Covid-19 adversely affects office space, residential launches in top Indian cities
HYDERABAD: The top five Indian cities of Bengaluru, Mumbai, Chennai, Hyderabad, and Kolkata have suffered a steep fall of 54% in office space absorption and a 71% decline in new residential launches during the second quarter of the year ended June thanks to Covid-19 outbreak.
The five major cities saw absorption of around 4.42 square feet of office during Q2, says the quarterly report of global real estate consultant Vestian Global.
Bengaluru led the way with a 45% share of the total office space absorption in these five cities, followed by Mumbai at 30%, while Hyderabad accounted for a 12% share. Chennai and Kolkata accounted for 10% and 2% share respectively, of the total absorption during the quarter under review.
The total office space absorption for the half-year ended June added up to 13.6m sft for the five cities with positive traction in the first quarter softening the overall half-yearly decline to 31%.
Vestian said the new office space completions for Q2 were recorded at 6.84m sft in the five cities, translating into a significant dip of 41% as compared with the new supply in the same quarter a year ago. For the first half of the year, the total supply stood at 14.34m sft across the five cities, a decline of 32% year-on-year.
Hyderabad suffered the most in office space absorption during June quarter at 0.55m sft representing a fall of 77%, while for the half-year it stood at 2.19m sft, translating into a fall of 52%. The office space supply during June quarter stood at 3.1m sft, down by 52%, while it amounted to 4.1m sft during the first half of the year, a fall of 51%.
“With the COVID-19 crisis leading to a stringent nationwide lockdown starting March-end, it was only a matter of time before the realty industry was impacted adversely, along with all other economic activities. The effects of the pandemic are quite apparent today – the downward shift perceptible in every asset class,” said Shrinivas Rao, CEO-APAC, Vestian. “However, the real estate industry is ruled by strong fundamentals and even at this critical stage it holds the potential to bounce back, sooner rather than later, given the various measures introduced to confront the perturbing situation.”
Residential demand was substantially impacted in the top Indian cities “with people postponing their buying decisions owing to mounting fears of job loss and pay cuts, while developers have refrained from launching new projects,” said the Vestian report.
About 5,186 new residential units were launched during the June quarter and 21,504 units in half-year, representing a fall of 71% and 41%, respectively, during first half in four cities of Bengaluru, Chennai, Hyderabad, and Kolkata.
However, the market saw some activity towards the end-May and June thanks to several measures announced by the government to create momentum in the market as well as the lockdown being lifted in phases, said the Vestian report.
Bengaluru led the way with the maximum number of units launched amongst the four cities in the June quarter, recording a share of 49% in the total new launches. Hyderabad accounted for 30% share while Chennai and Kolkata accounted for 14% and 6% share respectively of the new residential launches in the four cities.
Bengaluru struggled with office space absorption of 2m sft in June quarter, a decline of 43%, even as new completions suffered from the construction activity slowing down. The residential market saw 2,537 units launched in June quarter, a fall of 66%. A majority of launches were in the affordable and mid-segment categories.
The office market in Chennai faltered with just 0.45m sft of office space absorption, a fall of 68% even as the market saw substantial growth in new supply during the quarter. The residential market remained subdued with 750 units launched in the quarter under review representing a decline of 75%. Mid-segment housing continued to remain in the spotlight.
The Hyderabad’s office market saw 0.55m sft of office space absorption in June quarter, a fall of 77%. Though there was an improvement in the new supply during the quarter, it fell short when compared with the same quarter a year ago. The residential unit launches saw a fall of 65% at about 1,565 units. Majority of the new launches during the quarter were observed in the western zone of the city.
Mumbai saw 1.32 m sft of office space absorption in June quarter, representing a 37% decline. However, total absorption in the first half of the year holds relatively steady when compared with the same period last year.
Kolkata saw dismal office space absorption of 0.10m sft in June quarter, representing a fall of 60% decline with new completions reported during this period. Around 334 residential units were launched in June quarter, a fall of 87% year on year.
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