Brand reliability and trustworthiness leading factor for buyers of Affordable Housing: RICS-Knight Frank Report

 

New Delhi, July 29, 2019: International Property Consultant Knight Frank in association with Royal Institute of Chartered Surveyors (RICS) today released a report “Affordable Housing- Know your customer”. The latest RICS – Knight Frank report captures findings of a market survey that was conducted with homebuyers across 15 cities in India to understand the expectations of the urban end - users for ideal affordable housing. Homebuyers ranging from age 23 to 66 were surveyed and the engagement methods primarily used were Focus Group Discussions (FGDs) – Qualitative Research and Structured Questionnaires based interactions – Quantitative Research.

KEY FINDINGS

·         While purchasing an affordable housing property, product quality ranked as the 1^st key parameter followed by Brand Name. 

·         80% homebuyers put cost as the top most consideration while buying a home followed by safety and security for 71% for homebuyers

·         52%homebuyers highlightedparkingspace as a major gap in terms of their requirements in their current residences, followed by adequate security, playground and availability of public transportaccounted for 43% each.

·         53% homebuyerssaid thatself-use is the main purchase driver. While 48% highlighted better location and 44% expanding family size, amongst others as important drivers for their decision to buy houses.

·         As per Knight Frank’s market survey, customers perceivethe below mention brands  as top 10 developers providing affordable housing

o   Provident Housing

o   Mahindra Lifespaces

o   PS Group 

o   Prestige Group

o   Lodha Group

o   ATS Homekraft

o   Signature Global

o   TATA Value Homes

o   Godrej Properties

o   Ashiana Group

Nimish Gupta FRICS, Managing Director, South Asia - RICS said, “Housing is one of the most fundamental demands that influence the quality of life. Access to acceptable living conditions is an elementary human need, which affects individuals at many levels as it provides shelter, safety, security and for most of us represents the most significant investment that we will ever make during our lifetime. The affordable home segment offers great potential which is yet to be fully explored. This segment will definitely perform better when affordable housing projects ‘on-ground’, while catering to the needs of customers on security, safety and lifestyle attributes are successfully executed and energies stay focussed on delivering these within the promised cost and timeframes.”

Shishir Baijal, Chairman and Managing Director of Knight Frank India said “Customers of affordable housing are highly value conscious and since they normally buy a house once in their life time, the focus is more on developer credibility. Today, when most of the stake holders in real estate sector are boarding the affordable housing bandwagon, they need to first understand their consumers before converting their ideas into reality. This explicitly explains why few of the affordable housing developers, who are keeping customer preferences on the forefront are succeeding in this sector while most of the others are not.”

Residential launches in Mumbai grew by 22% (YoY) in H1 2019; sales grew by 4% (YoY) in H1 2019: Knight Frank Report

62% of all launches in sub INR 7.5 million ticket size; 82% below INR 10 million ticket size.

Volume of office space transacted in the city record 61% rise (YoY) in H1 2019: Knight Frank Report

Mumbai, July 9, 2019: Knight Frank India today launched the 11^th edition of its flagship half-yearly report - India Real Estate. The report presents a comprehensive analysis of the residential and office market performance across eight cities for the period January – June 2019 (H1 2019). The report findings establish that the number of residential launches in Mumbai increased by 22% in H1 2019 to 43,822 from 35,874 in H1 2018. The housing units sold saw an increase of 4% in H1 2019 to 33,731 from 32,412 in H1 2018.

Mumbai’s office market witnessed 61% increase in volume of office space transacted in H1 2019 to 0.43 mn sq m (4.6 mn sq ft) from 0.27 mn sq m (2.9 mn sq ft) in H1 2018. The Other Services sector, which includes media, consulting, ecommerce, co-working, etc. continued to dominate transaction activity in H1 2019 garnering 39% share of total transactions followed by BFSI at 34%.

RESIDENTIAL MARKET HIGHLIGHTS OF MUMBAI:

·         The launches growth tapers to 22% year-on year (YoY) during H1 2019, after registering a stellar 220% YoY growth in 2018.

·         62% of the launches during H1 2019 were in the sub-INR 7.5 million ticket size and 82% were below INR 10 million ticket size.

·         Thane market witnessed the largest quantum of new launches on account of new projects launched by some of the country's biggest corporates.

·         During H1 2019, sales in MMR grew marginally by 4% YoY to 33,371 units

·         Sales in H1 2019 were affected by two major events- GST ambiguity and election uncertainty.

·         Homebuyers yet to benefit from RBI’s policy rate reductions, banks have passed on only 10-30 bps out of the 75-bps cut by RBI in 2019.

·         GST change has failed to enthuse homebuyers; most developers have opted for earlier GST regime for 12% with ITC for on-going projects.

·         Peripheral Central Suburbs witnessed the highest sales growth in MMR of 9% YoY during H1 2019 followed by Thane at 7% YoY.

·         Affordable houses continued to drive sales in H1 2019, relatively affordable markets of MMR – Thane, Peripheral Central Suburbs and Peripheral Western Suburbs combined, grew by 6% YoY during H1 2019. However, sales in the pricier BMC markets grew only by 3% YoY in the same period.

·         On account of launches being higher than the sales, the unsold inventory levels in MMR have inched up 14% YoY to 136,525 units during H1 2019.

·         Quarters-to sell (QTS) for the MMR market went up from 8 quarters in H1 2018 to 8.5 quarters in H1 2019. The current QTS of 8.5 quarters should not be interpreted as a sign of a healthy market. Over the past few years, in MMR, launches have constantly surpassed sales since H2 2014 till H1 2017.

·         The liquidity crisis in the NBFC sector, which struck during H2 2018, is still casting its shadow on the MMR market and cost of funds have gone up for developers to the tune of 180–250 bps.

·         The weighted average price for MMR was down 3% YoY during H1 2019. The prices have corrected by 12% from the peak of H2 2016.

·         Host of indirect offers and freebees remain in the market, they include: no floor rise, no stamp duty, 2 years maintenance free period, no club house charges, 2 years assured rentals schemes, various subvention schemes, deferred payment plans, etc.

·         Earlier subvention schemes and deferred payment plans were available only in under-construction projects, but now it is available in few OC ready projects as well.

·         Unprecedented investment in infrastructure in Mumbai. Over INR 2 trillion or INR 2 lakh crore being invested. Metro projects worth INR 1.16 trillion or INR 1.16  lakh crore under-construction.

Gulam Zia, Executive Director– Valuation & Advisory, Retail & Hospitality said, “The mood of residential realty in Mumbai continues to be sombre and withdrawn. With more skeletons tumbling out of NBFC cupboards the shadows on Indian housing industry are getting longer. The respite offered in the finance bill may still not be able adequate to pull the sector out of its current situation. to rescue a few more developers who’re already on the brink of an imminent collapse. Affordable housing segment has emerged as a silver lining in these dark clouds. The finance minister has announced more sops for this segment to step closer to the dream of “housing for all”. The developers who desire to remain relevant after this catastrophic period of downturn will have to recalibrate their business models and focus on creating more affordable homes.”

COMMERCIAL MARKET HIGHLIGHTS OF MUMBAI:

·         The transaction activity in the Mumbai Metropolitan Region (MMR) office market was strong 0.43 mn sq m (4.6 mn sq ft) in H1 2019 registering a growth of 61% YoY.

·         There were several large transactions in H1 2019, which involved occupiers from the Banking, Financial services and Insurance (BFSI) segments, Other Services sector and co-working players.

·         In H1 2019, new completions dropped by 56% year-on-year (YoY) at 0.18 mn sq m (1.9 mn sq ft).

·         Only three out of six business districts witnessed addition in supply in H1 2019 – peripheral business district (PBD), suburban business district (SBD) Central and SBD West.

·         The SBD Central market has been gaining traction, witnessed 143% YoY growth in transactions in H1 2019.

·         PBD had the highest share of transactions in H1 2019 at 31%. SBD West and SBD Central, combined, garnered 50% share of the transactions in H1 2019.

·         The Other Services sector, which includes media, consulting, ecommerce, co-working, etc. continued to dominate transaction activity in H1 2019 garnering 39% share of total transactions followed by BFSI at 34%.

·         Co-working operators took up 0.02 mn sq m or 0.3 mn sq ft of office space in H1 2019 and constituted 14% of the transactions by the Other Services sector in H1 2019.

·         Vacancy levels declined by almost 400 bps from 21.5% during H1 2018 to 17.8% during H1 2019. As supply could not keep pace with the transactions for two consecutive periods of H2 2018 and H1 2019.

·         Weighted average transacted rentals for the MMR office market went up by 7.8% YoY during H1 2019, as share of the expensive business district of Bandra Kurla Complex(BKC) and off-BKC in transaction activity was higher than it was during H1 2018.

·         Central Mumbai witnessed the highest rental growth of 6% YoY during H1 2019, followed by BKC at 5% YoY and SBD Central at 5% YoY.

·         The trend of consolidation of space by occupiers continues across the MMR office market. Despite the number of transactions in the same period increasing from 105 to 160, the average size of deals increased from 2,548 sq m (27 ,429 sq ft) per deal to 2,700 sq m (29,059 sq ft) per deal.

Gulam Zia, Executive Director– Valuation & Advisory, Retail & Hospitality said, “The office market has been growing steadily across India with strong record of transactions each successive year.Mumbai witnessed record half-yearly growth in transactions led by occupiers in BFSI and other service sectors. While the city level vacancy remains elevated, we have a scenario where preferredmarkets in the city have significantly low vacancy level. SBD Central has been witnessing significant growth in occupier interest over the past few years and would soon join the list of tight supply markets like BKC and Central Mumbai.”

Warehouse space leasing grows by 77% year-on-year in 2018: Knight Frank Report

Warehousing space requirement for manufacturing sector expected to be 68 million sqm in 2019; estimated to reach 86 million sqm by 2024 

19^th June 2019, New Delhi –Knight Frank, the independent global property consultancy in association with REED Exhibitions India is participating in the region’s largest warehousing expo the“9^th India Warehousing Show 2019”. As a part of this association, Knight Frank launches the latest edition of its flagship report, India Warehousing Market 2019to give perspective on the scale and growth of the warehousing market in India. According to the report, total warehousing space estimated to be 68 millionsq m (739 millionsqft) in 2019 for the manufacturing sector which is projected to grow at a compounded annual growth rate (CAGR) of 5%in the next five years to 86 million sq m (922 million sqft) by 2024.

The report notes that logistics cost in India accounts for 13%-14%of the Gross Domestic Product (GDP) which is substantially higher than the (8-10%) logistics cost to GDP ratio in other developed countries.The primary reason for this is the skewed multi-modal mix and the fact that60% of freight movement in India happens via roadways.

Key Highlights:

·         Total requirement of storage space in the Indian manufacturing sector accounts for 80% of the warehousing market today.

·         Top warehousing markets in India witness a growth of 77% year-on-year in leasing in April 2018–March 2019.

·         The warehousing industry has witnessed massive participation from institutional investors, as well as developers, who have collectively invested over USD 6.8 billion since 2014, with an average investment per deal of USD 282 million.

·         Private Equity funds had a 49% share of the total investments into the warehousing industry. This was followed by sovereign & pension fund at 31% and 20% of the pie belonged to the developers.

·         83% of the investments in warehousing assets went into new developments whereas 10% went into ready assets and 7% into a combination of ready and under construction assets.

·         The investments committed by institutional investors alone, is estimated to create over 15 million sq m(158 million sqft)of new warehousing space over the next few years.

·         Kolkata witnessed highest year-on-year (YoY) surge with 191% in warehousing leasing volume over 2017 followed by Bengaluru (147%) & Hyderabad (96%).

·         Other cities such as Coimbatore, Guwahati, Rajpura, Ludhiana, Nagpur, Lucknow, Visakhapatnam, Bhubaneswar and Siliguri are gaining prominence now in terms of the growing demand for warehousing space.

·         Of the 29 states, only seven have a dedicated policy framework for the logistics industry.A comparative analysis of the existing logistics policies of seven states shows that Haryana is rated the highest based on the benefits for developers as well as occupiers.

Sector-wise allocation of Warehousing costs in proportion to net sales:

Sector	Warehousing costs in proportion to net sales
Cement	2.03%
FMCG	0.80%
Chemicals	0.57%
Fertilizers and agrochemicals	0.46%
Automobile	0.43%
Pharmaceuticals	0.43%
Consumer durables	0.38%
Textile	0.36%
Auto-ancillary	0.35%
Metals	0.25%
Engineering	0.22%

Source: Knight Frank Research

Shishir Baijal, Chairman & Managing Director, Knight Frank India, said, “The growth of the manufacturing sector has been slated to have the most prominent impact on the Indian Warehousing industry.  Just this sector’s storage requirement forecasted to reach 86 million sqm by 2024, instantly puts the spotlight on scope and growth for developers and investors in the warehousing market. The warehousing segment is in the midst of an evolutionary leap spurred by the new GST regime, technological enhancements and the increasing adoption of third party logistics providers. The tangible efficiencies brought in by these logistics experts and the substantial growth in institutional investment activity in the warehousing space have seen leasing transactions in this segment grow by a substantial 77% during 2018. Of which, at 128% growth, the e-commerce segment is the fastest growing occupier segment for the Indian warehousing market.”

Annual lease transactions in Warehousing in India:

City	2017	2018	Growth
	in million sq m (millionsqft)		(YoY)
Kolkata	0.1 (1.6)	0.4 (4.7)	191%
Bengaluru	0.2 (2.5)	0.6 (6)	147%
Hyderabad	0.2 (2)	0.4 (4)	96%
NCR	0.6 (6.5)	1.1 (12.6)	94%
Chennai	0.2 (2.5)	0.4 (4.2)	79%
Ahmedabad	0.3 (3.3)	0.5 (4.9)	51%
Mumbai	0.4 (5.2)	0.7 (7)	34%
Pune	0.2 (2.5)	0.3 (3.5)	41%
Total	2.4 (26.1)	4.2 (46.2)	77%

Source: Knight Frank Research

Balbirsingh Khalsa, National Director, Industrial & Asset Services, Knight Frank India said, “Organised warehousing developers are steadily seeing more demand from occupier groups and sectors like E-commerce, 3PLs, Retail, Manufacturing, FMCG,FMCD etc. The string of policy and regulatory reforms unveiled by India in recent times such as implementation of the Goods and Services Tax (GST), the ‘Make in India’ programme and initiatives to set up industrial corridors like Delhi Mumbai Industrial Corridor (DMIC), Delhi-Kolkata Industrial Corridor and logistics parks has accelerated the entry of international institutional players in the Indian warehousing and logistics space. Exponential demand of large sized warehousing structures that are legally compliant in for regional warehousing purpose in top 8 cities has driven leasing volumes to grow from 26.1 mnsqft to 46.2 mnsqftin last one year. Demand in tier 2 cities is also on the rise and showing big growth potential and combinedly taking demand up to 60 mnsqft across India. This growth is adequately funded by a substantial growth in investments, giving the required stimulus to develop quality and organised warehousing spaces across India.”

Akshita Kapoor, Portfolio Director, REED Exhibitions India said “The exponential growth in the Warehousing and Logistics segment is very encouraging, especially the growth in tier 2 and tier 3 cities across the country. The current size of the warehousing space in the country which is easily more than 150 million sqft. which is set to witness. What is interesting to note is that the sector is growing inclusively encompassing technological advances, service delivery platforms as well as strong real estate strategies. Our show, now in the 9^th edition is expected to be the largest not only in India but also in the region.” 

About Knight Frank:

Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank has more than 18,170 people operating from over 523 offices across 60 markets. These figures include Newmark Grubb Knight Frank in the Americas, and Douglas Elliman Fine Homes in the USA. The Group advises clients ranging from individual owners and buyers to major developers, investors and corporate tenants. For further information about the Company, please visit www.knightfrank.com.

In India, Knight Frank is headquartered in Mumbai and has more than 1,000 experts across Bangalore, Delhi, Pune, Hyderabad, Chennai, Kolkata and Ahmedabad. Backed by strong research and analytics, our experts offer a comprehensive range of real estate services across advisory, valuation and consulting, transactions (residential, commercial, retail, hospitality, land & capitals), facilities management and project management. For more information, visit http://www.knightfrank.co.in/