Year 2018 was a mixed bag of highs and lows for the Indian real estate sector. The initial pangs of policy alterations seemed to fade away with each region seeing visible signs of recovery across segments. Even as the liquidity crunch and stalled/delayed projects continue to plague the sector, the main southern cities of Bangalore, Chennai and Hyderabad actually saw faster growth momentum than their northern counterpart NCR.
Retail, commercial and residential real estate saw a lot more activity in Southern cities than in the North.
As per ANAROCK data, the southern cities raced far ahead of those in the North, including entire NCR.
- The three main southern cities collectively saw a whopping 77% increase in new residential supply in 2018 over the previous year – from approx. 38,330 units in 2017 to 67,850 units in 2018.
- NCR, on the other hand, saw an increase of just 16% in new supply in 2018 against the preceding year. The main West Indian cities of MMR and Pune together saw a mere 17% jump in new residential supply numbers in the same period.
- Chennai led with a significant 98% increase in the new launch supply among the southern cities. Bangalore followed with a 91% jump, while Hyderabad witnessed a rise of about 43% in new housing stock.
- Even on the sales front, the main southern cities collectively overtook their northern and western counterparts. They saw a 20% increase in housing sales as against18% rise in the North and 15% in the West.
- Even more interestingly, the collective unsold stock in these southern cities is a mere 19% of the total 6.73 lakh unsold units across the top 7 cities. NCR alone has nearly 28% of the total unsold stock.
This clearly indicates that the housing markets in the southern cities are exceptionally resilient, and were quick to recover from the overall slowdown in the Indian real estate sector. The fact that these cities are driven by demand from the IT/ITeS sector definitely played a role. However, more pertinently, these are largely end-user driven markets, unlike cities in the north that were driven by speculators.
In terms of market traction, commercial real estate remained the most buoyant sector in 2018 across major cities. Demand for Grade A office space saw new highs and vacancy levels declined in prime locales. Here too, the southern cities surpassed their northern counterparts.
As per ANAROCK data, the main southern cities saw collective office space absorption of nearly 21 million sq. ft. as against just 6 million sq. ft. in entire NCR. In terms of new supply too, the southern cities raced ahead with nearly 14.7 million sq. ft. of Grade A office space getting deployed there in 2018.
Among the southern cities, Bangalore retained its top position with more than 9 mn. sq. ft. of new supply in 2018. Office absorption in Bangalore touched nearly 12 mn. sq. ft. by the end of Q4 2018, denoting a massive annual increase of 37%. The city’s large talent pool, its vibrant start-up culture, ample Grade A office stock, relatively affordable rents and steady demand from the IT/ITeS sectors, BFSI and co-working spaces prompted this growth.
Fresh supply of malls across the top 7 cities was limited in 2018. However, the further liberalization of FDI policies repositioned Indian retail on the global investment map and attracted a large number of global retailers into the country.
ANAROCK data indicates that the three primary southern cities together accounted for more than 90% of the overall new mall supply in 2018, leaving their western and northern counterparts far behind. Among the southern cities, Hyderabad led in terms of new mall supply, followed by Chennai and Bangalore.
All in all, the southern cities had a very clear edge across sectors in real estate activity in 2018. Their inherent advantage stems from the more professional and organized approach to real estate – not just post RERA implementation but also in the pre-RERA years.
Genuine end-users have helped steer consistent housing growth in these cities, in contrast to markets in the north where speculative pricing coupled with questionable activities of some developers dampened sentiment.
During all the ups and downs that the Indian real estate market has witnessed in recent years, the southern cities have displayed remarkable strength and resilience even in the worst phases.
- Bangalore, Hyderabad & Chennai saw 77% increase in new residential supply in 2018; NCR 16%, MMR & Pune 17%
- Chennai led new launch supply with 98% increase, Bangalore 91%, Hyderabad 43%
- Bangalore, Hyderabad & Chennai saw 20% increase in housing sales; 18% in North, 15% in West