Knight Frank analyses the property market for January-June 2015 and put forth its findings.

The housing market of Mumbai Metropolitan Region (MMR) records the worst half-yearly period post the global financial crisis. Knight Frank has presented a comprehensive analysis of the residential and office market performance of the MMR for the period between January-June 2015.

Residential properties

• Housing market is still under pressure; H1 2015 witnesses a 47 per cent drop in new launches
• Nearly two lakh unsold homes in Mumbai; sales continue its down ride
• Launches plummet by nearly 70 per cent, while demand dives 30 percent over the last 2 years
• Confusion over Mumbai?s new Development Plan 2034 impacts approvals for new projects
• Airport on the anvil, will prices in Navi Mumbai take flight? Currently commands prices in the range of Rs 4,500-15,000/sq ft

Commercial

• Mumbai maintains its pace of 2014; records office space transaction of 2.5 million sq ft in H1 2015.
• IT/ITeS find greener pastures across Bengaluru, Hyderabad, Chennai and Pune; state?s new IT/ITeS policy – unlikely to be the game changer.
• Improved East-West connectivity owing to the metro and the Santacruz-Chembur Link Road will drive office demand in H2 2015 across Ghatkopar, Andheri, Versova among others
• Banks, manufacturing and media consulting continue being the anchor for MMR?s office market; Forecast of office space sale is expected to be at 5.8 million sq ft in the second half of 2015 – an increase of 20 per cent compared to H2 2014.

Speaking about the findings, Dr. Samantak Das, Chief Economist & National Director – Research, Knight Frank India said, "Despite delayed reforms in the economy and concerns across the globe, the Indian economy is doing reasonably well with basic fundamentals showing a strong foothold. This has had a positive impact on the office market that did see a turnaround in 2014 and the pace continues in 2015. Although Mumbai holds a mixed portfolio of occupiers, media consulting, e-commerce and manufacturing sectors are showing a perceptible positive traction. Going forward, we expect Mumbai to clock office transactions of 7.7 million sq ft during 2015. Residential market on the other hand is still reeling under tremendous pressure with drastic drop in new launches at the back of falling demand. The recovery of the residential market does not seem eminent until 2015 and we expect sales to be in the range of 63, 000, marginally below the 2014 levels."

Adding on the office market findings, Viral Desai, National Director, Office Transactions, Knight Frank India, said, "Mumbai developers have begun showing interest towards commercial developments which was not the case in the last 2-3 years. Two reasons for this, firstly office space has shown robust growth in demand on the back of improved economic sentiments and second, with the residential market slowing down, developers foresee the office market to be more lucrative. Although valuations within the office market are lower as compared to the residential space, the demand however, is a sustained one. Additionally, supply of Grade-A office spaces have reduced which may lead to a marginal increase in rents across select locations. This will also lead to a resultant increase in the demand of Built to suit office spaces. Going forward, I expect absorption to clock 5.8 million sq ft – an increase of 20 percent compared to H2 2014."

NCR Region Residential takeaways:

• New launches drop by 68 per cent in H1 2015.
• Policy fallacies and project delays hit NCR?s real estate appetite. Sales drop by 50 per cent y-o-y
• Muted sales lead to price stagnation. Knight Frank estimates sales to plug around 15,000 units in the coming two quarters.

Office takeaways:
NCR maintains the 2014 turnaround story! Office absorption touches 3.7 million sq ft in H1 2015. Small-size transactions dominate NCR?s office leasing activity; transactions in the range of 5,000-12,500 sq ft make deeper inroads e-commerce majors account for 16 per cent of the half-yearly abortion – Snapdeal, Zomato, Lenskart among the major occupiers in H1 2015. The commercial segment continued to pick up further momentum on the back of large requirements from corporate occupiers. This has led to vacancy levels going below 10 per cent in some of the key micro markets resulting into an upward pressure on lease rentals. The weighted average rentals in NCR are forecaste to inch upwards by an average of 3-5 per cent from H1 2015.