Q3 brings in silver lining for realty industry in India

New Delhi: Indian realty industry is experiencing exponential growth in commercial and residential segment, owing to shift in buyers' sentiments and aggressive sales strategy adopted by realtors over the year with spot discounts, financing deals, stamp duty waivers and other freebies to entice end consumers.

According to a report, namely India Real Estate Update (July – September 2021), by realty consultancy agency Knight Frank India, stamp duty cuts have proved to be an effective demand stimulant in the case of Mumbai, Pune and Kolkata where the state governments have applied a broad-based cut across ticket sizes in the primary market. The report analyzed residential and office market performances across eight major cities, Kolkata, Hyderabad, Pune, Mumbai, Bengaluru, Chennai, National Capital Region and Ahmedabad, for the Quarter 3, 2021 period.

Shishir Baijal, Chairman and Managing Director, Knight Frank India, said: "Comparatively lower residential prices, attractive interest rates and higher household savings rate over the past year should support housing demand going forward. While financial stress remains a significant factor for developers across markets, homebuyers' preference for grade A developers and their access to cheaper credit has positioned them well in this recovering market."

As per the observation for the Q3 this year, cities such as Hyderabad and Kolkata have seen the strongest recovery to pre-pandemic levels in terms of sales as well as launches. Reduction of stamp duty in West Bengal resulted spike in sales in Kolkata utpo 75 percent Year-on-Year to 6,861 units in Q3 2021. The report further states that city of Bengaluru, India's IT-hub, has also seen a strong bounce back in line with healthy growth in the IT sector. Despite the withdrawal of the stamp duty cut window, Mumbai and Pune markets have continued their sales momentum after a brief dip in the second wave impacted Q2 2021.

In the office space segment, Knight Frank in its report, has stated that Chennai, Bengaluru, and National Capital Region (NCR) recorded highest recovery in Q3 2021 with transactions reaching the level of 123 percent, 112 percent and 93 percent respectively of the quarterly average of the year 2019. Overall, office markets witnessed an incremental activity of 13percent in transactional volume and 6percent growth in new office completions compared to corresponding period of the last year.

With normalcy commencing in the industries, companies in India are looking forward to resuming work from office and with an objective to improve the business environment and aid a recovery to market traction levels seen in pre-pandemic times.

Rajani Sinha, Chief Economist and National Director – Research, Knight Frank India, said, "The office market has shown a smart bounce back in the third quarter. Going forward, with the economy moving towards normalcy and corporates making plans to get back to Work from Office, the outlook for the segment is likely to improve further. Healthy performance of the IT sector in the last few quarters and strong hiring in the tech sector also bodes well for the office segment."

As per the report analysis, unavailability of labour force during the second wave impacted construction work and completion of projects. However, new completions picked up significantly with 1.1 mn sq m (11.9 mn sq ft) getting delivered in Q3 2021, a 67 percent growth YoY. Bengaluru, Pune and Hyderabad accounted for 73 percent of the new completions with Bengaluru seeing the most space delivered at 0.4 mn sq m (4 mn sq ft). For Jan-Sep 2021, new completions have grown by 6 percent compared to corresponding period of previous year.

For rental segment, the report states that NCR was the only market that experienced growth in Q3 2021 (YoY). Provisions such as relaxed lease terms by landlords has been reflected in the fall in rentals on YoY basis across most markets. However, the fall in rentals has reduced in the last few months.