year.
Bengaluru will continue to remain at 8% in H2 2015.
a preferred market owing to the • Bengaluru attracted substantial
• In the forthcoming months, the
job opportunities in the region. occupier interest, the demand
office space demand in Bengaluru
Locations around the Outer Ring being driven primarily by the IT/
is expected to remain upbeat,
Road will witness increased ITeS sector and start-ups, which
driven by corporate occupiers
resulted in 2015 emerging as the
on an expansion mode as well
period with the highest absorption
as investors, both global and
in four years, falling marginally
domestic, who are considering
short of the absorption in 2011.
ownership of their operating
Significantly, start-ups accounted
assets.
for 3.4 mn sq ft of absorption in
2015, including pre-committed • The total absorption during H2 015
deals of 3.2 mn sq ft, compared was 5 mn sq ft, while only 4.5 mn
to the 0.5 mn sq ft transacted in sq ft of new office space came
2014. online.
• The city witnessed progressive

new office space additions during
the period, taking the total office
stock to 122.5 mn sq ft in H2 2015,
while the occupied stock was
recorded at 113 mn sq ft, making it
the office market with the highest
32 33
FIGURE 2 denying that e-commerce holds such as Think & Learn inking been an improvement over its
NEW COMPLETIONS AND ABSORPTION- ANNUAL great potential as well. Despite office space deals of 116,000 sq share in H2 2014. Big-size deals
fewer e-commerce transactions ft while e-commerce transactions by companies such as Mercedes-
NEW COMPLETION ABSORPTION
in H2 2015, as compared to the in H2 2015 include Flipkart taking Benz and Safran have augmented
7
large-size deals in the previous up 18,000 sq ft of office space in the sector’s share.
The IT/ITeS sector, whose 6
six months (H1 2015), developers Koramangala.
have recognised that the additional
share in absorption had • Meanwhile, a few major
5 demand coming in from the sector
transactions were recorded in
fairly lessened in the last has had a positive effect on the
4
the manufacturing sector in H2
city’s office market. Some of the
few quarters, resurged mn sq.ft 2015. Although its share of 10%
prominent transactions in the other
is minimal in the total office space
strongly in H2 2015. The 3
services sector include companies
absorption in H2 2015, this has
sector accounted for 70% 2
of the total absorption in 1
H2 2015. Despite fewer 0
e-commerce transactions H1 2014 H2 2014 H1 2015 H2 2015 H1 2016E
in H2 2015, as compared Source: Knight Frank Research H2 2015

to the large-size deals in SECTOR ANALYSIS 5.00
the previous six months mn sq.ft.
(H1 2015), developers

• The IT/ITeS sector—the key ft) and IBM (400,000 sq ft), among H2 2014
demand driver of the city’s office others. Significantly, it was the
have recognised that the market, whose share in absorption
had fairly lessened in the last few
e-commerce sector that stole the
limelight in the previous six months
4.40
mn. sq.ft.
additional demand coming quarters—resurged strongly in in H1 2015, with around 3.2 mn sq H1 2015
in from the sector has had H2 2015. The sector accounted ft of pre-committed deals.
a positive effect on the

for 70% of the total absorption
• The share of the other services
6.07
in H2 2015, as compared to H2 mn sq.ft.
sector, of which the e-commerce
city’s office market. 2014, which had seen a 53%
sector is a part, has dropped from
share. This can be attributed to
29% in H2 2014 to 16% in H2 2015.
the large-size deals transacted
Although the IT/ITeS sector led the
by IT majors, such as Accenture
way in the share of office space
(400,000 sq ft), Infosys (480,000 sq
absorption in H2 2015, there is no
FIGURE 3 DEAL SIZE ANALYSIS

SECTOR-WISE SPLIT OF ABSORPTION
H2 2014 H1 2015 H2 2015 FIGURE 4
80% AVERAGE DEAL SIZE AND NUMBER OF DEALS
70%
70% AVERAGE DEAL SIZE (SQ.FT.) NUMBER OF DEALS (RHS)
60% 90,000 120

53%
50% 80,000
50%
70,000
Number of deals
40% 36% 60,000 80
30% 29% 50,000
sq.ft
40,000
20% 16%
13% 11% 10% 30,000 40
10% 20,000
3% 4% 4%
10,000
0
IT/ITeS BFSI* MANUFACTURING OTHER SERVICES 0 0
H1 2014 H2 2014 H1 2015 H2 2015
Note: BFSI includes BFSI support services
34 35
SELECT TRANSACTIONS
OCCUPIER BUILDING LOCATION APPROX. AREA (SQ FT)
Metric Stream AMR Tech Park Hosur Road 90000
Citrix Embassy GolfLinks business park Intermediate Ring Road 145000
Resource Pro Karle Town Center Hebbal Outer Ring Road 86000
Mercedes-Benz Gopalan Global Axis Whitefield 140000
HSBC RMZ Futura 2 Bannerghatta Road 140000
Tech Mahindra Golden Hill Supreme IT park Electronics City 160000
Cadence RMZ Ecoworld Sarjapur Outer Ring Road 200000
IBM Bhartiya City Thanisandra Road 400000
Think & Learn IBC Knowledge Park Bannerghatta Road 116000

• The average deal size has lesser number of deals indicated

increased significantly in H2 2015, a dearth of large, ready office
coming close to 80,180 sq ft, configurations in the market.
while it stood at 55,430 sq ft in H2
• The drop in deal sizes also justifies
2014 and 54,250 sq ft in H1 2015.
the slightly lower quantum of
However, the number of deals has
absorption in H2 2015 (5 mn sq
reduced in the last six months,
ft) as against the absorption in H1
from 112 in H1 2015 to 88 in H2
2015 (6.07 mn sq ft).
2015.
• This denotes that while deals with
bigger ticket sizes were inked in
H2 2015 over the other periods, the
BUSINESS DISTRICT ANALYSIS
BUSINESS DISTRICT CLASSIFICATION

BUSINESS DISTRICTS MICRO-MARKETS
M.G. Road, Residency Road, Cunningham Road, Lavelle Road, Richmond

Central Business District (CBD) and off-CBD
Road, Infantry Road
Suburban business district (SBD) Indiranagar, Koramangala, Old Airport Road, Old Madras Road
Peripheral Business District (PBD) East Whitefield

Peripheral Business District (PBD) South Electronics City, Bannerghatta Road
Peripheral Business District (PBD) North Thanisandra, Yelahanka, Devanahalli
Outer Ring Road (ORR) Hebbal ORR, Marathahalli ORR, Sarjapur Road ORR
36 37
peripheral region accounted for a share in the city’s absorption in the 2014.
FIGURE 5 The Outer Ring Road 10% share of the total absorption near future.
BUSINESS DISTRICT-WISE ABSORPTION SPLIT • On the other hand, office projects
(ORR) office market saw in H2 2015, owing to large-size
• Meanwhile, the SBD office markets in the CBD and the peripheral
H2 2014 H2 2015 deals by companies such as
59% a considerable dip in at locations such as Koramangala business districts towards the east
60% IBM and Sutherland. With the
and Intermediate Ring Road have remained relatively subdued, with
H2 2015 compared to quantum of office space expected
been regaining occupier interest the majority of the traction taking
50% to be completed in the next few
H2 2014. Progressive as well. The region saw its share place in the ORR, PBD South and
quarters, the northern peripheral
40% increase to 14% in H2 2015, from SBD markets.
31% absorption YOY has led office markets portend a greater
33% 9% of the total absorption in H2
30%
24%
the ready-to-occupy
20% office space in the region BENGALURU OCCUPIES THE TOP SPOT FOR START-UPS IN THE COUNTRY
14%
10% 9%
10% to shrink significantly.
Bengaluru, proclaimed in recent support. Another important factor which aims at having 10,000 start-
3% 6% 6% 4% 1% This has resulted in
0
0% 0% years as the Silicon Valley of India, working in favour of Bengaluru is ups by 2023, and the New Age
CBD & Off SBD ORR PBD PBD PBD PBD PBD South markets is ready to be anointed with another its huge quality skill base. It has Incubators to promote student
CBD EAST SOUTH NORTH WEST a vast talent pool of technology start-ups. The government provides
tech-related sobriquet – that of
Source: Knight Frank Research such as Hosur Road,
the start-up capital of the country. experts, constituting of people who incubators along with Nasscom,
• The Outer Ring Road (ORR) office in the forthcoming months. Bannerghatta Road and More specifically, the unicorn work for global giants like IBM, Microsoft and a number of other
market saw a considerable dip in capital of India. Unicorn is a term Microsoft, HP, Dell, Infosys and companies that encourage start-
• With ready office space becoming Electronics City to account
H2 2015 compared to H2 2014. that has been made popular by Wipro to name a few, as well as the ups within their campus. Moreover,
scarce in the preferred markets,
Its share in the total absorption
H2 2015 saw the PBD South
for increased traction venture investor Aileen Lee to captive technology development most major software companies
in H2 2015 was 33% compared
markets resurfacing. Peripheral in H2 2015. Another describe start-ups valued at a centres of large corporate giants have their research centres in
to 59% in H2 2014. The ORR has
office markets in the south, such $1 billion or more. The city has like GE, Samsung, Fidelity and Bengaluru. These MNCs help in
been progressively preferred by
as Hosur Road, Bannerghatta
notable observation is the
leveraged its imposing IT services others. Bengaluru thrived on an accelerating the start-ups either
corporates due to factors such
Road and Electronics City, saw emergence of the PBD legacy to establish itself as the tech ecosystem that developed and through mentorship or funding the
as its proximity to the CBD and
increased traction and occupier
the major residential markets,
interest, thereby taking up the
North market, primarily entrepreneurial hub of the nation, supported talent, connected with entrepreneurs. Most importantly, the
access to large talent pools, the and currently boasts of housing five investors and followed lessons city offers relatively lower rentals for
region’s share from a mere 4% comprising the office of the eight homegrown unicorns from other start-ups. These factors office space, thereby encouraging
availability of contiguous land
in H2 2014 to 31% in H2 2015.
parcels, connectivity to the airport
Key transactions in PBD South
market in Thanisandra. – Flipkart, Ola, InMobi, Quikr and provided the start-ups with an early- companies to set up their offices
and the presence of hotel and MuSigma. Other three unicorn mover advantage, thereby leading here.
include those by Infosys and Tech
retail projects. This has led the Indian companies, viz. Snapdeal, Bengaluru to observe more start-
Mahindra at Electronics City, SAP While start-ups have a long way to
ready-to-occupy office space in Zomato and mobile wallet start-up ups than the other cities in India.
and Medi Assist on Bannerghatta go, re-structuring their processes
the region to shrink significantly,
Road, and MetricStream on Hosur Paytm, are based in New Delhi.
thereby resulting in a decline Besides, the government along the way to arrive at correct
Road.
in its absorption share in H2 A number of factors played in favour of Karnataka’s Department positionings, Bengaluru would
2015. However, the ORR still • Another notable observation is of Bengaluru to be chosen as the of Information Technology, continue to provide a nurturing
accounts for a large quantum of the emergence of the PBD North destination of choice of these start- Biotechnology and Science & environment for these companies
pre-committed space, which is market, primarily comprising the ups. For one, the city’s tech-first Technology has offered tremendous to succeed and, in all likelihood,
scheduled to become operational office market in Thanisandra. This culture lent the confidence required support with its numerous remain the start-up capital of India.
to embark on a business journey initiatives, instances of this are
that entailed significant technical the 10,000 start-ups initiative,
H2 2015 RENTAL TREND

5.00 • The SBD and ORR office markets witnessed an increase of 6%, from • This could be accredited to the
mn sq.ft.
witnessed the maximum rise in `48.5 / sq ft /month in H2 2014 to anticipated demand for large
H2 2014 rentals during H2 2015, owing `51.5 / sq ft / month in H2 2015. spaces as well as the lack of
primarily to the strong demand vacant office stock, which have
4.40 for office space in the region,
• Going forward, the weighted
average rentals are expected to
pushed the weighted average
mn. sq.ft. coupled with declining vacancies, rentals upwards in the Bengaluru
increase by 7% from the current
particularly in the ORR. office space market
values in H2 2015 to around `55 /
• The weighted average rental values sq ft / month in H1 2016.
38 39
FIGURE 6
WEIGHTED AVERAGE RENTAL MOVEMENT
55
50
INR / sq.ft./month
45
40
Yashwin Bangera
Assistant Vice President - Research
CHENNAI
35
30
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016E
BUSINESS DISTRICT-WISE RENTAL MOVEMENT
RENTAL VALUE RANGE IN H2 2015 6 MONTH

BUSINESS DISTRICT 12 MONTH CHANGE
(`/SQ FT/MONTH) CHANGE
CBD & Off-CBD 75–95 6% 5%
SBD 50–90 10% 8%
PBD East 31–47 4% 0%
PBD South 31–48 5% 4%
ORR 45–70 10% 7%
PROJECTIONS H1 2015 H1 2016E GROWTH
New supply (mn sq ft) 4.00 5.5 38%

Absorption (mn sq ft) 6.07 6 -1%
Vacancy (%) 10% 7%
Weighted average rental (` / sq ft / month) 50.0 55 10%

• Going forward, in the first half of quantum of new completions increase by 10% in H1 2016 on a
2016 (H1 2016), the Bengaluru compared to H1 2015, it remains to YOY basis.
office market will continue to see be seen if this would be sufficient
• The e-commerce sector, which
the momentum that was witnessed to cater to the city’s office space
barely existed two years ago, has
in 2015. The absorption in H1 2016 demand.
been gaining ground quickly in
is expected to remain steady,
• As a result of the space crunch the Indian business scenario and
albeit with a slight decline of 1%
brought about by the steady holds much potential to become
over the absorption in H1 2015.
absorption rate and declining one of key demand drivers of the
This marginal de-growth could
vacancy levels, the rental values of city’s office market, along with the
be accredited to the dearth of
select projects at locations such IT/ITeS sector. However, being in
substantial ready-to-occupy office
as the ORR and the SBD office its nascent stage, it remains to
space in graded projects in key
markets are likely to increase in the be seen how well the sector can
office markets. While H1 2016
short term. The weighted average sustain itself in the long run.
is projected to witness a larger
rentals of the city are estimated to
40 41
RESIDENTIAL MARKET MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES
CHENNAI RESIDENTIAL MARKET LAUNCHES, FIGURE 2
ABSORPTION AND PRICE TRENDS MICRO-MARKET SPLIT OF LAUNCHED UNITS

The South and the West
H2 2014 H1 2015 H2 2015
micro-markets were the
FIGURE 1 70%
CHENNAI MARKET TRENDS 63% hardest hit in H2 2015,
60%
H2 2015 saw a sharp 20% LAUNCHES ABSORPTION WT. AVG. PRICE (RHS)
50%
as they experienced the
50% 44%
decline in the number of 12,000 4,700 worst of the floods. These
4,650 40%
units launched compared 10,000
4,600
35% micro-markets usually
30%
30%
to the same period last 8,000 4,550 22% 24% attract over 90% of the
` / sq ft
Number of units
4,500 20% 15%

year. This was largely due 6,000
10%
development in Chennai,
4,450
5%
to the torrential rains that 4,000 4,400
10%
2% 0%
but H2 2015 saw this
4,350
brought the residential real 2,000
0
CENTRAL NORTH SOUTH WEST
share come down to 80%
4,300
estate market to almost a 0 4,250
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
standstill.
• Absorption levels in the Chennai • Weighted average prices have • The South and the West micro- residential locations of Pallavaram, High Road and Ambattur.
residential market have stagnated been growing, but at a steadily markets were the hardest hit in Perumbakkam and Kelambakkam, Thiruverkadu, Sriperumbudur
since H2 2013, as a lacklustre declining rate since H2 2012, when H2 2015, as they experienced the which usually see development and Avadi witnessed most of the
economic outlook, escalating they grew at 10.4%, and now stand worst of the floods. These micro- interest, experienced muted development interest in West
prices and the heavy November at 1.5% YOY at the end of H2 2015. markets usually attract over 90% activity due to the floods. Chennai during this period.
rains discouraged the price- of the development in Chennai,
• We do not expect the ongoing • Comprising close to a third of • West Chennai saw close to 59% of
conscious homebuyer from but H2 2015 saw this share come
lull in launches to persist in the units launched during H2 the launches occur in ticket sizes
entering the market. down to 80%.
H1 2016, as the festive season 2015, the West zone is second under `5 mn compared to 53% for
• Absorption levels averaged close during the first half of the year • South Chennai still accounted only to the South, as developers the entire market. In comparison,
to 14,000 units every half-yearly has traditionally seen developers for half of the units launched cater to the increasing number approximately 51% of the units in
period before H2 2013 but now launch new projects. during the period and saw the of homebuyers looking for South Chennai were launched in
average just under 10,000 units, bulk of these launches take comparatively affordable options the same ticket size.
• However, YOY growth will
with H2 2015 seeing the lowest place in locations beyond away from the city centre but
be hampered, as the market
absorption levels since 2011, at Navalur and Padur on the OMR. closer to the employment
sentiment is yet to recover from
8,792 units. This was a 15% drop The relatively more established hubs on Mount-Poonamallee
the aftermath of the floods. We
compared to H2 2014.
expect H1 2016 to see 8,500 units
• The developers, in turn, reduced in terms of supply – approximately
the pace of their launches in the 7% lower YOY.
face of mounting inventories as
demand continued to trend lower.
• We believe that the absorption H2 2015
levels will recover from the current
• H2 2015 saw a sharp 20% decline lows and reach approximately 5,854
in the number of units launched 9,000 units in the following period H2 2014 units
compared to the same period last – marginally lower than the level
year. This was largely due to the
torrential rains that brought the
achieved in H1 2015. 7,318
units
• This contraction in supply, coupled
residential real estate market to
with a recovery in the absorption
H1 2015
almost a standstill.
• However, this excessive reduction
levels, will support market health
and set the stage for a more robust
9,102
units
in supply in comparison to the recovery.
absorption levels has also caused
the unsold inventory level to fall to
a three-year low, at 36,497 units.
42 43
FIGURE 3
TICKET-SIZE SPLIT OF LAUNCHES DURING H2 2015
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
-
< `2.5 MN `2.5 - 5 MN `5 - 7.5 MN `7.5 - 10 MN `10-20 MN >-20 MN

MICRO-MARKETS OF CHENNAI
MICRO-MARKET LOCATIONS
Central Chennai T. Nagar, Alandur, Nungambakkam, Kodambakkam, Adyar, Kilpauk
West Chennai Porur, Ambattur, Mogappair, Iyyappanthangal, Sriperumbudur
South Chennai Perumbakkam, Chrompet, Sholinganallur, Guduvancheri, Kelambakkam

North Chennai Tondiarpet, Kolathur, Madhavaram, Perambur
FIGURE 4
H2 2014 H1 2015 H2 2015
68%
70%
65%
59%
60%
50%
40%
32%
30% 26% 26%
20%
10% 7% 10%
0% 3% 2% 2%
0
44 45
H2 2015 GROWTH CORRIDORS IN CHENNAI
8,792 Chennai’s residential real estate

market has been experiencing a
and will be the biggest drivers of the
Chennai real estate market in times
southern locations to central and
west Chennai, do not provide direct
H2 2014 units
slowdown, as the overall demand to come. connectivity to the bulk of the
10,343 and supply numbers have
The Chennai office space market
major office locations in the south
units fallen consistently since 2012. and southwest. This requires daily
H1 2015 Consequently, price growth has also
has expanded towards the south
commuters to rely largely on road
and southwest over the years, and
9,091 stagnated, rendering the investment
climate less than optimum for fresh
bulk of the office space today is
transport to get to their places of
work.
units
concentrated in these zones. The
real estate investments. However,
OMR stretch, especially, has seen These hurdles in commuting to
as in the case of the equity markets,
prodigious growth over the past work have encouraged homebuyers
when certain blue chip companies
decade, as quality office spaces to look for residential options
will continue to attract interest even
• Buyer behaviour has been largely in traction due to an increased affordable locations in the West, tailor-made for the IT/ITeS and other closer to office locations, and have
in a downturn, some locations or
consistent across the last three uptake of the lower-priced such as Tiruverkadu, caused services sectors have come up, and caused the proliferation of a healthy
periods, with an inevitable dip in inventory and good connectivity demand to increase 4% YOY in zones with the right fundamentals
this stretch currently houses over residential market in proximity to
demand in South Chennai due to with SBD locations, such as Mount that zone. in place will outperform and yield
half of the office stock in the city. these office hubs. As the residential
the floods. Poonamallee High Road and above average investment returns
• Landmark Construction, Doshi The state government’s initiative units coming up in these locations
Valasaravakkam. over the long term.
• Buyers responded favourably Housing, Emami Realty, Vijay Raja to promote the stretch as an IT are also lower priced compared to
to the increasing and lower- • Demand shrank by 15% YOY in Group and Godrej Properties were
Employment generation and corridor, coupled with affordable other residential zones in the city,
priced supply in the West zone. H2 2015. The South zone saw the most active during this period
the infrastructure that connects rentals, will ensure the growth of they are an attractive proposition for
Western micro-markets, such a 23% decline, while increased and contributed to over half of the
as Tiruverkadu, saw an increase homebuyer interest in the more units launched during H2 2015. employment hubs to residential this corridor in the foreseeable the resident workforce. Residential
areas are the cornerstones for future as well. locations comparatively closer
the development and growth to these office hubs that have
As the southern end of the Chennai
MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS AS OF DECEMBER 2015 of any residential location. sufficient supply constraints will see
office space market has thrived
Chennai has always had a strong better price performance compared
on the IT/ITeS sector’s demand for
Source: Knight Frank Research manufacturing base, but the new to the market. Thus residential
large format office spaces, the SBD
millennium ushered in an era of locations such as Alandur and
locations have attracted corporate
A IT/ITeS development after Old Guindy are more likely to see
CENTRAL 5% Mahabalipuram Road (OMR) was
offices and other front offices that
above average price appreciation.
B
can afford comparatively higher
NORTH 4% promoted as an IT corridor, and the
rentals and prefer being closer to
In addition to being connected to
C IT/ITeS and other services sectors major employment hubs via road,
the city centre. These dynamics
WEST 27% (ecommerce, healthcare, etc.) metro and MRTS routes, they also
are expected to sustain over time
B C D are the largest employers in the have sufficient supply constraints
SOUTH 65% and close to 80% of the IT/ITeS and
D city today. The IT/ITeS and other in place to give residential prices
A other services sectors’ workforce
services sectors currently account sufficient room to grow.
will continue to commute to these
for a massive 80% of the office
office hubs during the same period.
stock in Chennai. The availability
• Nearly 92% of the under- developers to shun this part of The city faces sizeable challenges
of a vast talent pool, favourable
construction units in Chennai are the city and focus their energy on in terms of transport infrastructure,
state government policies and
concentrated in the South and more viable locations in West and
an improvement in the overall which are being addressed by
West micro-markets of the city. South Chennai.
economic landscape will ensure a initiatives such as the ongoing
• Comparatively poor connectivity • The shortage of developable land
sustained growth in the IT/ITeS and construction of the metro and
to office market locations and and high prices prevent sizeable
other services sectors. This will also near completion of the outer ring
the lack of social infrastructure development activity in Central
has left very little incentive for Chennai, but it remains the most ensure that these sectors will be the road (ORR). These initiatives, while
the Chennai homebuyer to look sought-after residential micro- largest consumers of office space significant in terms of connecting
north for homes. This has caused market of the city.
46 47
• The quarters to sell unsold

PREMIUM RESIDENTIAL MARKET LAUNCHES, inventory (QTS) is the number Chennai market health
Prices in this segment ABSORPTION AND PRICE TRENDS of quarters required to exhaust
the existing unsold inventory in FIGURE 6
have increased 42% since PREMIUM MARKET the market. The existing unsold QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS
H1 2013, compared to MICRO-MARKET LOCATIONS
sales velocity of the preceding CHENNAI PREMIUM MARKETS
the overall residential Nungambakkam, R. A. Puram, Alwarpet, T. Nagar, eight quarters in order to arrive at 10
Central Chennai Mylapore, Royapettah, Kilpauk, Anna Nagar, the QTS number for that particular 9
market, which, at 9%, has quarter. A lower QTS indicates a
Teynampet, Adyar 8
not performed even half healthier market.
7
West Chennai K. K. Nagar, Thiruvanmiyur, Valasaravakkam
No. of Quarters
as well during the same • The Chennai residential market 6
currently has a QTS of 7.6, with
period South Chennai Injambakkam, Palavakkam, Uthandi
an average age of inventory of
5
4
10.7 quarters. The QTS has been
FIGURE 5 inching down since the beginning 3
PREMIUM MARKET TRENDS of 2015, which signifies an 2

improvement in the overall market 1
health. 0
450 16,000
400
14,000 • A spurt in the absorption levels,
350 coupled with depressed launches, Source: Knight Frank Research
12,000
300 has pulled the QTS and age of
` / sq ft
inventory of the Cental zone to 7 FIGURE 7
Number of units
250 10,000
200 8,000
quarters – well below that of the MICRO-MARKET-WISE QTS VS AGE OF INVENTORY
150 overall market.
6,000
CENTRAL WEST NORTH SOUTH
100 • South and West Chennai contain
50 4,000
the largest chunks of unsold 13
0 2,000 inventory in the Chennai market
H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 12
and have a QTS of 7 and 8
Age of unsold inventory in quarters

Source: Knight Frank Research quarters respectively. Relatively 11
Note: Premium markets include locations where the average ticket size of a residential unit affordable residential prices,
is above `15 mn, are in close proximity to the central business district of the city and have proximity to employment hubs 10
witnessed new project launches in the preceding three years and improving social infrastructure
9
continue to drive both these micro-
• The premium locations of the bungalows in central locations, the
markets. 8
city are concentrated largely in breakdown of joint families among
Central Chennai areas, such as the affluent and the dearth of • North Chennai is the worst-
7
Nungambakkam, Adyar and R. lifestyle residential products have performing micro-market, with a
A. Puram, and some locations been strong drivers of the premium QTS and age of inventory of nearly 6
with a high aspirational value in segment. 11 quarters, though its QTS has
been reducing over the last three 5
South and West Chennai, such
• Prices in this segment have 5 6 7 8 9 10 11 12 13
as Palavakkam, Injambakkam, analysis periods.
increased 42% since H1 2013,
Thiruvanmiyur and K. K. Nagar. QTS
compared to the overall residential Source: Knight Frank Research
• The premium market in Chennai market, which, at 9%, has not
has been better insulated against performed even half as well during
market vagaries compared to the the same period.
PRICE MOVEMENT DURING H2 2015
overall Chennai residential market,
• Absorption levels that averaged
as there was relatively little supply WEIGHTED AVERAGE PRICE MOVEMENT IN CHENNAI
almost 800 units on a half-yearly
in the early years of this decade
basis in the six periods prior to
compared to the situation today.
2013 have dropped nearly 55% LOCATION PRICE RANGE IN H2 2015 (`/SQ FT) 12 MONTH CHANGE 6 MONTH CHANGE
• The Chennai market had a to the 350 levels since then. This
significantly higher appetite for has pushed the QTS level of the Chennai 4,596 1.5% 1%
premium residential products premium segment over that of the
compared to the supply on offer. Chennai residential market since Premium markets 14,474 7% 6%
The increasing redevelopment of June 2015.
48 49
• The drop in market traction during aftermath of the damage caused completion, has helped these
the latter part of H2 2015 weighed by the floods. This phenomenon central locations register a price OUTLOOK FOR THE NEXT SIX MONTHS
down the price growth in the was especially exacerbated in growth in the range of 3–5% YOY.
Chennai residential market during the secondary market, where Projections H1 2015 H1 2016E GROWTH The consistent decline in
• We expect the weighted average
H2 2015. Growing at just 1.5% YOY opportunistic buyers were seen
prices in Chennai to grow at a
unsold under-construction
Launches (units) 9,102 8,500 -7%
during this period, the price growth looking for big discounts in a
has stagnated, compared to the market full of panic-stricken
significant 3% YOY in H1 2016, inventory levels and steady
as the shock of the recent floods Absorption (units) 9,091 9,000 -1%
4% YOY growth seen during the sellers.
blows over and homebuyers start
QTS levels since H1 2015
previous period. Weighted average price (`/sq ft) 4,532 4,662 2.9%
• Developers were also seen to come back to the market during lead us to believe that
• South Chennai bore the brunt pursue aggressive subvention the festive season. Source: Knight Frank Research
of the floods and also took the schemes to push sales.
the Chennai market is
• We believe that the price growth in • Chennai city is currently • The revival in the manufacturing
hardest hit in terms of real estate
• Central locations in Chennai, the premium segment locations will undergoing a prolonged phase of and IT/ITeS sectors that make bottoming out and close
price growth, with locations such
as Guindy and Ekkaduthangal—
such as Anna Nagar, T. Nagar continue to outperform the market time correction, characterised by up the bedrock of Chennai’s to a point of recovery in
and Adyar, continue to remain the and match the current analysis a persistent slump in launches and economy, coupled with reducing
which are located within a 1–2 km
most premium locations of the period’s 9% growth in H1 2016 as absorption levels, wherein market interest rates and inflation levels in sales numbers
radius of the Adyar river—seeing players are wary about entering the national economy, makes for a
city. Relatively strong absorption well.
prices stagnate completely in H2 the market at this time. strong case for the business and
during H2 2015, brought on by
2015 as end user and investor investment climate to improve and
the fact that most of the under- • Our interactions with the
sentiments took a beating in the to boost the overall sentiment.
construction inventory was nearing developer and investor community
corroborate our analysis and • These factors instil confidence that
lead us to believe that the recent the residential market is slowly but
slump in the Chennai residential surely on its way to recovery in the
PRICE RANGE IN H1 2015 12 MONTH 6 MONTH market was accentuated by the coming 12 months.
(`/SQ FT) CHANGE CHANGE floods, and that this situation will
• We believe that South Chennai will
ease in the months to come. While
Anna Nagar Central 10,500–11,900 3% 1% continue to grow, as connectivity
residential supply will take some
to employment hubs such as
Adyar Central 16,500–17,800 1% 1% more time to revive due to the still
the OMR, improving social
high unsold inventory levels, we
Kilpauk Central 14,800–15,800 4% 0% infrastructure and comparatively
believe that H1 2016 will see a 7%
lower prices will deter homebuyers
T. Nagar Central 18,000–19,300 4% 1% de-growth YOY compared to the
from looking elsewhere.
20% fall YOY in H1 2015.
Alandur Central 7,000–7,500 3% 2%
• The premium market has been
• We believe that the absorption
Porur West 5,200–5,500 3% 2% under increasing pressure, as is
levels, however, will prove to be
seen in its rising QTS; however, the
Ambattur West 4,100–4,600 2% 1% much stronger and match the H1
above-average price growth and
2015 levels in the next period.
Mogappair West 6,200–6,700 2% 2% the small number of units relative
• We expect the weighted average to its specific demand base lead
Iyyappanthangal West 4,000–4,500 2% 2%
price in Chennai to increase at a us to believe that the price growth
Sriperumbudur West 2,700–3,200 2% 1% healthier rate, by close to 3% in in this segment will continue to
Perumbakkam South 4,100–4,500 1% 0% H1 2016 compared to H1 2015, be strong, though slightly muted
on the back of the improved sales compared to earlier periods.
Chrompet South 4,200–4,700 2% 0% volume. Price growth will continue
• The effects of a steadily-improving
Sholinganallur South 4,500–5,500 2% 1% to be capped until the absorption
office market, thanks to improving
volumes start approaching the
Guduvancheri South 3,200–3,700 1% 0% fundamentals in the IT/ITeS and
14,000-unit average per six-
manufacturing sectors, are bound
Kelambakkam South 3,500–3,900 0% 0% month period that the Chennai
to rub off on the residential market
market had clocked prior to 2013,
Tondiarpet North 4,500–4,800 2% 2% as well. Hence, locations such
compared to the sub-10,000 units
as Pallikaranai, Medavakkam,
Kolathur North 4,800–5,500 2% 1% averaged by the market since then.
Perumbakkam and locations on
Madhavaram North 4,500–5,000 2% 0% • The consistent decline in unsold the Pallavaram–Thoraipakkam
under-construction inventory levels road that are well connected to IT/
Perambur North 6,200–6,500 2% 3% and steady QTS levels since H1 ITeS office hubs on the OMR with
2015 lead us to believe that the improving social infrastructure are
Chennai market is bottoming out expected to see increasing market
and close to a point of recovery in activity in the coming months.
sales numbers.
50 51
OFFICE MARKET • The total office space absorption

in H2 2015 was 3.1 mn sq ft, while
only 1.2 mn sq ft of new office
FIGURE 2
NEW COMPLETIONS AND ABSORPTION
Up almost 41% YoY, H2 space came online.
CHENNAI OFFICE MARKET STOCK, NEW COMPLETIONS, NEW COMPLETION ABSORPTION
2015 experienced the 4.0

ABSORPTION AND VACANCY TRENDS • The adjoining chart depicts the
highest absorption levels stabilising absorption levels, 3.5
FIGURE 1 coupled with the falling trend in 3.1
of any half-yearly period in supply since H2 2013. However,
3.0
2.4
the history of the Chennai the current period saw a rise in 2.5
2.2
mn sq.ft
STOCK OCCUPIED STOCK VACANCY (RHS)
completions, which is heartening 2.0
2.0 1.8
office space market in a market starved of new, high-
70 25% 1.5
1.5 1.4
quality office projects. 1.1 1.2
1.0 0.9
60
20%
0.5
50
0
15% H1 2014 H2 2014 H1 2015 H2 2015 H1 2016E
mn sq.ft.
40

30
10%
20
5% SECTOR ANALYSIS
10
FIGURE 3
0 0%
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
H2 2014 H1 2015 H2 2015
70%
• The Chennai office space market online – a substantial 58% drop
60%
moved from strength to strength from the 11.1 mn sq ft delivered 54%
as demand rose for the third during the previous reference 50% 46%
consecutive year. period.
40% 36%
• 2015 recorded 5.1 mn sq ft of • By contrast, the same period
30% 26% 27%
absorption, 28% higher than the 4 saw a 34% increase in the total
mn sq ft absorbed in 2014. On the absorption levels, highlighting the 20% 18% 19%
14% 15%15% 16%
other hand, 2015 witnessed 2.1 mn underlying strength of the market. 13%
10%
sq ft of office space come online,
• The improvement in global
compared to 2.6 mn sq ft in the 0
sentiment, especially in the BFSI* IT/ITeS MANUFACTURING OTHER SERVICES
previous year.
US—a major market for Indian
• Spiralling absorption numbers, IT/ITeS companies—along with Source: Knight Frank Research
coupled with falling supply, has the relatively stable domestic Note: BFSI includes BFSI Support Services
pushed down vacancy levels from economy, has bolstered the
24% in 2013 to 15% at the end of recovery of the Indian IT/ITeS
2015. sector, which is the mainstay of
the Chennai office space market. H2 2015
• Up almost 41% YoY, H2 2015
This momentum is expected to
experienced the highest
absorption levels of any half-yearly
continue in the following period as
well.
3.1
period in the history of the Chennai H2 2014 mn sq.ft.
office space market on the back
of big-ticket transactions by Yes 2.2
Bank, AstraZeneca, Sutherland mn. sq.ft.
and Ericsson, among others. H1 2015
• The fall in vacancy levels
accelerated after 2013, as the
2.3
mn sq.ft.
following two years saw just 4.7
mn sq ft of office space come
52 53
• The Chennai office market has services and accounted for some active IT/ITeS companies in H2
traditionally been anchored by of the largest transactions in H2 2015. BUSINESS DISTRICT ANALYSIS
the IT/ITeS sector, but recent 2015.
• The shares of the manufacturing
periods—especially the last 18 BUSINESS DISTRICT CLASSIFICATION
• The IT/ITeS sector continues to and other services sectors have
months—have seen the BFSI
be the largest consumer in the been declining since H1 2014, but BUSINESS DISTRICTS MICRO-MARKETS
sector also gaining in market
Chennai office space market gained in the recently-concluded
share.
despite losing market share over period, as companies such as Anna Salai, RK Salai, Nungambakkam, Greams Road,
Central business district (CBD and off-CBD)
• The BFSI sector has nearly the past three periods. The sector AstraZeneca, Ford, Ericsson and Egmore, T. Nagar
doubled its market share YoY, as accounted for 1.1 mn sq ft of Access Healthcare took up large
industry majors such as Yes Bank office space absorption during H2 office spaces in the city. Suburban business district (SBD) Mount-Poonamallee Road, Porur, Guindy, Nandanam
and the World Bank took up large 2015. Accenture Sutherland and
office spaces for their support Freshdesk were among the most SBD – Old Mahabalipuram Road (OMR) Perungudi, Taramani
DEAL SIZE ANALYSIS Peripheral business district (PBD) – OMR and Grand Southern
OMR beyond Perungudi Toll Plaza, GST Road
Trunk road (GST)
FIGURE 4 • Deal sizes averaged close to
AVERAGE DEAL SIZE AND NUMBER OF DEALS 25,000 units in 2014, and have PBD – Ambattur Ambattur
grown nearly 40% to almost
AVERAGE DEAL SIZE (SQ.FT.) NUMBER OF DEALS (RHS)
35,000 units in 2015. This bodes
40,000 100
well for the market and could
35,000 90 herald a more sustained recovery
80 in 2016.
30,000
25,000
70 Number of deals • The increase in the average
60
deal size, strong absorption and
sq.ft
20,000 50
an increase in the number of
15,000 40
30
transactions since 2014 clearly
10,000 indicate an overall improvement in
20
5,000
10 occupier interest in the Chennai
0 0 office space market.
H1 2014 H2 2014 H1 2015 H2 2015
• The increase in big-ticket
Source: Knight Frank Research transactions has a major role
to play in the spike seen in the
average deal size.
SELECT TRANSACTIONS
BUILDING OCCUPIER LOCATION APPROX. AREA (SQ FT)
One Indiabulls Park Yes Bank Ambattur 700,000

Shriram IT Gateway Accenture Perungulathur 225,000
Chennai One Astra Zeneca Thoraipakkam 150,000
Shriram IT Gateway Sutherland Perungulathur 125,000
SP Infocity Ericsson Kandanchavadi 120,000
Futura Tech Park Scope International Sholinganallur 90,000
One Indiabulls Park Access Healthcare Ambattur 75,000
SP Infocity Freshdesk Perungudi 68,000
SP Infocity Ford Perungudi 63,000
SP Infocity World Bank Perungudi 63,000
54 55
FIGURE 5 RENTAL TREND

BUSINESS DISTRICT-WISE ABSORPTION SPLIT
H2 2014 H2 2015
Rental growth was healthy
FIGURE 6
WEIGHTED AVERAGE RENTAL MOVEMENT across locations, and
50%
45% 54
SBD locations such as
40% 38% Pallikarnai, Guindy and
35% 52
31% Nandambakkam continue
30%
INR / sq.ft./month
26%
to witness an above-
mn sq.ft
25% 50
25%
20%
15%
20% 17%
48
average rental growth,
14%
15%
9%
particularly due to their
10%
46
5%
5%
specific offerings for
0 44 medium-scale enterprises
CBD SBD PBD Ambattur SBD OMR PBD OMR & GST
42
that are looking for office
H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016E
spaces of up to 0.1 mn
sq ft
• Rental values have seen a • Rental growth was healthy across
H2 2015
sustained rise since 2012 on locations, and SBD locations
3.1 the back of steady demand
and a lesser amount of office
such as Pallikarnai, Guindy and
Nandambakkam continue to
H2 2014 mn sq.ft.
space inventory coming online in witness an above-average rental
2.2 successive years. growth, particularly due to their

specific offerings for medium-scale
mn. sq.ft. • The severe shortage of good
H1 2015 enterprises that are looking for
quality office space in prime
office spaces of up to 0.1 mn sq ft.
2.3
areas has rendered the market
favourable to landlords, who
mn sq.ft. are asking for higher rents from
tenants with each passing quarter.
• The lack of vacant office stock,
coupled with steady demand,
• The peripheral business districts as nearly 87% of the sector’s has pushed the weighted average
saw a spurt in demand, while transactions took place in this rentals in the Chennai office
the other business districts market. space market to `52 per sq ft per
experienced a fall in market share month at the end of H2 2015 – a
• Practically all the area taken up
in H2 2015. significant 4% growth YoY.
by the BFSI sector in H2 2015
• This could be attributed to the was accounted for by Yes Bank,
comparatively higher rentals and which leased 0.7 mn sq ft at One
the lack of viable office stock in the Indiabulls Park Tech in Ambattur. BUSINESS DISTRICT-WISE RENTAL MOVEMENT
central and secondary business
• Just three locations— RENTAL VALUE RANGE IN H2 2015 6 MONTH
districts. BUSINESS DISTRICT 12 MONTH CHANGE
Ambattur, Kandanchavadi and (`/SQ FT/MONTH) CHANGE
• The peripheral business districts Shollinganallur—accounted for
CBD & off-CBD 60–95 4% 2%
are the only markets that have a over half of the total transacted
significant availability of viable volume in H2 2015. PBD OMR & GST Road 25–35 3% 1%
office spaces with large floor SBD OMR 45–80 3% 1%
plates in the city. This factor,
coupled with the comparatively PBD Ambattur 28–35 3% 2%
low rentals, has rendered the SBD 50–65 3% 2%
PBD – Ambattur business district Source: Knight Frank Research
a BFSI sector favourite in H2 2015,
56 57
PROJECTIONS H1 2015 H1 2016E GROWTH

Absorption (mn sq ft) 2 2.4 20%
Vacancy (%) 19% 13.4%
Weighted average rental (` / sq ft / month) 50 52 4%

Yashwin Bangera
Assistant Vice President - Research
HYDERABAD
• We believe that the absorption • Improved accessibility through
levels will continue their uptrend infrastructure initiatives such as
in H1 2016, as occupier interest the metro, the quality of office
remains strong at the end of the office spaces and lower rentals
current period and no significant compared to the CBD and off-CBD
supply is scheduled to come online locations continue to enhance the
in the short term. the SBD’s appeal as a desirable
occupier destination.
• Based on our analysis, the
current rate of enquiries and our • Locations such as Guindy, in the
interactions with market players, SBD, have already seen a run-
we estimate that approximately up in occupier interest and rents
2.4 mn sq ft of office space will be alike, and adjoining locations,
absorbed in H1 2016 – a healthy such as Mount-Poonamallee
20% growth over H1 2015. This, Road and Nandanam, should see
in tandem with a limited 1.4 mn development interest as viable
sq ft scheduled for delivery in the land becomes scarce in the
We believe that the Chennai office space market, will surrounding locations.
absorption levels will force vacancy levels to go below
14% and support sustainable
continue their uptrend rental growth, inevitably setting
in H1 2016, as occupier the stage for further office space
development.
interest remains strong
• Going forward, we expect that the
at the end of the current current momentum in demand will
period and no significant sustain itself and have a direct
impact on rentals. We project
supply is scheduled to rentals to grow by a healthy 4%,
come online in the short from `50 per sq ft per month in H1
2015 to approximately `52 per sq ft
term per month by H1 2016.
58 59
Steady absorption, RESIDENTIAL MARKET

coupled with falling HYDERABAD RESIDENTIAL MARKET LAUNCHES,
demand, has reduced the ABSORPTION AND PRICE TRENDS
unsold inventory levels to
31,480 units – the lowest FIGURE 1
HYDERABAD MARKET TRENDS
since 2010
9,000 3,700
8,000
3,600
Number of units
7,000
6,000 3,500
` / sq ft
5,000
3,400
4,000
3,000 3,300
2,000
3,200
1,000
0 3,100
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
• The closure of the Telangana in the number of units launched,

issue has helped keep absorption compared to the previous period.
numbers stable as 2015 ended On the other hand, the festive
on a flat note. However, the season did not boost absorption
Hyderabad residential market levels, which stayed largely
has yet to show definite signs of stagnant.
recovery in market activity.
• Steady absorption, coupled with
• While the sales volume fell falling demand, has reduced the
marginally, by 1% in 2015 unsold inventory levels to 31,480
compared to the previous year, units – the lowest since 2010.
new launches dropped by a more
• The ongoing supply crunch and
pronounced 14% during the same
the reduction in unsold inventory
period.
have helped sustain price growth.
• The end of the year did show Weighted average prices in the
some promise in terms of supply, Hyderabad residential market grew FIGURE 2
as H2 2015 saw an 11% growth by 3.1% YoY in H2 2015. MICRO-MARKET SPLIT OF LAUNCHED UNITS
H2 2014 H1 2015 H2 2015
MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES 80%

70%
MICRO-MARKETS OF HYDERABAD 70%
66%
60%
MICRO-MARKET LOCATIONS 58%
50%
HMR – Central Begumpet, Banjara Hills, Jubilee Hills, Panjagutta, Somajiguda
40%
HMR – West Kukatpally, Madhapur, Kondapur, Gachibowli, Raidurgam 30%
20% 18%
HMR – East Uppal, Malkajgiri, L. B. Nagar 15% 15%
12% 11% 12%
10% 8% 6%
HMR – North Kompally, Medchal, Alwal, Quthbullapur 1% 1% 5% 3%
0
HMR – South Rajendra Nagar, Shamshabad
*HMR refers to the Hyderabad Metropolitan Region
60 61

H2 2015 H2 2015
FIGURE 4
5,740 MICRO-MARKET-WISE RESIDENTIAL SALES

H2 2014 units H2 2014 H1 2015 H2 2015
5,151 80%
units 70%
H1 2015
60% 58% 57% 59%
5,457 50%
units
40%
30%
20% 12% 17%

11% 10% 13% 12% 12% 13%
8%
10% 5% 7% 5%
• West Hyderabad attracts most of greater development interest • The shares of the East, South and
0
the development interest in the compared to their counterparts Central Hyderabad micro-markets CENTRAL EAST NORTH SOUTH WEST
city, as its residential ethos and in the southern and eastern have dropped compared to the
proximity to the IT/ITeS and BFSI peripheries. preceding period, while those of Source: Knight Frank Research
sector hubs, such as HITEC City West and North Hyderabad have
• East Hyderabad has seen
and Gachibowli, continue to attract increased during the same period.
development interest plummet
young IT employees that form the
in recent years, as homebuyer • In the long term, East Hyderabad
bulk of the city’s workforce.
activity has greatly fallen short of should see more traction in terms
• While the West zone continues to expectations. However, this lack of launches, especially along the H2 2015
7,780
dominate the residential market, of supply has helped reduce the Warangal highway, once the ORR
northern locations, particularly unsold inventory to a large extent. and the metro connecting it to the
Jeedimetla and Aminpur, saw western locations are H2 2014 units
7,829
units
H1 2015
• Nearly all the zones saw
FIGURE 3
developers launching basic
housing projects with few
7,123
units
amenities in the `2.5–5 mn ticket
100%
size range, in a bid to attract the
90%
budget-conscious buyer.
80%
• Almost 40% of the unit launches
70% in H2 2015 were in the `2.5–5 mn • While the relative shares of the zone’s share had been declining
60% ticket size range. various residential zones in over the three half-year periods
Hyderabad have not deviated prior to H2 2015, while the other
50% • Nearly 66% of the units launched in
much, the North zone experienced markets have been gaining over
40% H2 2015 were under `7.5 mn.
an increase in its share of the same period. This is largely
30% • Projects with average ticket absorption during H2 2015 due to because buyers have been
20% sizes above `10 mn were, a significant increase in launches resisting developers’ attempts
understandably, launched largely in during the same period. to raise prices. However, H2
10%
the western and central locations 2015 saw a marginal increase
-
• Apartment and villa projects within
during H2 2015. in the West zone’s share of the
< `2.5 MN `2.5 - 5 MN `5 - 7.5 MN `7.5 - 10 MN `10-20 MN >-20 MN gated communities have been
absorption pie, indicating that
• The fact that West Hyderabad gaining the buyers’ favour in recent
buyer sentiments are slowly
CENTRAL EAST NORTH SOUTH WEST has a healthy representation of times due to the access to social
improving.
Source: Knight Frank Research projects launched in all ticket sizes infrastructure and security on offer.
underscores its attraction as a
• It was observed that the West
residential destination.
62 63
PREMIUM RESIDENTIAL MARKET LAUNCHES,

MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS AS OF DECEMBER 2015
ABSORPTION AND PRICE TRENDS The weighted average
FIGURE 5 price growth in the
premium segment has
A LAUNCHES ABSORPTION WT. AVG. PRICE (RHS)
CENTRAL 6% tapered off since 2013,

1,000 5,850
B
5% 900 5,800
from 13% YoY during H2
EAST
C 800 5,750 2013 to a stagnant 1%
NORTH 14%
D
700 5,700 in H2 2015, due to high
B 15%
Number of units
600 5,650
SOUTH prices and the real estate
C E 500 5,600
60%
` / sq ft
A WEST 400
investment climate going
D 5,550
300 5,500 sour, especially in this

200 5,450 segment
E 100 5,400
0 5,350
H2 2013 H1 2014 H2 2014 H1 2015 H2 2015

Source: Knight Frank Research is above ` 15 mn, are in close proximity to the central business district of the city and have
witnessed new project launches in the preceding three years
PREMIUM MARKET
HYDERABAD MARKET FUNDAMENTALS MICRO-MARKET LOCATIONS
Hyderabad is arguably the most the scapegoat for this status quo. workforce and consequently, an Banjara Hills, Begumpet, Jubilee Hills, Srinagar
HMR – Central
Colony, Somajiguda
affordable residential real estate However, the promised upswing in increase in the existing homebuyer
market among the six Indian market traction has not occurred base in a residential market. It HMR – West Madhapur
frontline cities, which include even eighteen months after the remains to be seen how long
the four metros and Pune and formation of Telangana, as both it takes for volumes to revive
• The premium market of • The weighted average price growth
Hyderabad. The city’s real estate demand and supply continue to in the residential market, while Hyderabad, which constitutes in the premium segment has
market has been vilified by investors lay low. The office market has an improvement in sentiments locations such as Banjara Hills, tapered off since 2013, from 13%
for underperforming in comparison however toed the line as far as according to the Knight Frank Jubilee Hills, Madhapur, Begumpet YoY during H2 2013 to a stagnant
to every other residential market market expectations go and is Sentiment Index seems to indicate and Srinagar Colony, among 1% in H2 2015, due to high prices
across almost all time periods, moving from strength to strength, that the market is on the cusp of others, has experienced a 55% and the real estate investment
YoY growth in launches during climate going sour, especially in
in spite of the great promise of as existing office space inventory a recovery. While market volumes
H2 2015, while the absorption this segment.
growth. Residential properties are shows signs of falling short of could indeed be close to a recovery, numbers have stayed almost the
available within the boundaries of demand. Vacancy levels have fallen observers should not be surprised same compared to the previous
the ORR from ` 2,000 per sq ft on a huge four percentage points in the to see the price growth being muted reference period.
the outskirts to ` 14,000 per sq ft in past 18 months since the formation in comparison as Hyderabad has • Project launches, which topped
premium locations such as Banjara of Telangana, underscoring the an abundance of developable land out in H2 2013 when they spiked
Hills. Prices even in premium momentum that the office market and an extremely well developed over 100% YoY and dropped in
offerings in the most sought-after juggernaut has gained. transport infrastructure base that 2014, are seeing a recovery in
the current period, as the market
locations of the city are comparable supports the infusion of fresh
Characteristically, the residential appetite for gated communities
to those of mid-segment locations residential supply in case prices see
market follows office markets, as in these premium locations has
in Mumbai. significant increases in a short time, grown.
increased office space take-up
effectively capping price increases.
The Telangana issue has long been points to an increase in the existing
64 65
HYDERABAD MARKET HEALTH FIGURE 7

MICRO-MARKET-WISE QTS VS AGE OF INVENTORY
Trending up from a QTS FIGURE 6
HMR CENTRAL HMR EAST HMR NORTH HMR SOUTH HMR WEST
level of just 3 in H2 2011 QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS
22
to 9.4 in H2 2015, the HYDERABAD PREMIUM MARKETS
20
12
premium segment has 18
deteriorated much more 10 16
rapidly compared to No. of Quarters 8 14
the overall Hyderabad 12

6
residential market 10
4
8
2
6
0 4
0 5 10 15 20 25 30
Source: Knight Frank Research QTS
• The quarters to sell unsold Hyderabad residential market, as
inventory (QTS) is the number the supply of projects with average • It is clear from the adjoining comparatively low QTS and age inventory.
of quarters required to exhaust ticket sizes over `15 mn increased chart that the Central zone is the of inventory, considering that it
• East Hyderabad has a QTS of
the existing unsold inventory in dramatically, especially in 2012 healthiest market today, as it has carries the largest inventory among
just 5 quarters, second only to
the market. The existing unsold and 2013, while demand dried up. the lowest QTS, and comparatively, all the zones in Hyderabad.
the Central zone and much below
inventory is divided by the average the youngest unsold inventory
• Having said that, the QTS for • Incidentally, its proportion of the 8.4-quarter average for the
sales velocity of the eight trailing among all the residential markets
premium locations in Hyderabad unsold inventory to under- Hyderabad market as a whole.
quarters in order to arrive at the of Hyderabad. This could be
is still close to the market average construction stock is also the It shows the increasing interest
QTS number for that particular attributed to the limited inventory
today, which is quite exceptional lowest among all the zones. that this zone is attracting due
quarter. A lower QTS indicates a and inherent supply constraints in
compared to other cities where to the focus on the completion
healthier market. this zone. • North Hyderabad contains the
premium locations suffer with a of the ORR and the promised
oldest inventory, while South
• The Hyderabad market QTS has much higher QTS. • West Hyderabad is arguably the development along the Warangal
Hyderabad will take the most time
been range-bound between 8–9 next healthiest market, as it has a highway.
• We do not expect the QTS level for to liquidate its existing unsold
quarters, but has been on an
the Hyderabad residential market
uptrend since the end of 2013.
to worsen further during H1 2016,
• Now at 8.4 quarters, the QTS is at as we believe that the continuously PRICE MOVEMENT DURING H2 2015
its lowest level in 2015. strengthening office market and
uptick in our sentiment index is
• The steep fall in launches had WEIGHTED AVERAGE PRICE MOVEMENT IN HYDERABAD
rubbing off on the Hyderabad
helped the QTS level stay range
residential market as well.
bound; however, declining
LOCATION PRICE RANGE IN H2 2015 (`/SQ FT) 12 MONTH CHANGE 6 MONTH CHANGE
absorption levels have outweighed
this factor. Consistently-declining
unsold inventory levels and an Hyderabad city 3,610 3.1% 2.9%
expected recovery in demand
Premium markets 5,825 0.6% 0.3%
should help alleviate this situation.
• Trending up from a QTS level
• The weighted average asking • However, the weighted average • Prices continued to firm up
of just 3 in H2 2011 to 9.4 in H2
prices for the Hyderabad prices in the premium locations across locations in Central and
2015, the premium segment
residential market grew marginally, stagnated over the 12 months West Hyderabad due to a limited
has deteriorated much more
by 3.1% YoY to `3,610 per sq ft in ending December 2015, with inventory and launches at higher
rapidly compared to the overall
H2 2015. growth since H2 2014 barely price ranges, respectively.
making it into positive territory.
66 67

OFFICE MARKET
(`/SQ FT) CHANGE CHANGE HYDERABAD OFFICE MARKET STOCK, NEW
Begumpet Central 4,500–6,000 4% 3% COMPLETIONS, ABSORPTION AND VACANCY TRENDS
Banjara Hills Central 7,000–9,000 5% 3%
FIGURE 1
Jubilee Hills Central 4,500–6,200 6% 2%
Madhapur Central 5,800–7,800 5% 0% H2 2015 experienced the
Uppal East 2,600–2,800 4% 3% highest absorption levels
L. B. Nagar East 2,500–2,900 4% 4% 70 20%
seen in any half-yearly
Nacharam East 2,200–2,800 3% 3% 18%
Kompally North 2,200–3,100 2% 6%
60 period in the history of the
16%
Quthbullapur North 2,100–2,600 -3% 3% 50 14%
Hyderabad office space
Shamirpet North 2,000–2,400 -1% 1% 12% market, on the back of
mn sq.ft.
40
Shamshabad South 2,300–3,000 2% 2% 10% big-ticket transactions by
30
Bandlaguda South 2,200–3,100 2% 2% 8%
Qualcomm, Salesforce,
Rajendranagar South 2,100–3,100 1% 2% 20 6%
Kondapur West 4,000–5,200 2% 2% 4%

Unitedhealth Group and
10
Gachibowli West 3,800–4,750 5% 4% 2% J.P. Morgan
Manikonda West 3,400–4,500 5% 3% 0 0%
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
Kukatpally West 2,800–4,000 6% 3%
Madeenaguda West 2,600–3,350 3% 5%
• The Hyderabad office space • 2015 recorded 4.6 mn sq ft of
OUTLOOK FOR THE NEXT SIX MONTHS market continues to trend upward absorption, marginally lower
as demand stays robust and than the 4.7 mn sq ft absorbed
Projections H1 2015 H1 2016E CHA supply tapers down for the second in 2014. 2015 also saw 3.9 mn sq
straight year. ft of office space come online,
Launches (units) 5,457 5,300 -3% compared to 5 mn sq ft in the
• H2 2015 experienced the highest
previous year.
Absorption (units) 7,123 7,450 5% absorption levels seen in any half-
yearly period in the history of the • Hyderabad has an office stock of
Weighted average price (`/sq ft) 3,510 3,620 3% Hyderabad office space market, on approximately 64 mn sq ft today,
Source: Knight Frank Research the back of big-ticket transactions with a vacancy of 14.5%.
by Qualcomm, Salesforce,
• Hyderabad’s business districts are • The health of the office market is • We believe that absorption levels Unitedhealth Group and J.P.
well connected via the internal/ a fair indicator of the economic will stay buoyant going forward, as Morgan.
outer ring roads, and the upcoming activity / business sentiment in the our research and interactions with
metro will enhance this further. city, and if the drop in its vacancy developers and other stakeholders • Robust absorption numbers,
While this is an excellent factor levels and steady absorption lead us to believe that the underlying coupled with falling supply, have
to promote balanced real estate are anything to go by, then the sentiment in the Hyderabad residential pushed down the vacancy levels
growth in the city, it does tend to Hyderabad residential market market is improving steadily. from 17.7% in 2013 to 14.6% at the
cap the real estate price growth, as is most likely on the cusp of a end of 2015.
• We do expect the supply numbers
people are willing to move further recovery. • While the recently concluded
to revive over the second half of 2016,
away from the business districts to analysis period reached a new
• West Hyderabad locations will while forecasting that H1 2016 would
save on real estate costs. high and underscored the buoyant
continue to be the centre of have a flat-to-slightly negative growth
• We do not expect the steep de- residential real estate activity in YoY in terms of supply. sentiments in the market, the
growth in launches and absorption Hyderabad, be it launches, sales annual numbers ended on a flat
• The continued pressure on supply note.
to continue, because the easing or price growth. By contrast, South
and the slowly-improving economic
of the political situation, initiatives Hyderabad still has a long way to
sentiments will support prices, which
such as the recent rate cuts by the go, as there is no significant driver
are expected to grow by 3% YoY,
RBI and an overall improvement to attract buyer interest in the short
reaching `3,620 per sq ft in H1 2016.
in business sentiment will reap term.
rewards in the future.
68 69
• The Hyderabad office market FIGURE 2

DEAL SIZE ANALYSIS
experienced approximately 2.4 mn NEW COMPLETIONS AND ABSORPTION
sq ft of supply and a massive 3.1 NEW COMPLETION ABSORPTION FIGURE 4
mn sq ft of absorption during H2 AVERAGE DEAL SIZE AND NUMBER OF DEALS
2015 – a 23% and 13% growth, 3.5
respectively, compared to the 3.0 3.1
3.0 2.8
same period in the previous year. 70,000 100
2.5 2.4 90
60,000
1.9 1.9 1.9 1.8 80 The significant increase
mn sq.ft
2.0
Number of deals
50,000 70
1.5 1.5
60
in the number of deals,
1.5 40,000
sq.ft
30,000
50 coupled with the jump
1.0 40
20,000 30 in transaction volumes,
0.5
10,000
20
also indicates a higher
0 10
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E 0 0 propensity or greater
H1 2014 H2 2014 H1 2015 H2 2015
Source: Knight Frank Research confidence among
SECTOR ANALYSIS occupiers to take up office

• The number of transactions has demand poured into the market.
space in the market
• The IT/ITeS sector has traditionally been increasing consistently This is also among the highest-
FIGURE 3
dominated the absorption pie since H2 2014, when the state ever concentrations of big-ticket
in the Hyderabad office space of Telangana was formed. H2 transactions in a six-month period.
H2 2014 H1 2015 H2 2015
market; however, other services 2015 saw the highest number
• The significant increase in the
70%
sector companies from the of transactions in three years,
number of deals, coupled with
consulting, healthcare and coupled with the highest-ever
60% the jump in transaction volumes,
e-commerce space have been volumes in any six-month period,
48% also indicates a higher propensity
50% 49% 47% increasing their presence in recent accentuating the upward trajectory
39% or greater confidence among
40% years. that the Hyderabad office market
40% occupiers to take up office space
35% has taken.
• Qualcomm’s 0.39 mn sq ft lease in the market.
30%
at Raheja Mindspace was the • There were nine transactions
20% 17%
largest transaction of H2 2015 and exceeding 0.1 mn sq ft in H2
9% 10% made up the bulk of the volume 2015, as much of the latent
10%
2% 1% 2% transacted by the manufacturing
0
sector. SELECT TRANSACTIONS
BFSI IT/ITeS MANUFACTURING OTHER SERVICES
• The other services sector’s share BUILDING OCCUPIER LOCATION APPROX. AREA (SQ FT)
had eclipsed that of the IT/ITeS
Note: BFSI includes support services
sector in H2 2014, but the current Raheja Qualcomm Madhapur 388,500
period saw it take up the most Divyasree Orion Salesforce Raidurgam 200,000
space in the market again, at 1.2
mn sq ft, or 39% of the entire Raheja Mindspace Unitedhealth group Madhapur 150,000
H2 2015
market. Divyasree Orion NTT Data Raidurgam 120,000
3.1 • The manufacturing and BFSI Divyasree Trinity J.P. Morgan Madhapur 120,000
mn sq.ft. sectors saw manifold increases
in the space taken up, compared Signature Towers Income Tax Kondapur 112,000
H2 2014
to H2 2014, as big names such Laxmi Cyber Point Fernandez Hospital Banjara Hills 100,000
2.8 as IBM, AMD, J. P. Morgan and
KPMG were active in H2 2015. Flagstone Towers ValueMomentum Gachibowli 100,000
mn. sq.ft.
H1 2015 Divyasree Trinity Deloitte Madhapur 92,000
1.5 Divyasree Omega Deloitte Madhapur 92,000

mn sq.ft. Raheja Building 11 J.P. Morgan Madhapur 87,700
70 71
BUSINESS DISTRICT ANALYSIS FIGURE 5

BUSINESS DISTRICT CLASSIFICATION H2 2014 H2 2015
BUSINESS DISTRICTS MICRO-MARKETS 120%
Banjara Hills, Jubilee Hills, Begumpet, Ameerpet, Somajiguda, Himayat Nagar, Raj 100% 96%
CBD & off-CBD
Bhavan Road, Punjagutta
80% 76%
SBD Madhapur, Manikonda, Kukatpally, Raidurg
60%
PBD West Gachibowli, Kokapet, Madinaguda, Nanakramguda, Serilingampally

40%
PBD East Uppal, Pocharam

20%
0% 12% 11%
4%
0 0% 1%
CBD & Off-CBD SBD PBD PBD EAST
H2 2015
3.1
mn sq.ft.
H2 2014
2.8
mn. sq.ft.
H1 2015
1.5
mn sq.ft.
• The scarcity of viable office space experienced a huge spurt in office spaces in locations such as
in the SBD locations saw the share demand during H2 2015, at 0.37 Gachibowli and Nanakramguda.
of this business district fall during mn sq ft, compared to less than
• The spillover demand from SBD IT/
H2 2015, while all other business 0.05 mn sq ft in H2 2014. Lakshmi
ITeS hotspots, such as Madhapur
districts experienced manifold Cyber Point and Sanali Info Park
and Kondapur, which have almost
increases in their market share themselves accounted for almost
no viable large-format office
during the same period. However, half of the total space consumed
spaces left, pushed occupiers to
the SBD continues to dominate by lessees in the CBD and off-CBD
take up spaces in the PBD West
the office space landscape of business district.
business district.
Hyderabad, as it is the most
• PBD West is second only to the
sought-after business district in • Just three locations—Madhapur,
SBD in terms of the quality of
the city. Madhapur and Kondapur Kondapur and Raidurgam—
office development for the IT/
solely accounted for close to 2.0 accounted for over 75% of the
ITeS sector. This business district
mn sq ft of office space absorption space transacted during H2 2015.
also saw absorption volumes
during H2 2015.
triple in H2 2015, compared to
• The most prolific increase in the same period in the previous
absorption was seen in the CBD & year due to the comparatively
off-CBD business district, which greater availability of good quality
72 73
RENTAL TREND OUTLOOK FOR THE NEXT SIX MONTHS

Just three locations—
FIGURE 6 PROJECTIONS H1 2015 H1 2016E GROWTH
Madhapur, Kondapur and WEIGHTED AVERAGE RENTAL MOVEMENT
Raidurgam—accounted
44
Absorption (mn sq ft) 1.5 1.8 23%
for over 75% of the space 43
transacted during H2 42 Vacancy (%) 16% 14%

40
2015. INR / sq.ft./month Weighted average rental (` / sq ft / month) 40 43 7%
41
39
38
37 • Approximately 1.9 mn sq ft of destinations by the IT/ITeS
36 quality office space is expected to sector today, and will continue to
35 come online in H1 2016 and will be experience the strongest rental
34 instrumental in boosting absorption growth, going forward. Gachibowli
33
numbers to approximately 1.8 mn and Nanakramguda, in the PBD
H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016E sq ft – a 23% growth over H1 2015. West business district, will also see
strong rental growth.
Source: Knight Frank Research • A steady demand pipeline, coupled
with limited office space deliveries
• Rentals in the Hyderabad office • The PBD West business district hitting the market in the following
market, which had stagnated till experienced the next highest six months, should push vacancy
2013, have seen sustained growth growth in rentals on the back of levels down to an estimated 14%,
since 2014, as the Telangana issue big-ticket deals by other services and consequently, drive rental
achieved resolution. and IT/ITeS sector companies such growth by a further 7% YoY, from
as ValueMomentum, Capillary `40 per sq ft per month in H1 2015
• The lack of vacant office stock,
Technologies and Genpact. to approximately `43 per sq ft per
coupled with steady demand,
Practically all of the transaction month by H1 2016.
has pushed the weighted average
activity during the period
rentals in the Hyderabad office • The SBD locations along the
took place in Gachibowli, and
space market to `42 per sq ft per IT Corridor of HITEC City and
consequently, it also experienced
month at the end of H2 2015 – a Kondapur are undisputedly
the most appreciation in asking
strong 8% growth YoY. the most sought-after office
rentals, as vacancy levels
• H2 2015 saw rental levels grow continued to drop during H2 2015
across locations, compared to the as well.
same period in the previous year.
• The PBD East market has
SBD locations such as HITEC City
witnessed little interest from
and Kondapur have experienced
occupiers and developers alike,
the strongest rent growth in the
and saw marginal rental growth
market, particularly due to the
during this period.
absence of viable space in this
business district.

CBD & off-CBD 44–49 5% 2%
SBD 40–48 9% 6%
PBD West 34–38 7% 3%
PBD East 27–32 1.5% 1%
74 75
RESIDENTIAL MARKET
KOLKATA RESIDENTIAL MARKET LAUNCHES,
Kolkata strived to keep
FIGURE 1
KOLKATA MARKET TRENDS itself afloat amidst
subdued market
14,000 4,000 sentiments. With new
Sangeeta Sharma Dutta
Lead Consultant - Research
12,000 residential projects
KOLKATA
10,000
being curbed to some
` / sq ft
Number of units
8,000
3,500 extent in the previous six
6,000
months, the number of
4,000
2,000
new launches continued
0 3,000 to be under pressure in
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
H2 2015. However, the
city’s sales volume, driven
• Kolkata strived to keep itself witnessed during the period, with largely by end users,
afloat amidst subdued market mid-segment housing witnessing
sentiments. With new residential the most number of launches. witnessed an increase
projects being curbed to some
• We expect the Kolkata residential of 10% in 2015 vis-à-vis
extent in the previous six months,
the number of new launches
market to improve in the first half 2014. The absorption in
of 2016, owing mainly to the strong
continued to be under pressure
traction in the office market that H2 2015 was significantly
in H2 2015. While new launches
fell by 6% in 2015 vis-à-vis 2014,
caused a growth of almost 44% in better as compared to
2015 compared to 2014, as well as
the rate of decline in H2 2015 was
the increased momentum in hiring H2 2014 and showed a
constrained at 10% as compared
to H2 2014.
activity in the city. The quantum of recovery of 29%.
office transactions in H2 2015 over
• On the other hand, the city’s the previous six months showed
sales volume, driven largely by a growth of 17%, whereas in H2
end users, remained unaffected 2014, it was a whopping 110% on a
by the dip in new launches; in YOY basis.
fact, it witnessed an increase
• We estimate new launches to
of 10% in 2015 vis-à-vis 2014.
increase by 29% in H1 2016
The absorption in H2 2015 was
compared to H1 2015, with the
significantly better as compared to
sales volume expected to improve
H2 2014 and showed a recovery of
significantly in the forthcoming six
29%.
months – to the tune of around
• The weighted average price 42%, on a YOY basis.
remained almost stagnant in H2
• On the price front, we expect
2015, with a slight increase of 1%
the weighted average values
compared to the corresponding
to improve slightly in H1 2016
period in 2014, emphasising the
as compared to H1 2015. The
fact that the market has remained
upcoming period is expected to
stable despite the decrease in
witness a growth of 2% in the YOY
new launches. This marginal
prices.
appreciation could be attributed
to the increased sales volume
76 77
Rajarhat emerged as the increased significantly in H2 2014, of the new launches in this zone limited number of new launches
MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES has been reducing gradually in belong to the affordable housing due to land constraints. Its share
region with the highest the recent months. While its share sector. has remained almost constant, in
number of residential units FIGURE 2 of residential launches was at
• Central Kolkata, the traditional
the range of 7–8% during H2 2014
MICRO-MARKET SPLIT OF LAUNCHED UNITS 32% in H2 2014 owing to the new and H1 2015, though H2 2015 saw
launched in H2 2015, launches in locations such as BT
bastion of the upper segment,
a slight increase in the share, at
H2 2014 H1 2015 H2 2015 witnessed a limited number of
accounting for a 42% share Road and Sodepur, it reduced to
new launches in H2 2014 as well
10%.
60% 20% in H2 2015. Notwithstanding
of the total number of new the slack in new launches, North
as H2 2015, although the latter • The Rajarhat area, excluding New
50% 49% period saw a slight improvement Town, was responsible for the
launches. South Kolkata 42%
Kolkata holds much potential
in this figure. These comprised majority of the affordable and
with its industrial tag dissipating
witnessed a significant 40%
gradually. The region has gained
small projects with very few units, mid-end projects in H2 2015,
32% 32% owing to land constraints, as a accounting for over 60% of the
number of new launches 30% 28% 28% 27%
prominence in recent years, owing
result of which the region’s share total number of new launches
to the existing and upcoming
in H2 2015 compared to 20%
20%
phases of the metro rail, impending
is restricted to just 1% of the total below the ticket size of `5 mn. By
15% number of new launches. contrast, South Kolkata and East
the preceding six months. 10%
infrastructure in and around VIP
Kolkata dominated the high-end
10% 7% 8% Road and Jessore Road, and its • The East zone, comprising
H2 2015 witnessed the 0% 0% 1% proximity to Rajarhat as well as the locations such as Salt Lake and
segment, with the most number of
0% launches priced above the ticket
launch of large-scale CENTRAL EAST NORTH RAJARHAT SOUTH
international airport. The majority Kankurgachi, also observed a
size of `1 mn.
projects in locations such Source: Knight Frank Research
FIGURE 3
as Maheshtala, taking TICKET SIZE SPLIT OF LAUNCHES DURING H2 2015
South Kolkata’s share of
100%
residential launches up to
90%
its H2 2014 levels. 80%
70%
60%
50%
H2 2015
40%
10,680 30%
units
20%
H2 2014 10%
11,891 -
< 2.5 MN 2.5 - 5 MN 5 - 7.5 MN 7.5 - 10 MN >10 MN
units
H1 2015 CENTRAL EAST RAJARHAT NORTH SOUTH
8,372 Source: Knight Frank Research
units

MICRO-MARKETS OF KOLKATA
MICRO-MARKET LOCATIONS
• Rajarhat has accounted for the for a 42% share of the total to the preceding six months.
largest share in the total number number of new launches. Rajarhat Being a conventionally-preferred Central Park Street, Rawdon Street, A.J.C. Bose Road, Minto Park, Elgin Road
of new launches in the city in the is expected to maintain positivity residential destination of the city,
last few years owing to persistent regarding the housing demand in it has always been on developers’ Kankurgachi, Beliaghata, Salt Lake, Narkeldanga, Keshtopur, E.M. Bypass (eastern
East
interest from the developer the forthcoming years, considering radars. H2 2015 witnessed the parts)
community. Although its share the quantum of office-sector launch of large-scale projects in North Baguiati, Ultadanga, Jessore Road, Shyambazar, Lake Town, B.T. Road, VIP Road
had reduced to come at par with development and infrastructure locations such as Maheshtala,
North Kolkata in H2 2014, it re- underway in the region. taking South Kolkata’s share of Rajarhat Rajarhat New Town
emerged as the region with the residential launches up to its H2 Ballygunge, Alipore, Tollygunge, Narendrapur, Behala, Garia, Maheshtala, E.M. Bypass
• South Kolkata witnessed a
highest number of residential units 2014 levels. South
significant number of new (southern parts)
launched in H2 2015, accounting
launches in H2 2015 compared • North Kolkata’s share, which had
78 79
FIGURE 4
MICRO-MARKET SPLIT OF RESIDENTIAL SALES
H2 2014 H1 2015 H2 2015
60%
50%
46%
40%
35%
32% 30%
29% 30%
30%
26% 25%
21%
20%
10% 8% 8% 7%
1% 1% 1%
0%
CENTRAL EAST NORTH RAJARHAT SOUTH
H2 2015
8,036
units
H2 2014
6,245
units
H1 2015
5,883
units
• Rajarhat witnessed the largest • On the other hand, South Kolkata H1 2014, dropped its share from
share of the absorption in H2 2015, has been witnessing a gradually 32% to 21% in H1 2015. However,
accounting for a whopping 46%, decreasing trend in absorption, we expect this region to perform
compared to 29% in H2 2014. The which continued in H2 2015 as better in the forthcoming periods
region’s share of the sales volume well. It accounted for a 25% share due to the abundance of mid-end
has been increasing, primarily of the sales volume in H2 2015, and affordable housing here.
due to factors such as the well- which dipped from its 30% share
• Despite being preferred residential
planned existing and upcoming of the absorption in H2 2014. This
locations for the affluent class,
road network, the proposed metro decline in absorption needs to be
East and Central Kolkata
connectivity within Rajarhat and controlled, as the unsold inventory
accounted for marginal shares
with other locations of the city and is expected to increase in the
in the total sales volume in the
its proximity to the international coming months.
primary market of the city, owing to
airport as well as Salt Lake Sector
• Meanwhile, North Kolkata, which a relatively smaller inventory size.
V – the IT/ITeS hub of Kolkata.
had seen an uptick in sales in
80 81
MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS AS OF DECEMBER 2015 PREMIUM RESIDENTIAL MARKET LAUNCHES,
The premium housing
MICRO-MARKET PREMIUM LOCATIONS segment has observed
A Park Street, Rawdon Street, Shakespeare Sarani, a considerable decline
CENTRAL 0% Central
Chowringhee Road
B in new launches during
7% East Kankurgachi, Topsia
EAST H2 2015, compared to
C
NORTH 27% Rajarhat New Town H2 2014. This could be
D
B C RAJARHAT 32% Ballygunge, Alipore, Tollygunge, Bhowanipore, Jodhpur
attributed largely to the
South
E
34% Park economic slowdown that
D SOUTH
A FIGURE 5
caused developers to
PREMIUM MARKET TRENDS hold back the launch of
E
LAUNCHES ABSORPTION WT. AVG. PRICE (RHS) premium projects.
800 9,750
700 9,700
600 9,650
Number of units
Source: Knight Frank Research 500 9,600
400 9,550
` / sq ft
300 9,500
• South Kolkata accounts for a major Madhyamgram and Jessore Road
Rajarhat witnessed the share of the total number of units now have a number of projects 200 9,450
under construction, to the tune of launched by reputed developers,
largest share of the 100 9,400
34%, given the fact that the region accounting for 27% of the total
absorption, accounting for has been witnessing large-scale residential units underway in the 0 9,350
residential development in the last city. H2 2013 H1 2014 H2 2014 H1 2015 H2 2015
46% of the total sales in H2
few years. Currently, development Source: Knight Frank Research
• The central and eastern markets
2014. The region’s share is being observed in the peripheral Note: Premium markets include locations where the average ticket size of a residential unit is
have fairly marginal shares of units
locations of Narendrapur, Sonarpur above `15 mn, are in close proximity to the central business district of the city and have witnessed
of the sales volume has under construction, to the tune of
Road and Diamond Harbour Road. new project launches in the preceding three years
less than 1% and 7% respectively.
been increasing, primarily This region is preferred, chiefly due • Kolkata’s premium market, of premium projects.
to its good social infrastructure,
due to factors such as the comprising locations such as
• On the other hand, H2 2015 saw an
causing developers to launch their Chowringhee, Rawdon Street,
well-planned existing and projects here. Ballygunge and Jodhpur Park,
improvement of 4% in absorption
compared to the same period
upcoming road network, • South Kolkata is followed by among others, witnessed the
in 2014. This bodes well for the
Rajarhat, with a 32% share of the launch of a number of high-
the proposed metro end residential projects in the
premium market of the city.
total number of residential units
connectivity within Rajarhat under construction. This zone, last year in locations such as • The weighted average price growth
comprising several Action Areas, E.M. Bypass, Chowringhee and YOY in the premium segment
and with other locations of Rajarhat. However, the segment remained almost constant, with
has witnessed frenetic residential
the city and its proximity to activity in the last decade and has observed a considerable a marginal improvement of 1%
boasts the presence of most key decline in new launches during observed in H2 2015 over H2
the international airport as H2 2015, compared to H2 2014. 2014. This relative stability in the
real estate developers.
well as Salt Lake Sector V – H2 2015 witnessed a steep weighted average price could be
• North Kolkata, recognised decline of 68% over the number attributed to the increase in the
the IT/ITeS hub of Kolkata. primarily as an industrial area of new launches in H2 2014. This sales volume during the period,
till recently, has emerged as a could be attributed largely to the coupled with constricted launches.
preferred residential location. economic slowdown that caused
Areas such as Sodepur, B.T. Road, developers to hold back the launch
82 83
segment has been higher than the and the largest quantum of and proximity to the international
KOLKATA MARKET HEALTH fall in demand. unsold inventory in the city – the airport as well as the employment
consequence of a sizeable number hub of Sector V have helped this
• Among the various zones, East
The QTS for Kolkata has of annual new launches in the micro-market perform better in
FIGURE 6 Kolkata is currently the best-
region. Despite being a preferred recent months.
QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS performing market of the city, with
decreased somewhat residential destination, its QTS
KOLKATA PREMIUM MARKETS the lowest QTS of 9.2 and age of • With a QTS of 9.9, North Kolkata
since H1 2015, the growth has been higher owing to a large
14 inventory pegged at 7.5 quarters. accounted for a lower age of
concentration of high-end projects
in demand for housing The presence of Salt Lake Sector inventory at 7.8 quarters. Though
13 that generally see slower sales
V, one of the key employment hubs this region also has a sizeable
in the last 12 months than mid-end developments.
12 of the city, catering primarily to the quantum of unsold inventory, it
Besides, the newer employment
being one of the reasons 11 IT/ITeS sector, and its proximity enjoys the advantage of a relatively
hubs of the city are located in
to Rajarhat—another upcoming IT smaller unsold inventory size,
No. of Quarters
for this decrease. East 10 the eastern and north-eastern

hub—have made East Kolkata a having evolved later than the
parts of the city, thereby shifting
Kolkata is currently the 9 preferred market for homebuyers. South zone. Thus, we expect this
homebuyer focus there.
8 However, the residential market market to pick up momentum once
best-performing market here is relatively smaller than in the • Rajarhat followed East Kolkata the infrastructure projects are
7
of the city, with the lowest other parts of the city and does not closely and is the second best completed.
6 have sufficient inventory and sales performing market, with a QTS of
QTS. The presence of • Due to its constricted market size,
5 volume compared to the other 9.5. Factors such as well-planned
the premium residential zone of
Salt Lake Sector V, one zones. existing and upcoming road
4 Central Kolkata does not seem to
networks, the proposed metro
of the key employment DEC-13 MAR-14 JUN-14 DEC-14 MAR-14 JUN-15 SEP-15 DEC-15 • On the other hand, South impact the city’s residential market
connectivity within Rajarhat and
Source: Knight Frank Research Kolkata has the highest QTS prominently.
hubs of the city, and its with other locations of the city,
• The quarters to sell unsold 2015, and currently stands at 10.7
proximity to Rajarhat— inventory (QTS) is the number quarters. The growth in demand
another upcoming IT of quarters required to exhaust for housing in the last 12 months AFFORDABLE HOUSING SEES AN IMPETUS IN A SLOW MARKET
the existing unsold inventory in could be cited as the main reason
hub—have made East the market. The existing unsold for this decrease. Significantly, Kolkata, in recent times, has nature of its residents and the gated communities established
Kolkata a preferred market inventory is divided by the average the QTS for the city’s premium witnessed a change in its socio- current tepid real estate scenario. in good neighbourhoods. In case
sales velocity of the preceding markets, which had witnessed a economic structure. Conventional Besides, they have realised over the of B.T. Road, it is well connected
for homebuyers. However, eight quarters in order to arrive at sharper rise than the city in Q4
joint family set-ups have given way last few years that there is a huge with the office projects located at
the residential market here the QTS number for that particular 2014 is set to converge with the
to nuclear families, while increase shortfall in demand for houses for Rajarhat and Salt Lake Sector V.
quarter. A lower QTS indicates a overall QTS, and is currently at 11.4
is relatively smaller than healthier market. quarters. This could be attributed in job opportunities has led to rising the middle income and low income While Rajarhat is better known for
to the fact that the correction in aspiration levels amongst the city’s groups. The slackening of residential its slew of premium and mid-end
in the other parts of the • The QTS for Kolkata has
new launches in the premium residents. Pent-up demand for demand has led developers to re- projects in New Town, the region
city and does not have decreased somewhat since H1
housing units led the city to witness strategise their product offerings also comprises several affordable
sufficient inventory and FIGURE 7 a surge in residential development and launch their projects at lower projects in the further Action Areas,
sales volume. MICRO-MARKET-WISE QTS VS AGE OF INVENTORY during 2006–08, thereby making the rates in the peripheral locations of which will continue to garner buyer
market end-user driven. Besides the city. This strategy seemed to interest. Metro rail connectivity will
RAJARHAT EAST CENTRAL NORTH SOUTH
these end-users, positive economic have paid off well and locations in increase its location attractiveness
14
outlook and transparency in real North Kolkata, such as B.T. Road even further. Other regions that are
13 estate transactions also attracted and Sodepur, and the peripheral witnessing buyer interest are E.M.
12 a large number of NRIs to invest in locations of South Kolkata, such Bypass and Garia, and this trend is
11 the city’s real estate. However, the as Narendrapur, Sonarpur Road likely to continue.
10 recession has had its impact on and Baruipur, witnessed increased
Thus, the bottom-line remains that
9 the city’s real estate sector and the developer and buyer interest,
there is a huge demand for smaller
ongoing slowdown has not taken off chiefly due to the affordable pricing
8 ticket-sized homes, even in a slow
well for the sector. of the projects and infrastructure
7 market. But the real challenge for
development. Besides the
6 Interestingly, developers have developers would be the ability to
upcoming extension of the metro
5
recognised the need to create more provide smaller homes at lower
rail, these locations hold buyer
6 8 10 12 14 affordable housing projects in the prices in the city and make it
interest because of the organised
QTS city, owing to the price-sensitive profitable.
84 85
PRICE MOVEMENT DURING H2 2015 OUTLOOK FOR THE NEXT SIX MONTHS
WEIGHTED AVERAGE PRICE MOVEMENT IN KOLKATA Projections H1 2015 H1 2016E GROWTH Kolkata managed to shed
Launches (units) 8,372 10,760 29% its inertia in H2 2015 and
LOCATION PRICE RANGE IN H2 2015 (`/SQ FT) 12 MONTH CHANGE 6 MONTH CHANGE
Absorption (units) 5,883 8,345 42% although new launches
Kolkata 3,535 1% 1% Weighted average price (`/sq ft) 3,495 3,570 2% were still somewhat
Premium markets 9,699 1% 2% Source: Knight Frank Research constrained, the period
witnessed a good traction
• Price appreciation across most • The weighted average price trend
locations in Kolkata during the last has been similar for both, the in sales. This sentiment
• Kolkata managed to shed its inertia • With its slew of premium and
12 months has been rather tepid premium housing market as well
in H2 2015 and although new launches mid-end projects in New Town and is likely to continue
and remained constant. While the as the city’s overall figure, in the
weighted average prices declined last 12 months, each witnessing
were still somewhat constrained, the affordable projects in the further in the forthcoming
period witnessed a good traction Action Areas, Rajarhat will continue to
slightly in H1 2015—primarily due an annual appreciation of 1%.
in sales. This sentiment is likely to garner buyer interest. The metro rail months, owing to growth
to the subdued sales volume and Premium markets, however, saw
huge amount of unsold inventory a slightly increased growth rate of
continue in the forthcoming months, connectivity will increase its location stimulators such as
owing to growth stimulators such as attractiveness even further. Other
in the market—H2 2015 saw some 2% on a half-yearly basis.
the increasing rate of employment, regions that are witnessing buyer the increasing rate of
movement owing to better sales.
The range of price appreciation
amplified office space development interest are E.M. Bypass and Garia, employment, amplified
and a rise in office space absorption. and this trend is likely to continue.
during the period was around
The fact that office transactions in office space development
1–2%. • On the price front, we expect the
H2 2015 showed a growth of 17% on
weighted average price in Kolkata to and a rise in office space
a half-yearly basis and a substantial
growth of 110% on an annual basis
appreciate marginally, by 2% in H1 absorption. The fact that
PRICE MOVEMENT IN SELECT LOCATIONS 2016.
augurs well for the residential sector. office transactions in H2
PRICE RANGE IN
LOCATION MICRO-MARKET H2 2015
12 MONTH 6 MONTH • Thus, absorption in H1 2016 is 2015 showed a growth of
CHANGE CHANGE estimated to surpass the H1 2015
(`/SQ FT) sales figure by 42%, signifying a 17% on a half-yearly basis
Park Street Central 12,000–20,000 0% 0%
positive trend in buyer interest in the and a substantial growth
forthcoming months.
of 110% on an annual
Rawdon Street Central 10,000–19,500 0% 0% • New launches are likely to improve
in H1 2016, given the activity in the basis augurs well for the
Ballygunge South 8,500–18,000 0% 0% office sector. The projected new residential sector.
launches in H1 2016 are expected
Tollygunge South 6,500–16,500 0% 0% exceed the H1 2015 figures by 29%,
indicating an increased momentum in
Behala South 3,300–4,800 1% 0% the market.
Narendrapur South 2,600–4,300 2% 0%
Kankurgachi East 6,000–9,100 1% 0%
Salt Lake East 5,000–8,000 0% 0%
New Town Rajarhat Rajarhat 4,300–7,000 0% 0%
Madhyamgram North 2,550–3,300 0% 0%
BT Road North 3,200–4,500 0% 0%
Jessore Road North 4,300–5,600 2% 0%
86 87
RESIDENTIAL MARKET
MMR RESIDENTIAL MARKET LAUNCHES, ABSORPTION
AND PRICE TRENDS
Going forward, in H1
FIGURE 1
2016, infrastructure
MMR MARKET TRENDS
thrust, the improving office
market and stable house
Vivek Rathi 40,000 9,000
Vice President - Research prices will aid the housing
MUMBAI
35,000
market revival. Amidst
30,000
the demand revival, new
8,000
25,000
launches are to be lower
20,000
and prices, stagnant on
` / sq ft
Number of units
15,000
7,000 account of the inventory
10,000
backlog.
5,000
0 6,000
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
• The MMR residential market price increased by a modest 3% in • The Navi Mumbai International
contracted further in H2 2015. In H2 2015 over H2 2014. Airport construction contract is
comparison with the half-yearly to be awarded by June 2016.
• Going forward, in H1 2016,
period of H2 2014, absorption and
infrastructure thrust, the improving • Amidst the demand revival, new
new launches shrunk by 6% and
office market and stable house launches are to be lower and
23%, respectively. A total of 20,776
prices will aid the housing market prices, stagnant on account of the
units were launched, making H2
revival. inventory backlog.
2015 the worst H2 period after the
global financial crisis. • The central and state governments
are pushing critical transit-oriented
• Despite the festive season, the
infrastructure projects in the MMR
markets failed to record a rise
and aim at completion by 2019.
in demand during this period.
Stretched affordability, coupled • The Mumbai Trans Harbour Link
with a bleak employment outlook, has secured the environment
kept buyers on the fence. clearance, and the bidding
process will begin in March 2016.
• In the case of supply, against the
backdrop of unsold inventory, new • Mumbai’s coastal road has
launches would only aggravate secured the forest and CRZ
the pressure. Taking cognizance clearances. The bidding process
of this, developers have aligned will begin in June 2016.
their new launches with the bleak
• The metro rail for the Dahisar
demand scenario.
to DN Nagar, Dahisar East to
• In line with the slowdown in the Andheri East, and Cuffe Parade
MMR residential property market, to SEEPZ corridors has been
the price growth decelerated in H2 expedited. Construction is to
2015. The MMR weighted average begin this year.
88 89
MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES FIGURE 3

FIGURE 2 100% WESTERN SUBURBS

MICRO-MARKET SPLIT OF LAUNCHED UNITS THANE
90%
SOUTH MUMBAI
H2 2014 H1 2015 H2 2015 80% PERIPHERAL WESTERN SUBURBS
40% PERIPHERAL CENTRAL SUBURBS
70%
36% NAVI MUMBAI
35% 60% CENTRAL SUBURBS
50% CENTRAL MUMBAI
30% 28%
25% 26% 40%
Number of units
25% 23%
20% 30%
19%
20%
20%
16%
15% 13% 14%14% 10%
12%13% 12%
10% 10% -
7% 5% < 2.5 MN 2.5 - 5 MN 5 - 7.5 MN 7.5 - 10 MN 10 - 20 MN >20 MN
5% 4% Source: Knight Frank Research
2%
0% 0% 0% 0% 1%
0
CENTRAL CENTRAL NAVI PERIPHERAL PERIPHERAL SOUTH THANE WESTERN MICRO-MARKET-WISE RESIDENTIAL SALES
MUMBAI SUBURBS MUMBAI CENTRAL WESTERN MUMBAI SUBURBS
SUBURBS SUBURBS
FIGURE 4
Source: Knight Frank Research MICRO-MARKET SPLIT OF SALES
H2 2014 H1 2015 H2 2015
40%
35%
32%31%
H2 2015 30%
28%
20,776
Number of units
25%
21%22%
21%
units 20% 17%
H2 2014 16%16%
15% 13%13%
12%
26,833 10% 8%
10% 9%
7% 7% 9%
units
H1 2015 5%
2% 2% 2% 0% 0% 1%
18,887 0
CENTRAL
MUMBAI
CENTRAL
SUBURBS
NAVI
MUMBAI
PERIPHERAL
CENTRAL
PERIPHERAL
WESTERN
SOUTH
MUMBAI
THANE WESTERN
SUBURBS
units
SUBURBS SUBURBS
• Developers in the peripheral Virar, Palghar), the overall tally is unsold inventory worth `2,020 bn,
markets were the most concerned. low for this market. The current of which `595 bn is in the South
Many put brakes on new project launch rate is just about a quarter and Central Mumbai markets. H2 2015
plans in H2 2015. The Peripheral of its historical rate. The premium South and Central
Central Suburbs (Kalyan, Karjat,
• The South and Central Mumbai
Mumbai markets witnessed 34,135
Kasara, etc.) and Navi Mumbai a tenfold jump in new project units
markets are critical for the industry
were the worst hit, seeing
because of their value. Even
launches, to 956 units in H2 2015, H2 2014 H1 2015
launches lower by 44% and 59%, compared to just 100 units in H2
respectively.
though they represent just 3%
of the MMR’s unsold inventory
2014. 36,505 28,446
units units
• While new launches grew in volume, they contribute a massive
Peripheral Western Suburbs (Vasai, 29% to its value. The MMR has an
90 91
• Even though demand shrunk by • Incremental infrastructure in terms localities such as Wagle Estate
MICRO-MARKETS OF THE MMR 6% in the MMR, Thane bucked the of the 32-km Mumbai Metro Line and Ghodbunder Road, Thane.
trend with a growth of 13%. 4 (Wadala–Ghatkopar–Thane– Going forward, we estimate an
MICRO-MARKET LOCATIONS Kasarvadavali) is scheduled for incremental office space addition
• Good connectivity to office
implementation in 2017–2023. of 13.7 mn sq ft in the PBD in
Central Mumbai Dadar, Lower Parel, Mahalakshmi, Worli, Prabhadevi markets, coupled with the right
the next five years (2016–2020).
ticket size products, made Thane • Employment hubs in the peripheral
Of this, approximately 5 mn sq
Central Suburbs Sion, Chembur, Wadala, Kurla, Ghatkopar, Vikhroli, Bhandup, Mulund successful in attracting buyers. business district (PBD), which
ft (62,500 jobs) will be in Wagle
Incidentally, Thane’s Majiwada– includes the office markets of
Estate and Ghodbunder Road.
Navi Mumbai Vashi, Nerul, Belapur, Kharghar, Airoli, Panvel, Ulwe, Sanpada Kasarvadavali belt also featured as Thane and Navi Mumbai, have an
a top investment destination in our office stock of 23 mn sq ft, out of
Peripheral Central Suburbs Kalyan, Kalwa, Dombivli, Ambernath, Bhiwandi, Mumbra, Karjat
last report. which 5.4 mn sq ft is present in
Peripheral Western Suburbs Vasai, Virar, Boisar, Palghar, Bhayandar, Nalasopara
South Mumbai Malabar, Hill, Napean Sea Road, Walkeshwar, Altamount Road, Colaba
Thane Naupada, Ghodbunder Road, Pokhran Road, Majiwada, Khopat, Panchpakhadi
MUMBAI RESIDENTIAL MARKET DYNAMICS
Western Suburbs Bandra, Andheri, Goregaon, Kandivali, Borivali, Santacruz, Vile Parle
The MMR residential property opportunities in Mumbai, and prices alone are not sufficient –
market can be classified in a price second, that the centre of gravity is connectivity to employment and
band of `3,000–100,000/sq ft, with a slowly but gradually moving towards social infrastructure centres is
small proportion beyond this range. the north, or closer to the newer critical. Thus, a glaring housing
A 33 multiplier between the highest residential markets. shortage estimate on one hand
and the lowest band makes for a and 181,000 unsold houses on
With a weighted average price of
very large price gradient. We take a the other highlight a dichotomy
`7,994/sq ft, residential property
look at the primary factors that have between consumer need and
in the MMR is the costliest in the
shaped the MMR residential market, market offering. Ensuring a
country. The gap between the MMR
widely considered as the country’s supply of affordable houses that
and the second costliest market,
costliest. Mumbai city is spread have access to employment
Pune, is a huge 65%. Compared to
over 458 sq km with a population opportunities will ameliorate the
the National Capital Region (NCR),
base of 12.4 mn (2011). By contrast, situation. While market forces will
it is 75% costlier. The premium
the larger geography identified as move with a capitalist ideology, it
is 67% compared to Bengaluru –
the Mumbai Metropolitan Region is the government’s prerogative to
the country’s technology capital.
(MMR) is spread over 4,355 sq km, focus on creating an ecosystem
Notwithstanding the associated
which is almost ten times the size of that enhances the right supply.
premium in pricing, the MMR has
Mumbai city and has a population of Augmenting the right supply
been witnessing lower launches
22.8 mn, which is about twice that would require working on several
compared to NCR and Bengaluru
of Mumbai city. The comparison facets. Building transit-oriented
during each of the last two years.
becomes pertinent, considering infrastructure that can significantly
While the lower supply has reduced
that the city has 80% of MMR’s reduce the time and cost for the
the unsold inventory pressure and
office space of 118 mn sq ft. The daily commute should be a starting
brought down the quarters to sell
new office development in the next point. The other factors would be
(QTS), it has also shrunk the market
five years would be such that the seamless construction approvals
momentum.
city would contribute 62%, with the and incentivising transit-oriented
balance coming up outside the city. Further, there are peripheral markets real estate development.
Clearly, this points to two things with prices at `3,000/sq ft, but
– first, that the rest of the MMR our analysis indicates a tough
localities are driven by employment time for these as well because low
92 93
MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS IN H2 2015 PREMIUM MARKET TRENDS
FIGURE 5
A
PERIPHERAL CENTRAL SUBURBS 30%
D B 2,000 35,000
E
PERIPHERAL WESTERN SUBURBS 19%
C
NAVI MUMBAI 15% 1,500
33,000
F C
D
WESTERN SUBURBS 14% 31,000
E
11% 1,000
` / sq ft
CENTRAL SUBURBS
Number of units
G B 29,000
F
THANE 7%
500
G
CENTRAL MUMBAI 3% 27,000
H H
A SOUTH MUMBAI 1% 0 25,000
H1 2013 H2 2013 H1 2014 H2 2014 H1 2015

Note: Premium markets include locations where the average ticket size of a residential unit is above `50 mn, are in close proximity to the central
business district of the city and have witnessed new project launches in the preceding three years
• With an average house price of of an extremely thin project launch market.

`50 mn and above, the premium scenario in H2 2014, wherein only
• Besides the factors that impacted
markets are select localities spread 121 new units were launched,
the overall MMR market, the large
across the micro-markets of South compared to the average launch
Source: Knight Frank Research ticket size in these markets made
Mumbai, Central Mumbai and the rate of close to 1,500 units in H1
buyers draw value proposition
Western Suburbs. These markets 2013 and H2 2013 each.
parallels with the relatively
have also been battling tough
• Demand in the premium market affordable markets in the Western
market conditions for the last few
fell by 17% in H2 2015, compared and Central Suburbs. Even as new
years.
to same period in the previous launches jumped sixfold, the price
• In H2 2015, new launches in this year. Large ticket sizes ensured growth in the premium markets
segment jumped by 490% to 714 that the shrinkage in this segment remained muted, at just 2% in H2
units. This happened on the back was bigger than the mainstream 2015 over H2 2014.
• With a 30% share, the Peripheral • The Peripheral Western Suburbs MMR MARKET HEALTH
Central Suburbs is the largest ranks second in terms of under-
market in the MMR in terms of the construction housing units, with a
FIGURE 7
quantum of under-construction 19% share.
housing units. QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS
16
14
PREMIUM RESIDENTIAL MARKET LAUNCHES, ABSORPTION AND PRICE TRENDS PREMIUM MARKETS
12
No. of quarters
10
MICRO-MARKET PREMIUM LOCATIONS
8
South Mumbai Malabar Hill, Tardeo, Mahalakshmi, Mumbai Central, Walkeshwar 6
4
Central Mumbai Worli, Prabhadevi, Parel, Lower Parel, Dadar MMR CITY
2
Western Suburbs Bandra West, Santacruz, Juhu 0
DEC-13
MAR-13
JUNE-14
SEP-14
DEC-14
MAR-15
JUN-15
SEP-15
DEC-15
94 95
FIGURE 8 PRICE MOVEMENT IN SELECT LOCATIONS

MICRO-MARKET-WISE QTS VS AGE OF INVENTORY
(`/SQ FT) CHANGE CHANGE
20 CENTRAL MUMBAI PERIPHERAL WESTERN SUBURBS
Lower Parel Central Mumbai 25,000–36,000 3% 0%
CENTRAL SUBURBS SOUTH MUMBAI
NAVI MUMBAI THANE Worli Central Mumbai 31,000–55,000 -1% -2%
PERIPHERAL CENTRAL SUBURBS WESTERN SUBURBS
17 Ghatkopar Central Suburbs 12,000–22,000 4% 3%
Mulund Central Suburbs 10,500–14,000 4% 0%
Powai Central Suburbs 14,000–20,000 6% 3%
14
Panvel Navi Mumbai 4,500–6,500 -1% 2%
Kharghar Navi Mumbai 6,500–9,500 2% 1%
11 Vashi Navi Mumbai 10,000–15,000 2% 2%
Badlapur Peripheral Central Suburbs 2,800–3,500 0% 0%
8 Dombivali Peripheral Central Suburbs 4,500–6,000 1% 0%
Mira Road Peripheral Western Suburbs 5,500–7,500 0% 0%
Virar Peripheral Western Suburbs 4,500–5,500 0% 0%
5
Tardeo South Mumbai 40,000–60,000 0% 0%
5 8 11 14 17 20
Ghodbunder Road Thane 6,000–10,000 2% 2%
QTS
Source: Knight Frank Research Naupada Thane 14,000–18,000 2% 2%
• The quarters to sell unsold six months, the QTS has come the worst across all markets. On Andheri Western Suburbs 14,000–22,000 3% 0%
inventory (QTS) is the number down, mainly on account of the the other hand, Thane and the Bandra (W) Western Suburbs 40,000–60,000 0% 0%
of quarters required to exhaust sharp curtailment in new project Peripheral Western Suburbs are Borivali Western Suburbs 11,000–15,000 1% 1%
the existing unsold inventory in launches. among the best markets on these
Dahisar Western Suburbs 8,500–10,000 3% 2%
the market. The existing unsold parameters.
• The unsold inventory declined Goregaon Western Suburbs 13,000–15,000 1% 1%
from 204,070 units in H2 2014 to • The QTS for the premium markets
sales velocity of the preceding
181,151 units in H2 2015, mainly on has remained higher than that of OUTLOOK FOR THE NEXT SIX MONTHS
eight quarters in order to arrive at
account of the sharp reduction in the MMR. Since these markets
the QTS number for that particular
new launches. During this period, have larger ticket sizes, it takes
quarter. A lower QTS indicates a Projections H1 2015 H1 2016E CHANGE
the QTS came down marginally, longer to sell. Against the
healthier market.
from 12 to 11. A comparison of the backdrop of a 490% jump in new Launches (units) 18,887 16,998 -10%
• Against the backdrop of a weak market health of all the micro- project launches in H2 2015, the
demand scenario, the QTS for markets of the MMR indicates QTS for premium markets has Absorption (units) 28,446 29,868 5%
the MMR saw an increasing that the South Mumbai market increased from 14 in H2 2014 to 17
trend between June 2013 and has been ailing. Its QTS of 17 and in H2 2015. Weighted average price (`/sq ft) 7,994 7,994 0%
June 2015. However, in the last age of inventory at 15 quarters is Source: Knight Frank Research
• Going forward, infrastructure augment end-user demand in H1 to the same period last year, we
PRICE MOVEMENT DURING H2 2015 thrust, the improving office market 2016, resulting in housing sales of forecast a stagnation in property
and stable house prices will aid 29,868 units – up 5% compared to prices on account of the large
the housing market revival. In the first six months of 2015. unsold inventory and low investor
WEIGHTED AVERAGE PRICE MOVEMENT IN PUNE
H1 2016, we estimate a modest interest.
• On the supply side, even while the
improvement in demand and lower
uncertainty over Mumbai’s new • Among the micro-markets, Thane,
LOCATION PRICE RANGE IN H2 2015 (`/SQ FT) 12 MONTH CHANGE 6 MONTH CHANGE supply coinciding with stagnation
development plan is expected the Central Suburbs and the
on the price front.
to be resolved in H1 2016 and Western Suburbs are expected to
MMR 7,994 3% 0% • Investor interest in residential developers gauge higher enquiries, benefit due to attractive project
property is expected to remain new project launches, at 16,998 launches and superior connectivity
Premium markets 33,100 2% 0%
muted on account of suboptimal units, will be 10% lower compared to office locations in Mumbai.
returns in comparison to other to H1 2015 on account of unsold
• Reeling under the pressure of new launches were reduced prevalent to aid property buying. • The Peripheral Western Suburbs
asset classes, such as equity and inventory pressure.
a large unsold inventory and a significantly, freebies in terms of will continue to be driven by price-
• Barring a few projects that have debt. A gradual improvement in
slowdown in sales, developers waivers on levies and preferential • While new launches and conscious homebuyers due to the
seen 1–2% price cuts, most the employment outlook, coupled
adopted coping strategies to limit location charges are being offered. absorption are estimated to plethora of options available in the
markets in the MMR are now with lower consumer inflation and
the pressure on prices. While Easy financing schemes are also improve in H1 2016 compared sub-`5 mn ticket size housing.
witnessing stagnant prices. housing loan interest rates, would
96 97
OFFICE MARKET SECTOR ANALYSIS
FIGURE 3
MMR OFFICE MARKET STOCK, NEW COMPLETIONS, SECTOR-WISE SPLIT OF ABSORPTION
ABSORPTION AND VACANCY TRENDS H2 2014 H1 2015 H2 2015
FIGURE 1 70%
In 2015, demand 60% Surpassing the BFSI
exceeded supply in the 50% 46% sector, the IT/ITeS industry
MMR for the first time 140 23% 40% 40%
40%
emerged as the top
since 2008, as only 5.8 120 30%
26% 26% 22% 24%
occupier of office space
22%
mn sq ft of new project 100
20% 16% 15% 17% 17% in the MMR, contributing
10%
completions were recorded 21%
10% 46% of the demand in H2
mn sq.ft.
80
against an occupier 0 2015, compared to 26% in
60 IT/ITeS BFSI* MANUFACTURING OTHER SERVICES
demand of 7.5 mn sq ft. 20%
H2 2014.
40
19% • Surpassing the BFSI sector, the sector generated 122,000 sq ft of
20 IT/ITeS industry emerged as the office demand in H2 2015, led by
top occupier of office space in players such as Amazon, Zomato
0 18%
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
the MMR, contributing 46% of the and Toppr. Though miniature in
demand in H2 2015, compared to contrast to Bengaluru, their most
Source: Knight Frank Research 26% in H2 2014. preferred market, e-commerce
FIGURE 2 enterprises have garnered a bigger
• The manufacturing sector boosted
NEW COMPLETIONS AND ABSORPTION office space presence in Mumbai,
its share even further, with leading
with their interest primarily in
NEW COMPLETION ABSORPTION engineering and pharmaceutical
the SBD Central and SBD West
companies taking up more space
7.0
6.4
business districts.
in H2 2015, compared to the same
6.0 period last year.
4.8 5.0
5.0 • With an 83% jump in demand,
e-commerce raised its head. The
4.0 3.5
mn sq.ft
2.9 2.5 2.9

3.0 2.8
2.5 2.3
2.0
1.0
0
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016E H2 2015
5.0
• In 2015, demand exceeded supply vacancy level trended down from is a dearth of large-size quality
for the first time in the MMR since 22.6% in H2 2014 to 20% in H2 office space. With occupiers mn sq.ft.
2008, as only 5.8 mn sq ft of new 2015. interested to sign built to suit (BTS) H2 2014
project completions were recorded facilities, developers are now
against an occupier demand of
7.5 mn sq ft. In H2 2015, new
• With the latest addition, the stock
and occupied stock in the MMR
opening up to opportunities for the
development of office buildings
4.8
mn. sq.ft.
stands at 118 mn sq ft and 94
completions comprised 3.5 mn sq
mn sq ft, respectively. At a 20%
to cater to such demand; large IT/ H1 2015
ft or 45% lower, and absorption ITeS giants signing up in markets
was at 5 mn sq ft or 3% higher
vacancy level, which is lower than
H2 2014, the market has a vacant
such as Thane and Navi Mumbai 2.5
than same period last year. being a prime example of this mn sq.ft.
stock of 24 mn sq ft.
phenomenon.
• As a result of the improving
• Although the market vacancy
demand-supply equation, the
appears high at around 20%, there
98 99
SECTOR ANALYSIS BUSINESS DISTRICT ANALYSIS
FIGURE 4 BUSINESS DISTRICT CLASSIFICATION

AVERAGE DEAL SIZE AND NUMBER OF DEALS
CBD & off-CBD Nariman Point, Cuffe Parade, Ballard Estate, Fort, Mahalaxmi, Worli
40,000 160
Bandra Kurla Complex & off-
Bandra Kurla Complex (BKC & BKC, Bandra (E), Kalina and Kalanagar
Number of deals
30,000 120
off-BKC)
Central Mumbai Parel, Lower Parel, Dadar, Prabhadevi
sq.ft
20,000 80
SBD West Andheri, Jogeshwari, Goregaon, Malad
10,000 40
SBD Central Kurla, Ghatkopar, Vikhroli, Kanjurmarg, Powai, Bhandup, Chembur
PBD Thane, Airoli, Vashi, Ghansoli, Rabale, Belapur
0 0
H1 2014 H2 2014 H1 2015 H2 2015
SELECT TRANSACTIONS
BUILDING OCCUPIER LOCATION APPROX. AREA (SQ FT)
BTS (Hiranandani Estate) TCS Thane 1,800,000

Godrej BKC Abbott India BKC 445,000
G: Corp Quintiles Thane 150,000
L&T Seawoods SBI Life Insurance Navi Mumbai 130,000
Lighthall Piramal Andheri East 100,000
Umang Shoppers Stop & Hypercity Malad 100,000
Mindspace IDBI Airoli 90,000
Kalpataru Prime CMA CGM Thane 65,000
Aventis House (Sanofi Bldg) Ajanta Pharma Andheri East 60,000
Indiabulls Finance Center Yes Bank Lower Parel 60,000
• The average deal size witnessed a

jump of 34%, from 27,700 sq ft in
H2 2014 to 37,300 sq ft in H2 2015,
though a similar number of deals
were closed in both years.
• The encouraging growth in deal
size took place on account of
the few large deals signed by IT/
ITeS and pharmaceutical sector
companies.
100 101
FIGURE 5
RENTAL TREND
H2 2014 H2 2015 FIGURE 6
60% WEIGHTED AVERAGE RENTAL MOVEMENT

53%
140
50%
130
40%
Notwithstanding the dip in
Number of units
INR / sq.ft./month
32% 120
30%
the weighted average rent,
24%
21%21% 110 owing to the improved
20%
20%
16% 14%
100
demand-supply dynamics,
12%
10% 7%
9%
7% office market rents are
3% 2% 90
trending up.
0
CENTRAL CENTRAL NAVI PERIPHERAL PERIPHERAL SOUTH THANE 80
MUMBAI SUBURBS MUMBAI CENTRAL WESTERN MUMBAI H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016E
SUBURBS SUBURBS
• The MMR weighted average rent dynamics, office market rents
is lower by 12%, from `118 / sq ft / are trending up. Markets such as
month in H2 2014 to `104 / sq ft / Thane, Navi Mumbai, Andheri and
month in H2 2015. This happened Goregaon witnessed a rent growth
on account of the relatively lower of 3% in the last six months.
H2 2015 priced PBD witnessing a jump in Premium markets, such as Central
5.0
its share of absorption from 32% Mumbai and BKC, also witnessed
to 53% during this period. a rent growth of 2% in the last six
mn sq.ft. months.
• Notwithstanding the dip in the
H2 2014 weighted average rent, owing to
4.8 the improved demand-supply
mn. sq.ft.

BKC & off-BKC 210–310 -4% 2%
• The demand share of the PBD CBD & off-CBD 160–260 -2% -2%
(Thane and Navi Mumbai)
increased from 32% in H2 2014 to Central Mumbai 150–190 0% 2%
53% in H2 2015 on account of the
robust demand from the IT/ITeS PBD 50–70 5% 3%
industry.
SBD Central 80–130 -4% -1%
• Central Mumbai has witnessed
its share decline from 20% in H2 SBD West 90–130 3% 3%
2014 to 7% in H2 2015, primarily
on account of the receding office
space options.
102 103

With macroeconomic
factors such as the PROJECTIONS H1 2015 H1 2016E CHANGE
slowdown in China, which New supply (mn sq ft) 2.3 2.9 26%
has impacted global Absorption (mn sq ft) 2.5 2.8 9%
growth, the India office Vacancy (%) 21.9% 19.7%

market is expected to Weighted average rental (` / sq ft /
117 123 5%
month)
maintain a business-as- Ankita Sood
usual scenario in H1 2016. Consultant - Research
NCR
• Government focus, and IT/ITeS and manpower-intensive industry to
Knight Frank estimates the manufacturing sector leadership open offices here. The sector’s
NCR office leasing to clock will improve the MMR office large share in the latest demand
market prospects, going forward. number bodes well and has further
approximately 3.5 mn sq New completions will grow by 26% improved the demand outlook.
ft in H1 2016 with rentals in H1 2016 and absorption will
• Encouragement in the office
improve steadily by 9%, translating
firming up at key locations into a lower vacancy level of 19.7%
segment would also occur with
the rising private equity interest
that offer quality office compared to 21.9% during the
and the shaping up pre-REIT-
same period last year.
space. launch environment. This will boost
• The IT/ITeS sector has been supply-side aspirations to start
the largest contributor to the considering new office projects.
office demand in India, and the
Maharashtra government’s IT/ITeS
Policy 2015 is among its latest
initiatives to induce this skilled
104 105
RESIDENTIAL MARKET Along with

NCR RESIDENTIAL MARKET LAUNCHES, ABSORPTION macroeconomic factors, • 68% of the total 63,458 units
FIGURE 2
AND PRICE TRENDS policy fallacies, such as launched in NCR in 2015 are in
MICRO-MARKET SPLIT OF LAUNCHED UNITS
Gurgaon and Greater Noida.
FIGURE 1
the opening up of new H2 2014 H1 2015 H2 2015
• Backed by the Haryana
NCR MARKET TRENDS land for development, government’s Affordable Housing
60%
51%
Policy 2013, Gurgaon showed a
allotment of group housing 50%
20% increase in new launches
Number of units
41% 41%
50,000 4,600
licences in areas with in 2015, compared to 2014. The 40%
45,000
policy intends to build group
40,000
4,550
no infrastructure, project 30% 27% 27%
housing projects of a predefined
Number of units
35,000
4,500
delays due to litigations
` / sq ft
30,000 size via a private developer, which 18%
20% 17% 17%
would be available to buyers at a 14%16% 14%
25,000 4,450
and the liquidity crunch, 12%
20,000 predetermined rate. The stipulated 10%
15,000 4,400 and stagnant incomes, completion time for projects falling 0% 2% 0% 1% 1% 1%
10,000 under this category is four years 0
5,000
4,350 have affected NCR’s real DELHI FARIDABAD GHAZIABAD GREATER GURGAON NOIDA
from the date of the approval of
NOIDA
0 4,300 estate appetite adversely. the building plan or obtaining the Source: Knight Frank Research
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
environmental clearance, failing
The three-year muted 9,475 units in 2015, compared to of new launches, more than half
Source: Knight Frank Research which, there will be no renewal of
11,117 units in 2015. have been category of less than
price growth indicates the licence. The projects under
`5 mn, indicating a move towards
• NCR saw the leanest year in terms also registered a YoY drop of 24% this scheme are not charged • New launches in Greater Noida
that residential real have declined by a significant
affordable options for homebuyers.
of new launches since 2010. in new project launches, there was with external development
Matching the trend in H2 2015,
a 15% increase in the number of estate is facing a strong charges (EDC) and infrastructure 39% in 2015, compared to 2014.
• Dropping to 63,460 units in 2015, 65% of the new launches were in
project launches compared to H1 development charges (IDC), thus However, in terms of percentage
new launches registered a 20% dip resistance to unattractive share, Greater Noida continues
the less than `5 mn category.
2015. This marginal increase can making the homes more affordable
YoY compared to 2014.
be attributed to the developers and unaffordable prices in than the private market. Gurgaon to be one of the largest markets • Catering mostly to the affordable
• Piling-up inventory and a low sales releasing their pent-up supply of contributed significantly to the new considering the number of new and budget segments, the
NCR. launches in NCR, with a 41% share maximum number of new launches
velocity led developers to restrict new launches into the market. launches in NCR in H2 2015, taking
the supply of new launches in up 27% of the overall pie. of the total new launches in H2 in Greater Noida fall in `5 mn
• On the other hand, demand in NCR
2015. 2015. category. Keeping up with this
is yet to pick up. Approximately • Noida witnessed new launches
trend, a massive 88% of the total
• Slow sales velocity and delayed 48,800 units were sold in NCR decrease by 15% in 2015, with the • The trend of new launches in NCR
new launches in Greater Noida in
projects due to litigations in 2015, showing a negligible total number of new launches at suggests that of the total number
characterised the NCR market in housing licences in areas with
improvement over the 2014 sales
2015. no infrastructure, project delays
numbers. The market refused to
due to litigations and the liquidity
correct itself in the second half of
• Taking cognisance of the pace of crunch, and stagnant incomes,
2015 and sales stood at 23,800
sales, developers were pressed have affected NCR’s real estate
units in H2 2015.
to restrict new launches, resulting appetite adversely.
in the thinnest annual supply • However, the market registered a H2 2015
• This three-year muted price
34,000
observed in NCR. 15% growth in sales in H2 2015
growth indicates that residential
compared to the same period in
• The trend suggests that new real estate is facing a strong price units
2014, which can be ascribed to
launches in NCR are on a constant resistance against unattractive and
decline since 2010, with the
the low base compared to the H2 2014
unaffordable prices in NCR.
preceding years.
average number of launched units
coming down from 86,000 in 2010 • Along with the impact of
• We forecast this trend to continue 45,000
to 31,700 in 2015. in the coming six months and units
macroeconomic factors, delays in
project the weighted average price H1 2015
the delivery of some major large-
• Registering a 20% drop in the
29,460
in NCR to grow slightly, at 2% in
scale projects have put buyers in
number of units launched, NCR H1 2016, compared to the same
NCR on the back foot.
saw approximately 63,458 units period in 2015. units
launched in 2015 compared to • Policy fallacies, such as the
79,577 units in 2014. opening up of new land for
development, allotment of group
• Though the second half of 2015
106 107
FIGURE 3
100% New launches in NCR

90%
H2 2015
have hit an all-time low,
80%
with the thinnest supply of 23,800
70% units
60%
residential units in 2015. A H2 2014
significant 68% of the total
50%
40% 63,458 units launched

20,630
units
30% in NCR in 2015 are in H1 2015
20%
10%
Gurgaon and Greater 25,000
units
Noida. While Greater
-
< `2.5 MN `2.5 - 5 MN `5 - 7.5 MN `7.5 - 10 MN `10-20 MN Noida has always been
NOIDA GURGAON GREATER NOIDA GHAZIABAD FARIDABAD DELHI NCR’s largest micro-
Source: Knight Frank Research market by virtue of the • Approximately 23,800 units were 64% share of the overall sales in
sold in the second half of 2015, H2 2015.
H2 2015 were in the `2.5–5 mn 2015, with 79% of the total new number of units launched,
compared to 20,630 units in
• On the other hand, Gurgaon
category. launches falling in the less than `5 Gurgaon saw an increase H2 2014, thus registering a YoY
mn category. registered a 13% uptick in sales in
increase of 15%; however, with the
• Like Greater Noida, the residential in the number of new H2 2015, compared to the same
market of Ghaziabad has also • A substantial 35% of the new base remaining low, the long-term
period in 2014. Fresh launches
established itself as an affordable launches in Gurgaon fall in the launches in 2015 on sustenance of the percentage
in New Gurgaon and New Sohna The looming uncertainty
growth is yet to be seen. The sales
residential choice in NCR, owing `2.5–7.5 mn category. the back of the Haryana have provided buyers with several
to its low capital values. Affordable volume in NCR has remained
options in the steep price market over project deliveries
and mid-segment project launches government’s Affordable muted and the percentage share
of Gurgaon, thus giving some and the unaffordability
of the micro-market has shown
saw a push in Ghaziabad in H2 Housing Policy, 2013. traction to the market.
negligible deviation from the past of the existing supply
quarters.
MICRO-MARKET-WISE RESIDENTIAL SALES The trend of new launches have depressed buyer
• Macroeconomic factors, along
in NCR suggests that with ambiguity of infrastructure sentiments in NCR. Our
completions and developer delays, survey findings suggest
FIGURE 4 more than half of the total have adversely affected the NCR
MICRO-MARKET SPLIT OF SALES
new launches have been market appetite. that there is a growing
H2 2014 H1 2015 H2 2015
in the category of less than • Our survey findings suggest that preference among
60%
there is a growing preference homebuyers for ready-
`5 mn, indicating a move among homebuyers for ready-to-
50%
44% 43%44% towards affordable options move-in projects or projects where to-move-in projects or
Number of units
40% there is a certainty of possession projects where there is a

for homebuyers. within a year. This growing
30% inclination is a consequence of certainty of possession
20% 20% 21% project delays and long gestation within a year. This is a
20% 19%19% 19%
15% 15% 14% periods in the completion of
infrastructure projects. consequence of project
10%
0% 1% 0% 2% 2% 2% • Affordability has driven sales in the delays and long gestation
0
micro-markets of Greater Noida periods in the completion
DELHI FARIDABAD GHAZIABAD GREATER GURGAON NOIDA
NOIDA and Ghaziabad, as both markets
Source: Knight Frank Research have low capital values. Both of infrastructure projects.
markets make up a considerable
108 109
MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS IN H2 2015 in proximity to the city centre in after negotiations. The value from the city. Shuttle services, 24x7
NCR hint that the buyers are mostly addition of every rupee spent has ambulances and doctors on call,
end users who do not want to become the new sale mantra of all-round security and tie-ups with
risk investing in bad products. On some developers. service agencies, such as laundry
the price front, due to the overall and housekeeping, are some of
Buyer awareness has revived
macroeconomic scenario, the the elements that have helped
concepts such as ‘habitation
market is in a catch-22 situation – developers attract buyer interest in
plans’ and ‘customer experience
neither is the demand side willing their projects.
centres’ in NCR. Such tools
to invest nor the supply side ready
become increasingly important
to bring down costs, though some
while attempting to attract
developers are offering discounts
customers to areas further away
A
C DELHI 1%
B
B
FARIDABAD 3%
D C
A
GHAZIABAD 14%
D
GREATER NOIDA 41%
E
E GURGAON 24%
F
NOIDA 17%
INFRASTRUCTURE LAG DAMPENS CONSUMER SENTIMENTS
The current real estate market before construction began. This and the completed infrastructure
scenario has put stakeholders on was called the infamous pre-launch leads to uninhabited areas – most
the back foot. At some places, or soft launch stage. Developers of our urban development is an
even ready inventory does not have enticed buyers with discounts on unfortunate consequence of such
takers, while elsewhere, end users the final selling rates and gathered mismatches.
are not moving in. Theoretically, large sums of money from investors
This scenario has caused buyers
when a particular area undergoes to fund the project, as well as divert
to be more cautious about
development, the infrastructure is money to other projects.
investing their money. Insights
first put in place to form the base,
On the other hand, since large suggest that factors such as good
followed by real estate, which
infrastructure projects involve connectivity, employment and social
cashes in on the infrastructure by
immense costs and negotiations infrastructure, including schools,
developing around it. However,
with the inhabitants of village colleges and hospitals, have begun
this does not happen in practical
settlements in the area, government to command more importance in
application.
projects usually exceed the time the recent past. The increased
When the market was up, committed for completion. This number of queries for ready-to-
developers would start selling even mismatch between project delivery move-in apartments and projects
110 111
PREMIUM RESIDENTIAL MARKET LAUNCHES, ABSORPTION AND PRICE TRENDS NCR MARKET HEALTH
The NCR market became
Micro-market Premium locations
overly bullish with a flurry
FIGURE 6
QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS of new project launches
Gurgaon Sectors 42, 53, 54, 58, 59, 65, Gurgaon–Faridabad Road
NCR PREMIUM MARKETS and was headed for
Noida Sectors 16 B, 100
35 oversupply in 2010–2012.
30
The demand did not keep
FIGURE 5 pace with the supply,
INR / sq.ft./month
25
which led to the slowdown
LAUNCHES ABSORPTION WT. AVG. PRICE (RHS) 20
in residential real estate.
600 17,000 15
NCR has moved from
500
10
a QTS of 15 to 17 in a
Number of units
400 16,500
` / sq ft
5 six-month period due to
300
0 sluggish sales velocity,
200 16,000 DEC-13 MAR-14 JUN-14 DEC-14 MAR-14 JUN-15 SEP-15 DEC-15
which has pushed the
100 Source: Knight Frank Research
QTS to nearly 5 years. The
0 15,000
H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 FIGURE 7 unsold inventory stands
MICRO-MARKET-WISE QTS VS AGE OF INVENTORY at approximately 206,030
The average sales velocity units as of December
Note: Premium markets include locations where the average ticket size of a residential unit DELHI FARIDABAD GHAZIABAD GREATER NOIDA GURGAON NOIDA
in NCR’s premium is above `30 mn, are in close proximity to the central business district of the city and have 2015.
18
segment has slowed

16
down considerably. • The NCR agglomeration comprises • The average sales velocity in the
five micro-markets, namely Delhi, premium segment in NCR has
Insights suggest that clear Gurgaon, Noida, Greater Noida, slowed down considerably. Insight
14
titles, a shift in lifestyle Faridabad and Ghaziabad, of suggests that clear titles, a shift 12
which Gurgaon and Noida are seen in lifestyle and positive returns are
and positive returns are as premium markets, with a fresh inducing buyers to buy property 10
inducing buyers to buy inventory above `30 mn. oversees. Buyers that are either
8
looking for a second home, have
property oversees. Buyers • The slowdown in the NCR
children studying abroad or are
residential market has hit the 6
that are either looking for premium segment the most.
looking for a long-term investment
12 14 16 18 20 22 24 26 28 30 32 34 36 38
are seen exploring this option,
a second home, have Despite there being no new
which is changing the dynamics of
QTS
launches in the premium segment Source: Knight Frank Research
children studying abroad in Gurgaon and Noida in 2015, the
this segment.
or are looking for a long- QTS was pushed to 31 quarters • Reflecting the overall market
• The quarters to sell unsold • NCR has moved from a QTS of launches and was headed for
from 25 quarters in a mere two- sentiment, the weighted average
term investment are seen quarter period. price growth in the premium
inventory (QTS) is the number 15 to 17 in a six-month period. oversupply in 2010–2012. However,
of quarters required to exhaust Though H1 2015 was the leanest demand did not keep pace with
exploring this option, • No new launches in 2015 comes in
segment remains muted in H2
the existing unsold inventory in half in terms of new launches, the supply, which led to the
2015, compared to the same
which is changing the the wake of weak buyer demand
period in 2014.
the market. The existing unsold the absence of sales velocity has slowdown in residential real estate.
for the premium segment, resulting inventory is divided by the average pushed the QTS to nearly 5 years.
dynamics of this segment. in developers opting to exhaust sales velocity of the preceding The unsold inventory stands at
• Pushed by the affordable and
mid-segment demand, Ghaziabad
the current inventory instead of eight quarters in order to arrive at approximately 206,030 units till
and Greater Noida are NCR’s best
blocking capital in high-ticket-size the QTS number for that particular December 2015.
performing markets, with a QTS of
projects. quarter. A lower QTS indicates a
• The market became overly bullish 14 and 15 respectively.
healthier market.
with a flurry of new project
112 113
PRICE MOVEMENT DURING H2 2015 OUTLOOK FOR THE NEXT SIX MONTHS
WEIGHTED AVERAGE PRICE MOVEMENT IN NCR

Projections H1 2015 H1 2016E Growth
PRICE RANGE IN 12 MONTH 6 MONTH
LOCATION Launches (units) 29,460 28,000 -5%
H2 2015 (`/SQ FT) CHANGE CHANGE
NCR 4,578 3% 1% Developers are trying to
Premium markets 16,373 0% -4% Weighted average price (`/sq ft) 4,511 4,580 2% reconnect with buyers
through exhibitions and
PRICE MOVEMENT IN SELECT LOCATIONS attractive payment plans,
• The realty market in NCR will • The recent developments in
continue to remain muted in the 2015, such as the clearance of but the far-reaching effects
PRICE RANGE first half of 2016. Knight Frank the Dwarka Expressway litigation
LOCATION MICRO-MARKET IN H1 2015 (`/
12 MONTH 6 MONTH of these steps on the
CHANGE CHANGE estimates sales to plug around in Gurgaon, have had a positive
SQ FT) 26,000 units in the coming two impact on the market. With the sales velocity are yet to
quarters. 18-km expressway now completely
Yamuna Greater Noida 3,295–3,557 3% 0% be seen. Factors such
litigation-free, buyer interest in the
Expressway • Developers will keep new launches
in check and we estimate new
zone is expected to revive. as affordability, ready-
Sector Chi V Greater Noida 3,448–3,514 2% 2%
launches to stay below 30,000 to-move-in properties
Sector Pi Greater Noida 3,545–3,576 1% 1% units in the first half of 2016, with
stagnation in the weighted average
with visibility on the
Sector 16 B Greater Noida 3,444–3,497 1% 1%
prices. project construction and
Sector 78 Noida 5,600–5,627 -1% 0%
• Delays in projects have made upcoming infrastructure
Sector 70 Noida 4,000–4,083 2% 0% buyers cautious of defaulting
developers. Till they are fully
will drive sales in the
Sector 117 Noida 4,850–4,905 1% 0%
convinced, buyers will continue to coming quarters.
Sector 131 Noida 5,900–6,000 2% 0% assess projects and developers
Sector 37 Gurgaon 5,243–5,600 -4% 0% before purchasing property, and
this is where the developers’ brand
Sector 49 Gurgaon 7,800–10,900 0% 0% and credibility will come into play.
The growth rate of the Sector 67 Gurgaon 9,222–9,255 7% 0%
weighted average price Sector 79 Gurgaon 4,500–6,500 -2% 0%
has been witnessing a Sector 82 Gurgaon 3,700–5,900 0% 0%
downward trend since NH-24 Bypass Ghaziabad 2,842–2,888 3% 2%
2013 and has slowed Raj Nagar Ghaziabad 2,884–2,959 3% 1%
down considerably, Extension
from 6% in H1 2013 to Crossings NH24 Ghaziabad 3,200–3,242 0% 2%
a mere 1% in H2 2015. Sector 37 Faridabad 7,900–8,137 3% 0%
The trend suggests that Sector 75 Faridabad 3,550–3,636 1% 1%
there has been no major Sector 87 Faridabad 3,448–3,600 1% 0%
price increase in NCR in • The growth rate of the weighted been no major price increase in
the past quarters, which average price has been witnessing NCR in the past quarters, which
a downward trend since 2013 and reflects a price correction.
reflects a price correction. has slowed down considerably,
• The price stagnation has also
from 6% in H1 2013 to a mere 1%
affected the premium segment,
in H2 2015.
with negligible deviations from the
• The trend suggests that there has preceding quarters.
114 115
OFFICE MARKET SECTOR ANALYSIS Corporate demand outdid

the IT/ITeS sector in NCR
NCR OFFICE MARKET STOCK, NEW COMPLETIONS, • Corporate demand outdid the IT/ transactions by companies such
once again, to emerge
ABSORPTION AND VACANCY TRENDS ITeS sector in NCR once again, to as Grofers, Hike and Groupon.
emerge as the driving sector for E-commerce is considered a part as the driving sector for
office space demand in H2 2015. of the other services sector, since
FIGURE 1
retail is the driving factor behind
office space demand in H2
OFFICE SPACE STOCK AND VACANCY LEVELS • The other services sector drove
office space demand in NCR
the business. 2015. The other services
The NCR market STOCK OCCUPIED STOCK VACANCY (RHS)
during this half, backed by strong • Another segment that saw growth sector drove office space
maintained its absorption demand from consulting and in terms of transacted space was
160 22%
e-commerce companies, such the manufacturing sector. The
demand in NCR during
appetite in 2015, 140 21% as Bain Consulting, Boston sector registered a more than this half, backed by strong
achieving a total of 7.4 Consulting Group and SpiceJet. double-digit growth in terms of
120
20% transacted space, which increased
demand from consulting
mn sq ft of absorbed • The second half of 2015 also saw
100
some large size e-commerce
from 0.35 mn sq ft in H2 2014 to and e-commerce
mn sq.ft.
office space at the end 19%

80 companies. The change
of the year. Driven by 18% FIGURE 3
60 SECTOR-WISE SPLIT OF ABSORPTION in the dynamics of the IT
corporate demand, 17%
40 H2 2014 H1 2015 H2 2015 sector is responsible for
3.7 mn sq ft of office 20 16% 70%
its slowdown, which is
space was clocked in 0 15%
60%
increasingly emphasising
the second half of 2015. H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E 48%
50% 44%
43% on automation, and in turn,
However, new project Source: Knight Frank Research
40% 37%
leading to a slowdown in
completions pushed the FIGURE 2
30%
30%30%
NEW COMPLETIONS AND ABSORPTION 22% hiring by larger IT firms,
vacancy levels to 21.5%. 20%
NEW COMPLETION ABSORPTION 11% 9%
14% thus getting translated
10% 8%
7.0 5% into a dull demand and
0
6.0
IT/ITeS BFSI* MANUFACTURING OTHER SERVICES
cautious moves for large
5.0
office spaces.
4.0 Note: * BFSI includes BFSI Support Services
mn sq.ft
3.0
2.0
1.0
0
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016E H2 2015
• The office stock in NCR stood • In terms of leasing, H2 2015 saw
3.7
mn sq.ft.
at 138 mn sq ft till the end of a total of 3.7 mn sq ft of office
December 2015, of which 108 mn space transactions. The market H2 2014
4.1
sq ft is occupied stock. maintained its absorption appetite,
achieving a total of 7.4 mn sq ft
• The influx of pent-up project mn. sq.ft.
of absorbed space at the end of
completions in 2015 has been
2015. H1 2015
instrumental in nudging the
vacancy levels from 20% in H2
2014 to 21.5% in H2 2015, with
• A pent-up supply of 11.5 mn sq ft
in the NCR market led to a 42%
3.7
mn sq.ft.
micro-markets such as Greater growth in new completions in 2015,
Noida contributing significantly to compared to the previous year.
the new supply.
116 117
0.80 mn sq ft in H2 2015. Take- • There was a 27% drop in the total

ups by companies such as Vivo transacted space of the IT/ITeS DEAL SIZE ANALYSIS
in Greater Noida, Ericsson in sector in H2 2015, compared to Small- to mid-size
Noida and Airbus in SBD Delhi the same period in 2014. In terms
FIGURE 4 transactions dominated
contributed significantly to the of percentage share in the overall
sector’s demand in this half. Long NCR transacted space, the sector the leasing activity in NCR
facing a slowdown, the impact of is seen to be losing out to the other AVERAGE DEAL SIZE (SQ.FT.) NUMBER OF DEALS (RHS)
in H2 2015. Approximately
the Make in India campaign on services sector.
the sector’s movement is yet to be
40,000 200
57% of the total number
seen.
of transactions in H2 2015
Number of deals
30,000 150
involved floor plates of less
sq.ft
20,000 100 than 12,500 sq ft.
10,000 50
QUALITY SPACE COMMANDS PREMIUM However, a few large-sized
0 0 transactions by companies
H1 2014 H2 2014 H1 2015 H2 2015
NCR’s economy is driven by buildings; however, since it is the locations within the office complex. such as Vivo, Google,
multiple industries – primarily oldest commercial business district Concepts such as preferential Source: Knight Frank Research
Reliance Jio and arvato
manufacturing, IT/ITeS, small and of NCR and also the political seat, location charges (PLC), which only
• Small- to mid-size transactions and more of corporate sector pushed up the overall
medium enterprises, banking, its importance to offices, especially applied to residential projects, are
dominated the leasing activity in occupancy than the large floor
financial services and insurance in the BFSI sector, holds true. now catching up even in the office NCR in H2 2015. Approximately space seeking IT/ITeS sector have absorption levels in the
(BFSI), and consulting. While the The business district, however, segment in NCR. 57% of the total number of contributed to the shrinking size of second half of the year.
national capital attracts the BFSI lags behind in quality office transactions in H2 2015 involved the office space demand in NCR.
Higher floors, floor direction, utilities
sector, Faridabad and Ghaziabad spaces with large floor plates and floor plates of less than 12,500 sq
and facilities are all attracting • Gurgaon led the tally of the
ft.
are perceived to be manufacturing associated infrastructure facilities. number of deals once again, with
occupiers looking for a ‘sense of
and industrial towns, and Noida and On the other hand, the peripheral • The average transacted space 54% of the 175 deals in H2 2015,
address and extravagance’. Going
Gurgaon are driven by the IT/ITeS business districts of Noida and came down significantly, to 21,000 followed by 39 deal conversions
forward, this trend is seen to be sq ft in H2 2015, from 35,600 in the peripheral business district
sector. Gurgaon attract corporate and IT/
backed by corporate occupiers, sq ft in H2 2014, registering a of Noida and 28 deals in the
ITeS companies that are looking drop of 41%. Factors such as secondary business district of
However, over the past few years, international financial institutions
for quality office spaces and well- the macroeconomic slowdown, Delhi, in locations such as Aerocity
the IT/ITeS and other services and the other services sector.
developed infrastructure that gives cautious expansion plans and Jasola.
sectors have emerged as the largest
them the ease of business.
employers in NCR, thereby evolving
as the biggest drivers of the city’s Insights suggest that lately,
office market, which is evident occupiers across business districts SELECT TRANSACTIONS
from the year-over-year absorption are willing to pay more for good
trends. With a current office stock quality office spaces, which OCCUPIER BUILDING LOCATION APPROX. AREA (SQ FT)
of 138 mn sq ft and a vacancy of resulted in high-value transactions
Vivo World Trade Centre Tech Zone – 1, Greater Noida 293,000
21.5% as of H2 2015, NCR’s office in 2015. The swift leasing of some
Google Signature Towers II NH-8, Gurgaon 207,161
market is second only to Bangalore. prime office buildings, such as
Since many industries drive the One Horizon Centre and DLF arvato India Phase V Udyog Vihar, Gurgaon 100,000
office market in NCR, the office Two Horizon Centre in Gurgaon, SpiceJet Phase IV Udyog Vihar, Gurgaon 100,000
footprint is a mixture of all types of Red Fort Capital in CBD Delhi
Ernst & Young Worldmark Aerocity, SBD Delhi 98,000
building construction specifications and Worldmark in Aerocity, bears
that vary across the business testament to the demand for quality Reliance Jio Logix Cyber Park Sector 62, Noida 92,000
districts of this agglomeration. office spaces in NCR. Today, Boston Consulting Group Building 9 A DLF Cyber City, Gurgaon 80,000
occupiers are willing to spend Mercer ASF Insignia Gwal Pahari, Gurgaon 69,000
For instance, the National Capital
the extra buck, not only for prime
Territory (NCT) of Delhi, which forms Groupon Paras Twin Towers – A Golf Course Road, Gurgaon 61,410
office real estate but also for choice
the CBD of NCR, has several old
IGATE Infospace 2 Sector 135, Noida 60,000
118 119
Hike Worldmark Aerocity, SBD Delhi 59,585

Bain Consulting DLF Building 8 DLF Cyber City, Gurgaon 52,000
H2 2015
Grofers Plot 81 Sector 32, Gurgaon 50,000
UrbanClap Sector 18 Udyog Vihar, Gurgaon 35,000 3.7
mn sq.ft.
Uber One Horizon Centre Golf Course Road, Gurgaon 33,000
H2 2014
PWC Building 8C DLF Cyber City, Gurgaon 30,647
Airbus Worldmark Aerocity, SBD Delhi 30,000 4.1
mn. sq.ft.
Gaadi.com Plot No. 49 Sector 44, Gurgaon 25,000
Delhivery Veritas Tower Golf Course Road, Gurgaon 12,000
Cisco System Pvt Ltd EastTower Barakhamba Road, CBD Delhi 7,650
BUSINESS DISTRICT ANALYSIS
BUSINESS DISTRICT CLASSIFICATION
CBD Delhi Connaught Place, Barakhamba Road, Kasturba Gandhi Marg and Minto Road
SBD Delhi Nehru Place, Saket, Jasola, Bhikaji Cama Place, Mohan Cooperative and Aerocity
PBD Gurgaon Zone A MG Road, NH-8, Golf Course Road and Golf Course Extension Road
PBD Gurgaon Zone B DLF Cyber City, Sohna Road, Udyog Vihar and Gwal Pahari
PBD Gurgaon Zone C Manesar
Noida Sectors 16, 18, 62, 63 and the Noida–Greater Noida Expressway
Faridabad Sector Alpha, Beta, Gamma and Tech Zone
FIGURE 5
H2 2014 H1 2015
61%
60%
56%
50%
Number of units
40%
30%
23% 23%
20%
13%10%
10% 8%
3% 2% 0% 1% 0%
0
CBD PDB PBD PBD SBD PBD- GREATER
DELHI FARIDABAD GURGAON NOIDA DELHI NOIDA
120 121
GURGAON NOIDA
• PBD Gurgaon emerged as the • Leasing activity in Noida continued
most preferred business district in to be dull in H2 2015. In terms RENTAL VALUE RANGE IN H2 2015 6 MONTH
NCR once again, taking up 56% of of transacted space, this micro- (`/SQ FT/MONTH) CHANGE
the total absorption pie of 3.7 mn market registered a 9% drop
sq ft in H2 2015. in leased space in H2 2015, CBD Delhi 208–350 4% 1%
compared to the same period in
• The market also registered an SBD Delhi 93–163 3% 4%
2014.
increase of 51% in the number
of deals over the same period in • Unlike Gurgaon, IT/ITeS drove
While commercial office PBD Gurgaon Zone A 94–159 18% 5%
2014, with a marginal decline in the leasing activity in Noida in H2 2015,
demand drove leasing in average transaction size. taking up 57% of the total 0.85 PBD Gurgaon Zone B 63–134 7% 5%
mn sq ft leased in this peripheral
the peripheral business • Office space in Gurgaon is driven
business district. Companies such PBD Gurgaon Zone C 25–35 0% 0%
primarily by the quality office
district of Gurgaon, as Fidelity, Reliance Jio, SafeNet
space offered, which agrees with
and IGATE were among the major Noida 44–64 10% 1%
Noida continues to the needs of the occupiers.
occupiers in this sector in H2 2015.
be a preferred office • Some of the locations that saw Faridabad 45–55 0% 0%
major traction in Gurgaon in H2
space for the IT/ITeS 2015 are DLF Cyber City and M. G. CBD AND SBD DELHI
sector. The secondary Road. Approximately 40% of the

• Leasing activity in CBD Delhi was • Though new completions have 2014 to `64 per sq ft per month in • However, quality office space in
95 deal closures in Gurgaon in H2
business district of Delhi 2015 were concentrated in these
concentrated around Barakhamba pushed up the overall vacancy H2 2015. micro-markets such as Gurgaon is
Road and Bhai Veer Singh Marg, rates in NCR, the weighted average expected to witness a significant
saw some movement in locations.
with eBay, ICICI Lombard, IFCI rentals seem to be firming up in the
• Going forward, we expect the
upward pressure on price.
weighted average rentals to
the second half of 2015, • The other services sector Limited and Cisco taking up region.
increase by 5% from the current
dominated the Gurgaon leasing spaces in the area.
with notable companies activity yet again, with more
• The weighted average rental values values in H2 2015, to around `67
• Aerocity in SBD Delhi saw some witnessed a sharp 11% increase, per sq ft per month in H1 2016.
taking up space in than half of the total leasing in
movement in the second half of from `58 per sq ft per month in H2
Gurgaon driven by consulting and
Worldmark. e-commerce companies, such
2015, with notable companies such
as Ernst & Young, Hike, Airbus and
as PWC, Uber, Bain Consulting,
Bharti Softbank taking up spaces OUTLOOK FOR THE NEXT SIX MONTHS
Boston Consulting, Deloitte,
in Worldmark.
SpiceJet, Groupon, OYO Rooms,
UrbanClap, Grofers and Delhivery. PROJECTIONS H1 2015 H1 2016E GROWTH Despite macroeconomic
New supply (mn sq ft) 5.5 4.5 -18% factors, such as the
RENTAL TREND Absorption (mn sq ft) 3.7 3.5 -5% slowdown in China, which
Vacancy (%) 20.7% 21.5% has impacted global
FIGURE 6 Weighted average rental (`/sq ft/ growth, the India office
WEIGHTED AVERAGE RENTAL MOVEMENT 62 67 9%
month)
market is expected to
68 Source: Knight Frank Research
maintain a business-as-
66
• With macroeconomic factors such • Going forward, we expect the usual scenario in H1 2016.
64
as the slowdown in China, which NCR office market to sustain its
Knight Frank estimates the
INR / sq.ft./month
62 has impacted global growth, the half-yearly momentum in H1 2016,

60
India office market is expected and envisage the absorption of NCR office leasing to clock
to maintain a business-as-usual approximately 3.5 mn sq ft.
58 approximately 3.5 mn sq
scenario in H1 2016.
• New completions will continue to
56
• The slowdown in the pump approximately 4–5 mn sq
ft in H1 2016, with rentals
54 manufacturing sector has been ft in the market, which will lead to firming up at key locations
plaguing the country for a long an increase in the overall vacancy
52
time now, and the impact of rates.
that offer quality office
50
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016E
government initiatives, such as the space.
Make in India campaign, are yet to
Source: Knight Frank Research be seen.
122 123
RESIDENTIAL MARKET
PUNE RESIDENTIAL MARKET LAUNCHES, ABSORPTION
AND PRICE TRENDS
FIGURE 1
PUNE MARKET TRENDS
Hetal Bachkaniwala
Vice President - Research 25,000 5,000
PUNE
20,000
` / sq ft
4,800
Number of units
15,000
10,000
4,600
5,000
0 4,400 New launches are still

H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
commanding old prices.
The majority of the new
• 2015 was the best time to buy • Nonetheless, new launches are launches in H2 2015 are
property in Pune, as the steady still commanding old prices. The
sales volume and stagnant majority of the new launches in H2 in price ranges similar to
price growth provided an ideal 2015 are in price ranges similar to those of H1 2015.
opportunity for homebuyers. those of H1 2015.
• While the sales volume grew • The price growth in Pune has
marginally, by 4% in 2015 fallen from above 12% to less than
compared to the previous year, 2% over the last three years. This
new launches dropped by 8% consistent drop in price growth
during the same period. presents a good opportunity for
homebuyers to buy property.
• However, encouraged by the
Going forward, we do not expect
consistent growth in sales volume,
prices to rise significantly, and
developers were back in action
hence, continue to recommend
during H2 2015. New launches
that buyers take advantage of this
increased by 9% during H2 2015
scenario.
compared to H2 2014.
• South Pune has witnessed • North Pune’s share has been • North Pune continues to remain
renewed interest from the falling gradually from the last the most affordable market in the
developer community, with its year, as the existing under- city, as 93% of the new launches in
share in the total new launches construction projects are yet to H2 2015 were below the ticket size
increasing steadily since H2 2014. offload a significant portion of of `5 mn. Central Pune is the least
Undri, Pisoli, Sinhgad Road and their inventory. This has led to affordable market, as more than
Kondhwa Road are some of the most of the developers in this area 85% of the new launches in H2
locations in South Pune that have postponing new project launches 2015 were above the ticket size of
recorded new launches during the for the coming six months. `10 mn.
last six months.
124 125
FIGURE 2
MICRO-MARKET SPLIT OF LAUNCHED UNITS MICRO-MARKET-WISE RESIDENTIAL SALES
H2 2014 H1 2015 H2 2015 MICRO MARKETS OF PUNE
45%
40%
40% MICRO-MARKET LOCATIONS
35%
32% 32% Central Koregaon Park, Boat Club Road, Erandwane, Deccan, Kothrud, Model Colony
29% 30%
30%
25% 24% East Viman Nagar, Kharadi, Wagholi, Hadapsar, Dhanori

22%
20%
20% 17% 19%
15%
13%
West Aundh, Baner, Wakad, Hinjewadi, Bavdhan, Pashan
15%
10% North Pimpri, Chinchwad, Moshi, Chikhali, Chakan, Talegaon

5% 4% South Kondhwa, Ambegaon, Undri, Dhayari, Warje, Sinhgad Road
2%
North Pune continues to 0%
1%
remain the most affordable CENTRAL EAST WEST NORTH SOUTH
market in the city, as 93% Source: Knight Frank Research
of the new launches in H2 FIGURE 3

2015 were below the ticket
size of `5 mn. Central 100%
Pune is the least affordable 90%
80%
market, as more than 85%
70%
of the new launches in H2
60%
2015 were above the ticket 50%
size of `10 mn 40%
30%
20%
10%
-
< 2.5 MN 2.5 - 5 MN 5 - 7.5 MN 7.5 - 10 MN 10 - 20 MN >20 MN
H2 2015
18,135
units
H2 2014
16,700
units
H1 2015
12,760
units
126 127
• The micro-market split of

FIGURE 4
MICRO-MARKET SPLIT OF SALES
absorption has not witnessed any PREMIUM RESIDENTIAL MARKET LAUNCHES, ABSORPTION AND PRICE TRENDS
significant change in the last six
H2 2014 H1 2015 H2 2015 months. While the shares of East
45% and West Pune have increased Micro-market Premium locations
40% marginally since H2 2014, North
Bhosale Nagar, Boat Club Road, Erandwane, Koregaon Park, Model Colony, Prabhat
35% Pune’s share has reduced slightly. Central
Road, Uday Baug
30%
30% • Central Pune’s share in the total
25% 26% 26% 26% 27% East Kalyani Nagar, Viman Nagar
25% 23%23% 24% 24% absorption has come down
22%
20% 18% marginally during H2 2015. This
South Salisbury Park
could be a worrying trend for
15%
developers operating in this
10%
market, as the unsold inventory
5% 2% 2% 1% will increase further in the coming
0% months. PREMIUM MARKET TRENDS

FIGURE 5
600 13,000
H2 2015 500 12,500
20,740 400 12,000
` / sq ft
Number of units
units 300 11,500
H2 2014 200 11,000
20,150 100 10,500

units
0
H1 2015 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015
10,000
15,520 Source: Knight Frank Research

units
is above `20 mn, are in close proximity to the central business district of the city and have
• The premium market of Pune,

which constitutes locations such
MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS AS OF DECEMBER 2015 as Koregaon Park, Model Colony,
Boat Club Road and Bhosale
Nagar, among others, has been
• Central Pune currently accounts witnessing a lower number of new
for only 2% of the total under- launches with each passing period
With a steady sales
construction units in the city, as since 2014, and H2 2015 recorded
the majority of the new projects no new launches. volume and receding
are being launched in the rest of • However, the sales volume has new launches, the
A
CENTRAL 2% the city. remained steady, in the range of
unsold inventory
B • The maximum under-construction 180 – 220 units for each of the half-
EAST 27% units are in East and West Pune. yearly periods since 2014. With pressure in the premium
C This is followed by South and steady sales volume and receding
C WEST 27% North Pune, at 24% and 20%, new launches, the unsold inventory
market has reduced
B D D significantly in the last
NORTH 20% respectively. pressure in the premium market
has reduced significantly in the last
A E two years.
E SOUTH 24% two years.
128 129
PUNE MARKET HEALTH

SOUTH PUNE HAS WITNESSED A PHENOMENAL RECOVERY, LED BY
MID-SEGMENT HOUSING
FIGURE 6
QUARTERS TO SELL (QTS) UNSOLD INVENTORY ANALYSIS South Pune, with locations such as inventory available in the market. employed in these hubs. This has
Ambegaon, Undri, Dhayari, Warje helped in maintaining end-user
13 PUNE PREMIUM MARKETS Secondly, the ticket sizes of the
and Sinhgad Road, has witnessed interest in this market. With a steady
launched units were brought down
A steady sales volume, 12 a phenomenal recovery in the last
to relatively affordable levels in
demand on the back of the factors
11 two years. This zone had an unsold mentioned above as well as falling
fewer new launches inventory of more than nine quarters
2015. While only 73% of the newly-
launches, the stress in the market
10 launched units in 2014 were below
No. of Quarters
and lower ticket sizes in H1 2014, which came down to less

the ticket size of `7.5 mn, it stood
has reduced considerably over the
9 than six quarters by H2 2015. There last two years. While the rest of the
have helped South Pune at 90% in 2015. The push towards
8 are three major reasons for this zones in the city have also witnessed
budget and mid-segment projects
improve its performance 7
recovery in the market:
seems to be working in favour of the
a fall in unsold inventory levels, it is
not to the extent observed in South
compared to the city’s Firstly, the surge in new launches market, as demand has witnessed a
6 Pune. This has aided South Pune’s
from 2010 to 2013 by developers marginal recovery during the year.
other zones. The 5
had led to a significant pile-up in
remarkable recovery from being one
Lastly, easy access from South of the worst performing markets of
advantage of being located 4 inventory by the end of 2013. While
Pune to the employment hubs of the city to one of the best.
DEC-13 MAR-14 JUN-14 DEC-14 MAR-15 JUN-15 SEP-15 DEC-15 developers continued to push new
between the two major Hinjewadi in the west and Kharadi
Source: Knight Frank Research project launches, the sales volume
and Hadapsar in the east places
employment hubs of remained sluggish, leading to a huge
the zone in a strategic position.
FIGURE 7 inventory overhang. Realising the
Hinjewadi in the west and These employment hubs are within
MICRO-MARKET-WISE QTS VS AGE OF INVENTORY perils of such a scenario, developers
a 30-minute drive from most of the
the Hadapsar-Kharadi belt curtailed new launches by 25% and
residential locations of South Pune
39% year over year (YOY) during
in the east has sustained CENTRAL EAST WEST NORTH SOUTH and hence, have become preferred
2014 and 2015, respectively. This led
11 residential destinations for people
homebuyer interest in this to a sharp drop in the total unsold
zone. 10
PRICE MOVEMENT DURING H2 2015

9
• The price growth across most

8 WEIGHTED AVERAGE PRICE MOVEMENT IN PUNE locations in Pune during the last
12 months has been tepid. It
PRICE RANGE IN 12 MONTH 6 MONTH
7 LOCATION has slowed down further in the
H2 2015 (`/SQ FT) CHANGE CHANGE
last six months, primarily due to
6 Pune 4,835 1.8% 0.3% the subdued sales volume and
5 7 9 11 the huge unsold inventory in the
QTS
Premium markets 12,580 3.1% 1.6% market.
• The weighted average price growth
has been much faster in the
PRICE MOVEMENT IN SELECT LOCATIONS premium segment in the last 12
• South Pune witnessed a its performance compared to the of the incremental employment
phenomenal recovery in the city’s other zones. The advantage generation in Hinjewadi and months compared to the growth
MICRO- PRICE RANGE IN 12 MONTH 6 MONTH
last two years. One of the worst of being located between the Wakad, has helped this zone LOCATION in the city’s overall price. However,
MARKET H2 2015 (`/SQ FT) CHANGE CHANGE
performing zones in H1 2014, it two major employment hubs of sustain in terms of sales volume. this has moderated to a mere 1.6%
has emerged as one of the best Hinjewadi in the west and the Koregaon Park Central 13,000 - 17,000 0% 0% in the previous six months.
• The situation in Central Pune has
performing markets in H2 2015. Hadapsar-Kharadi belt in the east
worsened, as the sales volume Kothrud Central 7,500 - 13,000 0% 0%
The QTS (quarters to sell unsold has sustained homebuyer interest
in this zone has been falling
inventory) has fallen from 9 in H1 in this zone. Erandwane Central 13,500 - 18,000 0% 0%
consistently since 2013. Higher
2014 to less than 5.7 in H2 2015.
• West Pune continues to be the ticket sizes and a lack of investor Boat Club Road Central 14,500 - 19,500 0% 0%
• A steady sales volume, fewer new best performing zone in Pune, interest have resulted in Central
Kharadi East 5,300 - 6,300 2% 2%
launches and lower ticket sizes with a QTS of 5.7 in H2 2015. Pune’s poor performance.
have helped South Pune improve Strong demand, on the back Wagholi East 3,500 - 4,600 2% 2%
130 131
OFFICE MARKET
Dhanori East 3,900 - 4,800 0% 0%
Hadapsar East 4,600 - 6,000 3% 3%

Aundh West 7,800 - 9,500 3% 3% PUNE OFFICE MARKET STOCK, NEW COMPLETIONS,
Baner West 5,600 - 8,000 0% 0% ABSORPTION AND VACANCY TRENDS
Hinjewadi West 4,800 - 5,900 5% 5%
FIGURE 1
The expected revisions in Wakad West 5,400 - 6,200 0% 0%
the development control Moshi North 3,700 - 4,300 0% 0% STOCK OCCUPIED STOCK VACANCY (RHS)
regulations (DCR) in the Chikhali North 3,500 - 4,100 2% 2% 70 25%
coming six months will Chakan North 2,900 - 3,400 3% 3% 60

20%
slow down the quantum Ambegaon South 4,400 - 5,500 0% 0%
50
of new launches, as Undri South 3,900 - 4,800 2% 2%
15%
mn sq.ft.
40
developers are awaiting Kondhwa South 4,600 - 5,700 2% 2%
30
clarity on the subject. We Source: Knight Frank Research 10%
estimate new launches 20

With demand
5%
to grow by 9% during H1 OUTLOOK FOR THE NEXT SIX MONTHS 10
consistently outstripping
2016 compared to the 0 0% supply, vacancy levels
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
same period in preceding Projections H1 2015 H1 2016E Growth witnessed a free fall,
year. from 16.5% in 2014 to
Launches (units) 12,760 13,900 9% FIGURE 2
NEW COMPLETIONS AND ABSORPTION 10.8% in 2015
NEW COMPLETION ABSORPTION
Weighted average price (`/sq ft) 4,820 4,880 1%
Source: Knight Frank Research 3.5
3.0
• The expected revisions in the watch mode, and are expecting 2.5
mn sq.ft
development control regulations further positive signs on the
2.0
(DCR) in the coming six months country’s economic front.
will slow down the quantum of 1.5
• We estimate that West and
new launches, as developers are 1.0
East Pune will witness a higher
awaiting clarity on the subject. We
traction in sales volume in the 0.5
estimate new launches to grow by
coming months, as the lack of 0
9% during H1 2016 compared to
a mass rapid transit system will H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 E
the same period in the preceding
continue to push homebuyers
year. Source: Knight Frank Research
towards locations that are in close
• West and East Pune will continue proximity to the employment • Office space demand in Pune delivered during 2014. Northern Trust Bank, various mid-
to dominate in terms of new hubs in these zones. The delay continues to outstrip new size deals by IT/ITeS companies
in commencing the construction • With demand consistently
launches, as proximity to the completions for the fourth straight seem to have helped in pushing
work of the metro project has outstripping supply, vacancy levels
employment hubs of Hinjewadi and year. 2015 recorded 5.5 mn sq ft of the absorption numbers to this
made homebuyers averse to areas witnessed a free fall, from 16.5% in
Kharadi make these micro-markets absorption, which was 22% higher level.
that are at a greater distance from 2014 to 10.8% in 2015.
attractive for developers to launch than the 4.5 mn sq ft mark in 2014.
• On the other hand, new
new projects. Hinjewadi, Kharadi and Hadapsar. • H2 2015 recorded one of the
• In terms of new completions, completions have remained
highest absorptions, at 3.3 mn sq
• However, the growth in the city’s only 2.7 mn sq ft of office space tepid at 1.1 mn sq ft in H2 2015.
ft. This was 39% higher than H2
sales volume will be limited to was delivered during the year, led Although this is more than double
2014, when 2.4 mn sq ft of space
6% during H1 2016 compared by Blue Ridge in Hinjewadi and the 0.5 mn sq ft achieved during
was absorbed. Apart from certain
to the same period last year, as Commerzone in Yerwada. This was H2 2014, it is still considerably
large-size deals by companies
homebuyers are still in a wait-and- higher by 6% from the 2.5 mn sq ft lower compared to the absorption.
such as HSBC, Siemens and
132 133
SECTOR ANALYSIS DEAL SIZE ANALYSIS
FIGURE 3
FIGURE 4
H2 2014 H1 2015 H2 2015
70%
62%
60% 60,000 120
50% 47% 50,000
Number of deals
40% 40,000 80
32%
sq.ft
27% 30,000
The IT/ITeS sector 30%
25%
23% 23%
18%
continues to remain the 20% 17%
12%
20,000 40
11%
biggest driver of office 10%
4%
10,000
space in Pune, with a 0

IT/ITeS BFSI* MANUFACTURING OTHER SERVICES
0
H1 2014 H2 2014 H1 2015 H2 2015
0
The shares of the CBD

47% share in H2 2015. Source: Knight Frank Research Source: Knight Frank Research
& off-CBD markets have
However, its share is Note: BFSI includes BFSI support services
increased during H2 2015
relatively lower than in • The average deal size in H2 2015 • The BFSI sector led in terms of
• The revival in manufacturing services, which, in other words, are was reported to be 39,700 sq ft, big-ticket deals, the majority of compared to H2 2014, as
2014, as the uptake of activity as a result of the ‘Make in closely linked to the IT/ITeS sector. which is similar to the H1 2015 them being in the range of 50,000
S. B. Road continues to
office space from the rest India’ initiative by the Government
• The IT/ITeS sector continues to level. This, despite the fact that sq ft and above. The space leased
of India and the improvement the number of deals increased by most of the companies in this witness traction in office
of the sectors continues to in business sentiment in the
remain the biggest driver of office
significantly in H2 2015, indicating sector is for their back office IT/
space in Pune, with a 47% share space absorption.
grow. corporate sector seem to have
in H2 2015. However, its share is that most of the tenants are ITeS-related operations.
maintained the office space take- choosing to lease larger space.
relatively lower than that in 2014,
up by Pune’s manufacturing sector.
as the uptake of office space from
• The shares of the BFSI sector the rest of the sectors continues to
continue to hold steady, at 23%, grow.
SELECT TRANSACTIONS
although this is lower than the 25%
share it reported during H1 2015.
However, the majority of the deals Siemens Cummins Building Campus Balewadi 342,000
in the BFSI sector are support
HSBC Raheja Woods Kalyani Nagar 335,000
MasterCard Business Bay Yerwada 100,000
Northern Trust Bank Tech Park One Yerwada 100,000
BNY Melon Commerzone Yerwada 90,000
H2 2015 Concentrix Tech Park One Yerwada 80,000
3.3 Saama Technology Blue Ridge Hinjewadi 70,000

mn sq.ft.
All states SP Infocity Phursungi 55,000
H2 2014
Deutsche Bank Business Bay Yerwada 54,000
2.4 Johnson Control Commerzone Yerwada 50,000
mn. sq.ft.
H1 2015 Tata Technologies Blue Ridge Hinjewadi 48,500
2.2 Varian Medical Systems

R Systems
Magarpatta
DTC
Hadapsar
Erandwane
44,000
42,000
mn sq.ft.
TCS Suzlon Campus Hadapsar 30,000
134 135
FIGURE 5
BUSINESS DISTRICT ANALYSIS BUSINESS DISTRICT-WISE ABSORPTION SPLIT
H2 2014 H2 2015
BUSINESS DISTRICT MICRO-MARKETS
50% 47%
CBD and off-CBD Bund Garden Road, S B Road, Camp, Deccan, University Road, Shankar Sheth Road
45% 44%
SBD East Kalyani Nagar, Yerwada, Nagar Road, Vishrantwadi, Hadapsar 40%
PBD East Kharadi, Phursungi, Wanowrie 35%
30%
30%
SBD West Wakdewadi, Aundh, Baner, Kothrud, Balewadi
25%
PBD West Hinjewadi, Bavdhan, Wakad 20%
20%
17%
15%
15%
10% 8% 8% 8%
5% 3%
0
CBD & Off-CBD SBD East SBD West PBD East PBD West
H2 2015
3.3
mn sq.ft.
H2 2014
2.4
mn. sq.ft.
• The shares of the CBD & off-CBD • Limited supply of vacant office
markets have increased during and relatively high rentals have
H2 2015 compared to H2 2014, as restricted the absorption levels in
Since no new major office
S. B. Road continues to witness PBD East, with its share coming projects are expected
traction in office space absorption. down from 30% in H2 2014 to
8% in H2 2015. Similarly, PBD
to be completed in the
• Yerwada continues to consolidate
its position as one of the largest
West’s share has also dropped coming six months,
significantly in the last six months,
office space hubs in the city,
although this is primarily due to
vacancy levels will witness
helping SBD East in increasing
its share in the total office space
a jump in SBD West’s share, a further fall to the single-
which otherwise would have been
absorption during H2 2015.
absorbed by the PBD West market.
digit level.
Proximity to the city centre and
easy access to the airport have
resulted in occupiers preferring
this location.
136 137

SHORTAGE OF READY-TO-OCCUPY SPACE IN PUNE COULD PUSH OCCUPIERS TO
RENTAL VALUE RANGE IN H2 2015 (`/SQ 6 MONTH
OTHER CITIES BUSINESS DISTRICT
FT/MONTH)
12 MONTH CHANGE
CHANGE
CBD & off-CBD 70 - 110 19% 10%
Vacancy levels in Pune have been any income on such assets and This undersupply situation is
falling consistently since 2012, from the residential market witnessing expected to worsen in 2016, as only SBD East 55 - 85 22% 17%
23.4% to less than 11% currently. a steady recovery post 2010, their 2.7 mn sq ft of new space is expected
SBD West 60 - 90 19% 12%
With demand outstripping new focus shifted from the commercial to to be delivered. We anticipate that
supply for the fourth consecutive the residential segment. the demand for space will far exceed PBD East 55 - 85 24% 20%
year, the situation has only worsened the supply, and this will lead to a
Since 2011, 20.2 mn sq ft of space has PBD West 40 - 58 12% 9%
for occupiers, who are unable situation wherein occupiers will have
been absorbed in Pune, in contrast Source: Knight Frank Research
to find leasable space in their to look for space in other cities. With
to the 14.6 mn sq ft of new space
preferred locations. The genesis of Bengaluru and Gurgaon in a similar
delivered. The shift in developers
the current predicament lies in the state of affairs, we believe that
focus towards residential housing
heydays of the pre-2008 period,
led to a limited number of new
occupiers will be pushed towards OUTLOOK FOR THE NEXT SIX MONTHS
when strong demand from the IT/ cities such as Hyderabad, Chennai
project launches in the office space
ITeS sector encouraged developers and Noida. Additionally, some
segment post 2010, and the result is PROJECTIONS H1 2015 H1 2016E Growth
to aggressively build new office occupiers may also prefer moving
seen in the current situation, wherein
space. However, the Global Financial to Navi Mumbai, which offers a
there are no major completed New completions (mn sq ft) 1.54 0.86 -44%
Crisis (GFC) of 2008 resulted in an similar occupancy cost. While such a
projects available for lease. Even the
oversupply situation, with a huge scenario would be a loss to the Pune Absorption (mn sq ft) 2.16 2.33 8%
existing 11% vacancy is largely in the
amount of ready-to-occupy space market, it will give a significant boost
peripheral business districts (PBD), Vacancy 15% 8%
remaining vacant from 2008 to 2010 to the already thriving office markets
with the prime areas having a near-
due to a lack of occupier demand. of Hyderabad, Chennai, Noida and Weighted average rent (`/sq ft/month) 50 61 22%
zero vacancy level.
With developers unable to earn Navi Mumbai. Source: Knight Frank Research
• Going forward, while absorption

RENTAL TREND is expected to increase 8%
compared to its H1 2015 level of
• Rental values have been rising 2.16 mn sq ft, new completions
FIGURE 4
steadily since 2013, as demand are estimated to drop further in H1
WEIGHTED AVERAGE RENTAL MOVEMENT 2016, by 44% to 0.86 mn sq ft.
continues to surpass new supply.
65 Currently, the weighted average • Since no new major office projects
rent in Pune is around `56 per sq ft are expected to be completed in
60 per month - 44% higher than in H1 the coming six months, vacancy
2013. levels will witness a further fall to
INR / sq.ft./month
55 the single-digit level.

• Severe shortage of good quality
office space in prime areas has • This will put additional pressure on
50
turned the market in favour of rents, which are estimated to rise
landlords, who are asking for by 22% in H1 2016 compared to
45
higher rents from tenants with H1 2015.
each passing quarter.
40
• In H2 2015, the weighted average
35 rents moved up 19% from `47
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016E per sq ft per month in H2 2014.
The maximum increase has been
witnessed in the eastern part of
the city, with rents in SBD East and
PBD East rising by 22% and 24%,
respectively in the past 12 months.
This is primarily because of the
limited availability of vacant space
in these markets.
138 139
Key Contacts
ADVISORY, RETAIL & HOSPITALITY CAPITAL MARKETS OFFICE AGENCY
GULAM ZIA RAJEEV BAIRATHI VIRAL DESAI
Executive Director - Advisory, Executive Director National Director
Retail & Hospitality rajeev.bairathi@in.knightfrank.com viral.desai@in.knightfrank.com
gulam.zia@in.knightfrank.com
FACILITY MANAGEMENT PROJECT MANAGEMENT
SAURABH MEHROTRA NELLIE SAMUEL DEBEN MOZA
National Director - Advisory Executive Director - Knight Frank Property Executive Director - Knight Frank Property
saurabh.mehrotra@in.knightfrank.com Services Private Limited* Services Private Limited*
nellie.samuel@in.knightfrank.com deben.moza@in.knightfrank.com
ADITYA SACHDEVA
Director - Retail
INDUSTRIAL & ASSET SERVICES RESIDENTIAL AGENCY
aditya.sachdeva@in.knightfrank.com BALBIRSINGH KHALSA MUDASSIR ZAIDI
National Director National Director
balbirsingh.khalsa@in.knightfrank.com mudassir.zaidi@in.knightfrank.com
LAND AGENCY (Mumbai) RESEARCH

FALI PONCHA DR. SAMANTAK DAS
Director Chief Economist and National Director
fali.poncha@in.knightfrank.com samantak.das@in.knightfrank.com
COPY EDITORS DESIGN & GRAPHICS

Rhea Pinto Mahendra Dhanawade
Lead Editor Assistant Manager
rhea.pinto@in.knightfrank.com mahendra.dhanawade@in.knightfrank.com
Deborah Herbert
Copy Editor
deborah.herbert@in.knightfrank.com
*Facility Management and Project Management services are offered by Knight Frank Property Services Private Limited which is a wholly owned subsidary of Knight Frank ( India ) Private Limited.
140 141
COMMERCIAL BRIEFING
For the latest news, views and analysis
of the commercial property market, visit
knightfrankblog.com/commercial-briefing/
RESEARCH
Dr. Samantak Das
Chief Economist and
National Director, Research
samantak.das@in.knightfrank.com
RESIDENTIAL AGENCY
Mudassir Zaidi
National Director, Residential
mudassir.zaidi@in.knightfrank.com
OFFICE AGENCY
Viral Desai
National Director, Office Agency
viral.desai@in.knightfrank.com
CAPITAL MARKETS
Rajeev Bairathi
Executive Director, Capital Markets
rajeev.bairathi@in.knightfrank.com
ADVISORY
Saurabh Mehrotra
National Director, Advisory
saurabh.mehrotra@in.knightfrank.com
CITIES
Mumbai (Corporate Office)
Shishir Baijal
Chairman & Managing Director
shishir.baijal@in.knightfrank.com
Ahmedabad
Balbirsingh Khalsa, National Director
balbirsingh.khalsa@in.knightfrank.com
Bengaluru
Satish BN, Executive Director-South
satish.bn@in.knightfrank.com
Chennai
Kanchana Krishnan, Director
kanchana.krishnan@in.knightfrank.com
Hyderabad
Vasudevan Iyer, Director
Vasudevan.Iyer@in.knightfrank.com
NCR
Rajeev Bairathi, Executive Director-North
rajeev.bairathi@in.knightfrank.com
Pune
Shantanu Mazumder, Director
Knight Frank India research provides development and strategic advisory to a wide range of
shantanu.mazumder@in.knightfrank.com
clients worldwide. We regularly produce detailed and informative research reports which
provide valuable insights on the real estate market. Our strength lies in analysing existing
trends and predicting future trends in the real estate sector from the data collected through
market surveys and interactions with real estate agents, developers, funds and other
stakeholders.
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REPORT not to be relied upon in anyway. Although high standards
2016
have been used in the preparation of the information
The global perspective on prime property and investment
analysis, views and projections presented in the report,

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by Knight Frank for any loss or damage resultant from
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RESEARCH

INDIA REAL ESTATE

AHMEDABAD | BENGALURU | CHENNAI | HYDERABAD | KOLKATA | MUMBAI | NCR | PUNE

Vice President - Research eight cities of India since

Source: Knight Frank Research

new launches, the sales volume

UNSOLD INVENTORY LEVELS (TOP EIGHT CITIES) OFFICE MARKET

MUMBAI levels to an eight-year low.

H2 2015, significantly lower from

OUTLOOK FOR THE NEXT SIX MONTHS FIGURE 2

Launches (units) 113,499 118,402 4% 160

economic sentiment and the stagnant in the coming six months, 80

• The IT/ITeS sector continued

Source: Knight Frank Research 0 0

Source: Knight Frank Research

RESIDENTIAL MARKET H2 2015 brings offers

Source: Knight Frank Research

• The situation in Ahmedabad’s worsened the oversupply situation

MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES

performance in the rest H2 2014 H1 2015 H2 2015 MICRO-MARKET LOCATIONS

Source: Knight Frank Research

CENTRAL EAST NORTH SOUTH WEST

Source: Knight Frank Research

• The micro-market split of FIGURE 4

Central Ambawadi, Navrangpura, Shahibaug, Nehru Nagar

West Ambli, Bodakdev, Jodhpur, Prahlad Nagar, Satellite, Thaltej, Vastrapur

MICRO-MARKET SPLIT OF UNDER-CONSTRUCTION UNITS AS OF DECEMBER 2015 FIGURE 5

B only 7% of the total number of 1,400 6,000

E • The maximum under-construction 800

AHMEDABAD MARKET HEALTH

11 from hiking prices in most of the

OUTLOOK FOR THE NEXT SIX MONTHS

Projections H1 2015 H1 2016E Growth

RESIDENTIAL MARKET MICRO-MARKET SPLIT OF RESIDENTIAL LAUNCHES

BENGALURU RESIDENTIAL MARKET LAUNCHES, FIGURE 2

CENTRAL EAST WEST NORTH SOUTH

Source: Knight Frank Research

MICRO-MARKET-WISE RESIDENTIAL SALES

MICRO-MARKET LOCATIONS H2 2015

MICRO-MARKET PREMIUM LOCATIONS FIGURE 6

Age of inventory in quarters

not have a sufficient inventory and • North Bengaluru shares almost

According to latest rules, these Malleshwaram West 9,000–13,250 6% 1%

While H2 2015 has been Projections H1 2015 H1 2016E Growth

• The city witnessed progressive

of the total absorption in 1

H2 2015. Despite fewer 0

e-commerce transactions H1 2014 H2 2014 H1 2015 H2 2015 H1 2016E

in H2 2015, as compared Source: Knight Frank Research H2 2015

(H1 2015), developers

a positive effect on the

FIGURE 3 DEAL SIZE ANALYSIS

60% 90,000 120

OCCUPIER BUILDING LOCATION APPROX. AREA (SQ FT)

Metric Stream AMR Tech Park Hosur Road 90000

Citrix Embassy GolfLinks business park Intermediate Ring Road 145000

Mercedes-Benz Gopalan Global Axis Whitefield 140000

HSBC RMZ Futura 2 Bannerghatta Road 140000

Tech Mahindra Golden Hill Supreme IT park Electronics City 160000

Cadence RMZ Ecoworld Sarjapur Outer Ring Road 200000

IBM Bhartiya City Thanisandra Road 400000

Think & Learn IBC Knowledge Park Bannerghatta Road 116000

• The average deal size has lesser number of deals indicated

BUSINESS DISTRICT ANALYSIS

• The IT/ITeS sector continued

• The situation in Ahmedabad’s worsened the oversupply situation

• The micro-market split of FIGURE 4

E • The maximum under-construction 800

not have a sufficient inventory and • North Bengaluru shares almost

• The city witnessed progressive

• The average deal size has lesser number of deals indicated

• The quarters to sell unsold

OFFICE MARKET • The total office space absorption

• The closure of the Telangana in the number of units launched,

• The Hyderabad office market FIGURE 2