In an unusual year disrupted by the epidemic and lockdowns, property markets throughout India have managed to show resilience and keep their position. While the housing market has rebounded well, commercial real estate has remained stable, particularly in the second half of 2021.
Residential sales increased by 51 percent year over year to 232,903 units across the country's top eight cities, marking a historic year of growth. According to Knight Frank India research, new house releases increased by 58 percent in 2021, with 232,382 units added.
The year was a mixed bag for the commercial office industry. Leasing volumes, reported at 38.1 million sq ft, remained consistent with 2020 levels, indicating the market's leasing potential.
Surprisingly, the second half of 2021 accounted for 68 percent of overall leasing. With 12 million square feet of total leasing during the year, Bengaluru topped the pack. In 2021, new office space completions totaled 39 million square feet, up 9% from the previous year.
The top eight cities sold 133,487 units in the second half of the year, up 41% over the previous year. In the quarter ending in December, roughly 69,477 house sales were reported. During the year, residential prices in seven cities remained stable or increased somewhat. In the second half of 2021, homes costing more than Rs 50 lakhs accounted for 58 percent of all sales.
"Despite the disruptions caused by the pandemic, residential sales momentum increased across the key eight markets of the country due to a plethora of demand stimulants such as lowest home loan rates, government sops, and change in attitude. Sentiments remain strong and should continue to aid market volumes in the near term. While buyer preferences were skewed towards ready inventory, established developers with a strong execution record are increasingly finding a market for their under-construction inventory," said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
In terms of half-yearly sales, the second half of 2021 had the most significant volume since the first half of 2016. Low borrowing rates, improved affordability, and a renewed interest in homeownership due to the pandemic's space limits have been the main drivers of this uptick in demand.
The leading residential sales performers in the second half of 2021 were Mumbai (34,382), the National Capital Region (23,599), and Bengaluru (23,218). During the second half of 2021, Hyderabad and Bengaluru saw the most considerable percentage growth in home sales, with 135 percent and 104 percent on-year growth, respectively. Mumbai (62,989), Bengaluru (38,030), and Pune (37,218) were the top three cities in terms of sales in 2021.
On the office market performance, Knight Frank India cited that the top eight cities recorded 25.9 million sq ft transactions in July-December. In contrast, the office completions were recorded at 23.7 million sq ft in the same period. Six of the eight markets saw transaction volumes grow from a year ago.
With the increasing need for flexibility and a hybrid working environment, the co-working and managed office sector's transactions increased to 18% in the second half of 2021 from 10% a year ago. With 8.7 million sq ft transactions during the period, Bengaluru recorded its highest-ever office leasing activity in a half-yearly period.
In H2 2021, 25.9 million sq ft of office space was transacted, up from 12.3 million sq ft in H1 2021, indicating a recovery in office assets. On a year-over-year basis, H2 2021 saw a 17 percent increase from 22.2 million sq ft in H2 2020.
While the 38.1 million sq ft transacted in 2021 almost equaled 2020 levels, it could have comfortably crossed the same but for the uncertainty caused by the emergence of the Omicron variant towards the end of the year. Market traction also got curtailed in Q2 2021 due to the pandemic's second intensive wave.
Information Technology led the office leasing with 27% share, followed by the manufacturing sector with 21%, and the other services sector accounting for 19% of the space transacted. Rental levels across markets were stabilizing towards the end of the year.