NCR Real Estate Report H2 2016 Presentation
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A look into the real estate figures of NCR from July-December 2016.
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NCR Real Estate Report H2 2016 Presentation
- 1. H1 2016, a recap - A recovery predicted INDIA REAL ESTATE JULY – DECEMBER 2016 NCR
- 3. The story so far NCR RESIDENTIAL MARKET ON A CONTINUOUS DOWNWARD SLIDE
- 4. New launches dry further in 2016 172,571 110,751 100,259 99,407 79,577 63,458 26,734 - 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 2010 2011 2012 2013 2014 2015 2016 Noofunits 85% drop from the peak 58% drop from 2015 Yearly trend of new launches
- 5. Buyers in a wait and watch mode; Sales dip further Yearly trend of sales 117,559 93,986 79,178 74,966 48,630 48,800 40,005 - 20,000 40,000 60,000 80,000 100,000 120,000 140,000 2010 2011 2012 2013 2014 2015 2016 Noofunits 66% drop from the peak 18% drop from 2015
- 6. Prices in NCR have corrected to 2013 levels
- 7. 7% drop in prices YoY in H2 2016 Half-yearly trend of weighted average price 2,760 2,780 2,999 3,370 3,720 3,970 4,195 4,330 4,400 4,444 4,511 4,578 4,346 4,250 2,500 3,000 3,500 4,000 4,500 5,000 H12010 H22010 H12011 H22011 H12012 H22012 H12013 H22013 H12014 H22014 H12015 H22015 H12016 H22016 WeightedaveragepriceINR Prices have come down to 2013 levels
- 8. The cookie crumbles further - H2 pulls down sales & launches in 2016
- 9. Dip in launches and sales by 73% and 29% YoY respectively in H2 2016 Half-yearly trend of sales, launches and weighted price movements 42,542 57,717 62,418 36,989 34,577 45,000 29,458 34,000 17,462 9,273 34,199 44,979 45,276 29,690 28,000 20,630 25,000 23,800 23,092 16,913 - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 No.ofunits Launches Sales -73% -29%
- 10. All micro-markets in the same boat Micro-market share of new launches 208 2,006 6,080 46,392 19,776 18,149 - 1,353 9,204 5,051 14,051 13,416 - 1,983 11,122 25,565 13,093 5,954 13 613 6,057 19,847 6,461 3,999 95 344 7,790 18,401 12,002 6,368 71 260 5,886 13,903 9,068 4,811 649 - 1,139 2,544 1,159 3,782 - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 Delhi Faridabad Ghaziabad Greater Noida Gurugram Noida No.ofunits H2 2010 H2 2011 H2 2012 H2 2013 H2 2014 H2 2015 H2 2016
- 11. Buyers still uncertain across all micro-markets Micro-market share of sales 158 2,175 6,152 24,618 11,336 19,658 109 1,449 7,719 6,047 11,755 13,353 63 1,643 8,375 13,733 11,485 9,681 67 703 6,170 13,840 5,126 3,783 59 382 4,179 8,986 3,944 3,080 65 463 4,882 10,518 4,451 3,421 50 298 3,888 6,770 2,897 3,010 - 5,000 10,000 15,000 20,000 25,000 30,000 Delhi Faridabad Ghaziabad Greater Noida Gurugram Noida No.ofunits H2 2010 H2 2011 H2 2012 H2 2013 H2 2014 H2 2015 H2 2016
- 12. QTS stagnated since 2015 - 4.2 years to offload the unsold inventory NCR market health – Quarters to sell and unsold inventory 0 2 4 6 8 10 12 14 16 18 20 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Unsold inventory stands at 192,758 units in 2016
- 14. NCR hit hard – Sales volume dropped by 53% YoY in Q4 2016; new launches fell by a massive 73% Quarterly trend of new launches and sales 18,771 15,806 27,000 18,000 18,070 11,388 20,400 13,600 10,477 6,985 5,564 3,709 15,680 12,320 10,417 10,213 15,000 10,000 9,520 14,280 9,237 13,855 10,148 6,765 2,000 6,000 10,000 14,000 18,000 22,000 26,000 30,000 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Noofunits Launches Sales
- 15. Demonetisation impact in Q4 Average # units sold in Q4 2014 & Q4 2015 12,247 # Units sold in Q4 2016 6,765 45% fall in sales Notional REVENUE LOSS to real estate industry INR 3,700 cr State government notional LOSS ON STAMP DUTY INR 260 cr
- 16. Key takeaways Endemic issues Inventory pileup l Infrastructure delays l Delayed projects completions Developers rush to complete projects before RERA kicks in Demonetization brings residential market to a standstill Uncertainty likely to continue for the next quarter Reduction in home loan interest rates, RERA, GST and ‘possible’ tax benefits in the upcoming budget likely to bring in a ‘feel good factor’ among buyers
- 17. Office market PROJECT DELAYS HAMPER NEW COMPLETIONS
- 18. Delay in project completions dry up supply in 2016 Yearly trend of new completions and transactions 9.9 6.3 9.6 7.0 8.1 11.5 4.6 6.9 7.2 6.4 6.6 7.6 7.4 7.3 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 2010 2011 2012 2013 2014 2015 2016 mnsqft New completions Transactions
- 19. New completions are at an all time low in H2 2016, demand holds steady Half yearly trend of new completions and transactions 5.5 6.3 6.0 3.5 4.1 6.0 1.8 3.5 3.3 3.0 3.2 4.1 3.7 3.8 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 H2 2010 H2 2011 H2 2012 H2 2013 H2 2014 H2 2015 H2 2016 mnsqft New completions Transactions 70% YoY drop
- 20. Pressure on rentals; Vacancy at an all time low since 2012 Weighted average price rentals 53 53 52 53 56 58 62 64 70 73 20.3% 21.9% 21.3% 20.9% 20.6% 20.0% 20.7% 21.5% 20.6% 18.9% 17.0% 18.0% 19.0% 20.0% 21.0% 22.0% 50 55 60 65 70 75 H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 Vacancy(RHS) INR/sqft/month Price Vacancy (RHS)
- 21. Gurugram holds the largest share in H2 2016 transactions Market share of transactions 2% 1% 56% 23% 10% 8% 1% 0% 63% 23% 11% 0% 0% 10% 20% 30% 40% 50% 60% 70% CBD - Delhi Faridabad Gurgaon Noida SBD - Delhi Greater Noida %share H2 2015 H2 2016 3.6 mn sq ft 3.8 mn sq ft
- 22. IT/ITES which experienced a setback in H1 2016, regains its position Share of sectoral split of transactions 5% 30% 22% 43% 13% 17% 29% 41% 8% 28% 28% 36% BFSI * IT/ITeS Manufacturing Other services sector H2 2015 H1 2016 H2 2016 74% increase in transacted space 3.7 mn sq ft 3.5 mn sq ft 3.8 mn sq ft
- 23. Key takeaways Transaction holds steady in H2 2016 Vacancy at all time low with key locations such as DLF Cybercity and Golf Course Road in single digit Upward pressure on rentals
- 24. Download the complete report from the link below: bit.ly/IREH216-SS
Editor's Notes
- The lack of clarity on RERA led developers to hold onto their new launches in 2016 Liquidity crunch and project delays characterised the market Demonetization towards the end of the 2016 squeezed the market further Reprimand by authorities like the meetings held by the Haryana CM imposing fines on Emaar MGF and Unitech and proactive actions of the No new licenses for new projects in major markets of NCR—Gurgaon or Noida. Insights suggests that applications are lying with the Government in Haryana Poor consumer confidence in new projects due to massive delays in project deliveries Poor sales velocity have led developers to restrict new launches
- Along with the impact of macroeconomic factors, stagnant incomes, delays in the delivery of some major large-scale projects had put the buyers on the back foot. Increase in frequency of developers defaulting on loan repayments and project deliveries has cautioned buyers There is a preference for ready to move in projects with buyers carefully selecting projects by good developers. Total disappearance of speculative interest from the market has held sales– market driven by self consumption Major infra projects like Dwarka Expressway, shifting of Kherki Daula Toll, Jewar airport yet to take off, NGT whip on Noida Greater Noida Metro link for EIA mar consumer sentiments Frequency of defaulting developers have increased over the past year with big developers such as Unitech, Jaypee being served notices Increasing frequency of consumer courts imposing fines for delay in handing over the project. DLF, Emaar MGF Land in Gurgaon
- Pressure on the markets led to price correction of 4% in H1 2016 over H1 2015 The prices have further come down and have registered a 7% yoy drop in 2016 Prices after negotiation see a 15 – 20% decline across markets The market sees a price crash in 2016. The primary reason for this dip is that prices in NCR shot up unrealistically from 2008 to 2012 The spike was such that some projects on the Dwarka Expressway in Gurugram saw a three times jump in prices from 2008 – 2012. Launched in 2008 at INR 2,350 per sq ft, the price spiked to INR 5,000 at the start of 2012 and by the end of 2012, the prices were up to INR 6,500 per sq ft. The reduction in circle rates in Gurugram and the demonetization drive of the government will further add pressure on the prices
- The NCR market has been under stress since H1 2013 Launches down by 85% and sales down by 63% since H1 2013 There has been a 7% degrowth in price and H2 2016 prices have come down to 2013 levels
- Over 68% of new launches concentrated in Noida and Greater Noida New launches in Gurgaon are seen in Sohna. ATS was one of the prominent developers in Noida and Mahagun and Gaur launched projects in Ghaziabad Galaxy, Gaur, Kalpvriksh, Ajnara are some of the developers who launched projects in Greater Noida Default by anchors like BPTP in Faridabad has arrested the growth of Faridabad
- Approximately 16,900 units were sold in the second half of 2016, compared to 23,800 units in H2 2015, thus registering a drop of 29%. Our survey suggests that ideally where a fall in prices should have kicked in sales, the buyers preferred to be in a wait-and-watch mode and were expecting prices to correct further. All micro-markets were seen to be in the same boat in terms of demand in H2 2016 and registered a YoY decline in share of sales. Improving connectivity and well-laid infrastructure gave Noida an edge over the other markets and it witnessed an increased interest from buyers. Affordability drove sales in Ghaziabad as it registered a 47% increase in sales in H2 2016 over H1 2016. As a result, there was a marked increase in the percentage share of Ghaziabad, which moved from 11% in H1 2016 to 23% in H2 2016.
- The QTS of NCR has remained unchanged since the past six quarters and stands at 17 quarters at the end of December 2016. Ghaziabad and Greater Noida still remain NCR’s comparatively better performing markets, with a QTS of 16 and 15, respectively. Though the market saw its thinnest-ever new launches in H2 2016, it has had little impact on the unsold inventory due to the slow sales velocity.
- The market did start giving indications of marginal recovery in Q3 2016 owing to developments like project deliveries, reduction in prices and improving infrastructure in places like Noida Extension and Noida–Greater Noida Expressway. Although the Q3 numbers for NCR were not very encouraging when compared to the peak of 2012, some prominent developers, especially in Noida and Greater Noida, registered a slight increase in their sales in Q3 2016 as compared to the same period in 2015, thereby indicating improving market sentiments. Instances like sale of over INR3 billion on the first day of the launch of a 100-acre township in Greater Noida was a testament to the improving sentiments The fourth quarter numbers are evidence to the impact of the demonetisation. Sales volume dropped by 53% YoY in Q4 2016 and new launches fell by a massive 73% during the same period. At only 6,765 units, the Q4 2016 sales volume is at its lowest quarterly level since 2010, down by 79% since the quarterly peak of 31,990 units in Q4 2010. The new launches number is much worse at just 3,710 units in Q4 2016, which is 91% lower than the peak of 40,136 units witnessed in Q4 2010. As the sales number for the first nine months had shown an optimistic trend, we believe that 2016 would have been at par with 2015 had it not been for the demonetisation move.
- Notional revenue loss to real estate industry INR 22,600 crore Notional state exchequer loss INR 1,200 cr (stamp duty)
- The NCR office market maintains its annual appetite and clocks 7.3 mn sq ft at the end of 2016, making it at par with 2015. The overall slump in the real estate sector plagued the office market as well. A mere of 4.6 mn sq ft of new completions entered the office market in 2016 as opposed to 11.5 mn sq ft in 2015.
- Planned supply fails to hit market on account of project delays There was a 35% drop in new supply in H2 2016 as compared to H1 2016 and a whooping 70% from H2 2015
- The lack of quality office space is responsible for the rentals to inch upwards and the vacancy to slide downwards Occupiers were willing to pay higher rentals for quality office space
- Gurugram yet again leads in the total transacted space in H2 2016 clocking approximately 2.3 mn sq ft. Some of the locations that witnessed major traction in Gurugram in H2 2016 are Golf Course Road and Sector-44 41% of the demand for office space in Gurugram came from the other services sector followed by 27% share from the IT/eS sector. Major deals include Genpact, XL Catlin, IBM, Amazon and Adidas. Noida registered a whopping 30% increase in the total transacted space in 2016 compared to 2015. Leasing activity and improving sentiments around Noida, stems from factors like good infrastructure and lower rentals compared to Gurugram. Locations such as Noida – Greater Noida Expressway and sectors 62,63 see major movement in H2 2016. TCS and Oppo Mobiles were among some major transactions in 2016 Both Noida and Gurgaon saw a significant increase in the average transaction size in H2 2016 Some of the major transactions were TCS, Iris Computers, Bhavna Software, Global Logic in Noida and, Home Credit, XL Catlin, Amazon, Adidas, Genpact and Makemytrip in Gurgaon H2 2016 Gurgaon avg size 39,900 sq ft and Noida – 43,000 sq ft
- IT/ITeS makes a comeback in NCR in H2 2016. The share of IT/ITeS was on a decline for the past one year but robust leasing from occupiers like IBM, Genpact and TCS in the second half of 2016 bucked the trend for the sector. Though the other services sector took up 36% of the total NCR office space demand in H2 2016, the sector registered a YoY degrowth of 13% in the transacted space. Transactions in this sector include Amazon and MakeMyTrip. Manufacturing saw a 29% uptick in space take up in H2 2016 compared to the same period in 2015. Prominent transactions in the manufacturing sector include Nokia in Gurugram and Dell in Noida Though the BFSI sector accounted for a minimal share of 8% of the total office space demand in NCR, large-size transactions such as XL Catlin, Religare and City Bank led to a massive 61% increase in the transacted space in H2 2016