YEAR ENDER FOR RESIDENTIAL & OFFICE REAL ESTATE

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Although the pandemic had slowed down the activity through 2020 and 2021, a strong rebound in 2022 has shown the inherent strength of demand in India. In office space, the bounce-back establishes two things: the flex spaces proposition is on solid ground, and office occupancies have returned resoundingly, even for the tech sector.

In the residential segment, the market movement, while being reliant on end users, also benefited from investors seeking medium to long-term investment opportunities in both under construction and secondary spaces.

THE OFFICE STORY

Office space absorption across India’s six major cities stood at 54.8 mn sqft, recording a 48.5% increase in 2022. This was very close to the historic peak of 55.7 mn sqft, recorded in 2019, falling short by less than a million sq.ft. Bengaluru, the longstanding flag-bearer of office markets, recorded its all-time peak at 17.3 mn sqft; and so did NCR and Chennai at 11.3 mn sq.ft and 7.3 mn sqft respectively. New supply rose by 45.1% at 53.4 mn sqft when compared to 2021, as per data released by International real estate advisory firm Savills India.

However, there are signs of caution in the mix. Despite the first half of 2022 recording an all-time-high H-1 demand, the second half slowed, as if picking up signals of global slowdown. H-2 performance leaves observers wondering if 2022 would have broken all previous records, but for the deceleration in the last quarter.

Coworking Picks Up Again: IT continues to drive the office market with 38.9% share of total leasing in 2022. With increased adoption of hybrid work, flexible workspaces contribution improved from 12.7% in 2021 to 14.1%in 2022. Banking, Financial Services and Insurance (BFSI) also maintained its pre-eminence at 12.2% share. Engineering and manufacturing, another important segment of demand registered approx. 8.2% share of demand in 2022.

Supply, Vacancy & Rents: Strong supply infusion was the theme across all cities. Of the 53.4 mn sqft of new completions across the 6 major markets, Bengaluru and Hyderabad alone accounted for more than half of the supply addition. While the all-India stock of Grade-A office space stood at over 700 mn sqft, Hyderabad breached the 100 mn sqft mark for the first time in 2022. Hyderabad, with supply infusion of 16.5 mn sqft in 2022, witnessed an outstanding YoY growth of 92%.

Average vacancy level has increased marginally from 18.3% in 2021 to 18.9% in 2022 on account of portfolio reallocations. This has resulted in rentals remaining largely stable.

The rental value change across micro-markets varied within each city and even within micro markets. While rentals remained stable in low demand micro markets, a developer-oriented market has resulted in strong yearly increase in other localities.

THE RISE OF HOUSING

Premium residential values in Mumbai, Bengaluru, Delhi, Gurugram and NOIDA have witnessed considerable growth throughout 2022. The demand side growth in premium residential segment has been evident despite the RBI increasing the benchmark lending rates by 225 bps in the year 2022. Demand in the rental market has also gained momentum as professionals have returned to their work locations. In the backdrop of hybrid work model, end-users are considering renting larger homes in residential complexes offering superior facilities.

Under construction projects in these cities witnessed higher appreciation in capital values as compared to the completed projects. This reflects buyers’ preference for new launches with better amenities and spacious units. Affinity for quality homes is likely to keep the demand steady for premium housing segment in 2023.

Mumbai

The city witnessed an increase of 1% Y-o-Y in average capital values for completed properties and an increase of 3% Y-o-Y in average capital values for under-construction properties.
Navi Mumbai and Thane micromarkets witnessed a significant increase of 3%-8% Y-o-Y on account of consistent demand for completed as well as under-construction properties.
The city is witnessing higher interest from Non-Resident Indians to liquidate their properties, especially in the micro markets of South Mumbai and Central Mumbai.

Bengaluru

The capital values in 2022 for both completed and under-construction premium housing projects increased in the range of 4-8% Y-o-Y in different micro markets.
Of all the micro markets in the city, Central Bengaluru has the highest average capital values at around INR 19,000 and INR 15,500 for completed and under-construction projects respectively.
South Bengaluru, meanwhile, registered the highest Y-o-Y increase in premium housing prices at 8% in 2022.

Delhi

With 2% Y-o-Y growth, the city continues to witness increase in average capital value for land parcels in 2022. South Central region with 8% Y-o-Y growth saw the biggest hike.
The average capital value for floors in premium housing segment remained constant across all micro markets of Delhi in 2022.

Gurugram

Capital values of completed and under-construction projects increased by 15% & 22% Y-o-Y respectively in 2022.
With 30% Y-o-Y increase, Dwarka Expressway registered the highest growth in capital values for under-construction projects in 2022.
The price hike of plots is significant with 32% Y-o-Y growth in 2022. Dwarka Expressway with 50% Y-o-Y increase registered the maximum growth in plotted development.
Under construction projects across all micro markets witnessed higher appreciation in capital values as compared to completed projects.

NOIDA

Capital values witnessed an increase in the range of 9-17% Y-o-Y in 2022 across micro markets.
Completed projects in NOIDA saw a steady growth in capital values at 12% Y-o-Y.
Under construction projects saw a steady growth of 14% Y-o-Y in 2022 as compared to 10% in 2021.

RENTAL TRENDS

Mumbai

During 2022, Mumbai witnessed an increase of 4% Y-o-Y in average rental values. The market gained momentum as end-users considered renting larger homes in the backdrop of hybrid working coming into play.
All micro markets witnessed an increase in rental values in the range of 1%-9%. The micro market of South Mumbai, Navi Mumbai and Thane witnessed the maximum increase of 7%-9% Y-o-Y.
The micro markets of Western Suburbs Prime, Central Mumbai and South Mumbai witnessed increased traction in the rental properties, especially for 2 BHK configuration.

Bengaluru

Although the growth has been significant for affordable and mid segment, the premium residential segment also witnessed a noticeable 4% Y-o-Y increase in rental prices across the city.
Much like capital values, South Bengaluru micro market recorded the highest rental growth of around 5% in 2022.
The rental range for premium 3BHKs in the city stood at INR 67,000 – 115,000 per month as of 2022. However, luxury properties in select pockets (Koramangala, MG Road etc.) command a much higher rental value as compared to the average rentals in the city.

Delhi

Delhi witnessed an overall increase of 11% in rental values in 2022.
Of all micro markets, South Central region with 14% Y-o-Y reported highest rise in the rental values.

Gurugram