Prices in the NCR residential market have corrected for the first time; registering a 4% Y-o-Y dip in H1 2016. The weighted average price growth in the premium segment registered a 5% dip in H1 2016, compared to the same period in 2015, according to a report by property advisory firm Knight Frank.
The report also shows that growing preference among homebuyers are ready-to-move-in projects or projects with a certainty of possession within a year.
“New launches have dropped by a staggering 41% Y-o-Y in H1 2016; Greater Noida and Gurgaon save the day with over 80% of the total launched units in NCR being in these two markets,” the report said.
Rajeev Bairathi, Executive Director & Head – Capital Markets, Knight Frank India said, “NCR residential sector’s performance has been dismal. Piled-up inventories and slow sales velocity has brought stagnancy in the market resulting in developers being unable to increase prices substantially. The market was already in a time correction phase for the last three years, and this is the first time that there is a decline in the quoted prices in NCR”.
“The market also saw a growing preference among homebuyers for ready-to-move-in projects or projects with a certainty of possession within a year. This further instilled the fear of Real Estate Regulatory Authority (RERA) and the provision of re-registration which led to developers controlling the launch of new projects and concentrating more on project completions. The silver lining in this gloomy market has been provided by Greater Noida and Gurgaon who saw over 80% of the total launched units,” he further added.
On the office front, new completions are at an all-time low; vacancy levels hover around 20.6% due to the less-than-expected leasing activity and leasing registered a 5% drop compared to the same period in 2015, according to the report.
The report further shows that IT/ITeS have lost ground; Make in India kicks in with manufacturing sector registering a two-fold jump in transacted space in H1 2016, compared to the same period in 2015.
Commenting on the Office segment, Viral Desai, National Director – Occupier Solutions, Knight Frank India said, “Though the NCR office transaction has held steady in H1 2016, new completions being at an all-time low is a cause for concern. As opposed to 2015, when pent-up new completions hit the market, new completions fell to an all-time low in H1 2016. The Noida–Greater Noida Expressway saw increased leasing activity in H1 2016. Improving connectivity and competitive rentals are building the sentiment around this area for occupiers looking for large floor space”.
“The lack of good quality office space in prime areas has given landlords an advantage, and concepts such as preferred location charges (PLC) are seen to be picking up in the office market thereby putting an upward pressure on rentals. Going forward, we expect the NCR office market to sustain its half-yearly momentum in H2 2016 as well. The select micro markets such DLF CyberCity and Golf Course Road continue to be the preferred locations and have shown 10-20% growth in rental values,” he added.