CBRE South Asia Pvt. Ltd., India’s leading real estate consulting firm, today announced the findings of its Asia Pacific Real Estate Market Outlook 2017 – India. As per the report, India continues to hold its position as the world’s fastest growing G-20 economy, on the back of improved investor confidence and better policy reforms. The report is part of a global research series released by CBRE every year, highlighting trends and dynamics across various segments in the real estate sector for the year ahead.
Commenting on the buoyancy of the sector, Anshuman Magazine, Chairman, India and South East Asia, CBRE said, “With 2016 being the year of landmark decisions for the Indian real estate industry, the sector saw concerted efforts by the Government to bring in transparency as well as boost consumer sentiment in the sector, especially in the residential market. The outlook for the year 2017 is positive with an expectancy of steady growth, stability and revival in the market.”
OFFICE MARKET OUTLOOK: INDUSTRY’S BRIGHTEST SPOT ACROSS ALL REGIONS
|2016 was a landmark year for the sector, with record absorption levels of over 43 million sq. ft. reflecting a 9% y-o-y growth. Bangalore and NCR dominated leasing activity; however, Hyderabad, in particular, witnessed a steep rise in occupier demand, with absorption more than doubling from 2015 to cross 6 million sq. ft. in 2016.
Office Market Outlook for 2017:
• High absorption levels and global investor interest will continue to bring life into India’s office sector.
• In 2017, the office sector is likely to maintain its momentum with an anticipated absorption of 40 million sq. ft.
o A strong trend of ‘pre-commitment’in under constructed buildings
• IT/ ITES to continue to be the key demand driver for space across the country
• Most preferred micro markets to witness strong rental escalation
• Technology to play a key role, even as the occupiers are expected to keep a strong check on space utilization ratios and innovations in workplace strategies, while implementing their expansion plans
• Occupiers are likely to follow this trend of ‘flight to value’, while also using space utilization strategies such as workplace optimization and co-working spaces.
• Global occupiers to continue to account for sizable share of leasing activity, however we see a rise in activity from domestic corporates
• Demand for large sized spaces to receive a boost with the various consolidation/expansion/relocation initiatives of corporates
• Supply across the seven cities is expected to marginally rise in 2017. Completion delays likely to abate supply pipeline dominated by the top three cities, followed by smaller cities such as Hyderabad and Pune
RESIDENTIAL MARKET OUTLOOK:IMPACT OF RERA TO DEFINEMACRO-ECONOMIC SCENARIO
|The impact of demonetization was expected to be catastrophic for the economy, however, the reality on the ground is quite encouraging; indicative of the fact that the economy is already on its way to fully absorb the impact of the policy
The Residential MarketOutlook for 2017:
• India residential supply has jumped up by 70% q-o-q in Q1 2017. Compared to only 18,000 units launched in Q4 2016, we have seen more than 30,000 units launched in Q1 17. Biggest jump was in Chennai, Hyderabad, Kolkata andBangalore.
• India housing sales have also jumped up by 70% q-o-q in Q1 2017. Compared to only 14,000 units sold in Q4 2016, we have seen more than 23,000 units sold in Q1 17. Biggest jump was again in Chennai, Hyderabad, Bangalore and Pune.
• Housing sales are expected to revive in H1 2017 both in primary and secondary markets
• Affordable housing, which is witnessing increased interest from private developers, will emerge as a key driver of housing sales.
RETAIL MARKET OUTLOOK: SECTOR TO REMAIN STRONG WITH HIGH DEMAND
|The Indian retail real estate market witnessed continuous foray of international brands, completion of retail developments and robust demand during 2016.
Retail Outlook for 2017:
• The year 2017 is likely to be positive for the retail sector which is likely to witness an increased quality supply
• 7 million sq. ft. of additional Grade A supply is expected to hit the market; to be led by Southern cities. Hyderabad and Bangalore are expected to lead the fresh supply addition in the retail sector for 2017
• Demand for organized retail space will continue to exceed the supply.
• Consumption patterns are likely to mature due to increasing urbanization with upcoming retail developments to allow entry points for global retailers beyond the traditional epicenters of Delhi NCR and Mumbai.
• REITs will enable development of better quality malls and discourage strata-sale of properties. Implementation of Goods and Service Tax (GST) would lead to rationalization of tax at different levels with expected improvement in ease of doing business and movement of retail goods.
LOGISTICS MARKET: ROBUST GROWTH CAPITALISED ON INDIA’S GROWING PRODUCTION CAPACITY
|Demand for quality space in the logistics sector crossed 10 million sq. ft. mark in 2016with smaller cities such as Hyderabad, Chennai, Kolkata and Pune accounting for almost half of leasing activity.
Logistics Outlook for 2017
· Demand for warehousing space is anticipated to remain robust throughout 2017 with consolidation being amongst the biggest drivers.
· In line with an increased demand, the supply of modern warehousing and industrial parks is also anticipated to increase over the next few years.
· GST to have a large impact on the sector in the long term; demand to increase over the next 12-24 months
CAPITAL MARKETS: TRANSPARENCY AND CLEANER FUNDING ENVIRONMENT TO ENHANCE SECTOR’S GROWTH
CAPITAL MARKETS& LAND OUTLOOK: ACTIVE INVESTMENTS MARKET, CONDUCIVE ENVIRONMENT TO DRIVE FUTURE GROWTH
• 2016 witnessed a high level of investment activity in office, residential and retail sectors with active interest in the warehousing and hospitality sectors
• The Capital Markets and Land outlook for 2017:
o Office and residential expected to be main drivers; alternate sectors such as retail, warehousing and hospitality will gain prominence
o A secure &favorable regulatory environment expected to generate more interest from offshore investors
o Lower interest rates to reduce the cost of doing business, debt to still be most prevalent form of capital. Banks expected to be equipped with liquidity
o While core assets will continue to witness strong interest, there will be enhanced development interest in office, warehousing and retail sectors
o Several players expected to launch ‘affordable housing’ platforms
o Developers with strong delivery track record would continue to experience stable residential sales activity. Corporate houses to become increasingly prominent
o Land transaction activity to continue unabated. Joint Developments and Development Managements are increasingly being adopted
o 2017 expected to witness a significant increase in investments from family offices and HNIs into real estate