Ahmedabad a Bright Spot of Indian Real Estate Markets

Ahmedabad emerged as a strong real estate destination despite multiple headwinds and regulatory changes for the sector in recent past years. At every segment and every level, Ahmedabad is justifying its dominance in the real estate market. The sale of houses in Ahmedabad witnessed a strong recovery registering a 95 per cent growth in the first half of calendar year 2022, stated a report released by Knight Frank India. A total of 8,197 residential units were sold in the city between January and June this year. This is more than the 4,208 units sold during the same period in 2021. The residential unit's weighted price is 3 percent hike because of the sale increase. The Ahmedabad and Gandhinagar are leading the race for office property transactions according to the latest report by JLL. Office transaction volumes in Q1 2022 are 3x of Q2 2021 and over 4x of Q2 2020. The office transactions grew most in cities like Ahmedabad, Chennai, and Hyderabad with significant growth between 72 to 165 percent YoY. Ahmedabad tops the list as the transactions have reached at 130 percent as compared to Q12019 (Pre Covid). As compared to Q1 FY21-22 Ahmedabad witnessed a 165 percent jump in transactions during Q1FY22-23. As per the Housing Price Index by National Housing Board, cities like Ahmedabad, Gandhinagar, Hyderabad, Bhuvneshwar and Vadodara tops a list of price performers. As per Ahmedabad, the price index jumped from 100 to 173 from the year 2018 to the year 2022.

The real estate sector anticipating demand from Non-Residential Indians during the festive season. Property get cheaper for NRIs when the rupee depreciates by more than 5 percent during the year. In Gujarat, NRIs from the state generally prefer to buy property in home state and that could support the buying of residential property, land, plots and office property.

Indian Residential Prices: Upward Momentum seen

The NHB housing price index is shown an upward trend since 2018, despite the multiple uncertainties like GST, RERA, and Covid-19. Overall prices jumped by 20 percent across the nation, however, price growth in some metro cities has underperformed. Indian real estate is also one of the most favored destinations for NRIs due to price growth with stable rental income.

Residential Market: Trend

As we discussed, sizable metros have underperformed in terms of residential price growth. However, the cities like Ahmedabad, Gandhinagar, Hyderabad, Bhuvneshwar, and Vadodara top a list of price performers as per data complied by NHB (National Housing Board). On state list, the Gujarat Real estate market tops versus peers in terms of price appreciation, according to data.

Despite a surge: Ahmedabad is still affordable

According to Knight Frank India’s affordability index, Ahmedabad improved from 46 percent of 2010 to 22 percent in H1 of 2022 in terms of the home purchase affordability index. During the pandemic and lockdowns in the nation, the affordability rates reached near to 20 percent in 2021.

Pune and Chennai affordability rates stand at 26 percent each even as the Knight Frank India study found that all markets have seen a decline in affordability due to the late ascent in home loan rates set off by the 90 BPS ascend in repo rates. Among the remaining top five cities, Bengaluru was also in the list of most affordable with 28 percent affordability ratio. Following Bengaluru, NCR stands at 30 percent, Hyderabad stands at 31 percent and Mumbai stands at 56 per cent affordability ratio.

Despite of the recent jump in the prices of real estate in Ahmedabad, still the city tops the list of most affordable cities according to data compiled by Knight Frank India’s affordability index. Pune and Chennai also having considerable affordability with the ratio of 26 percent each.

Residential Market: Summary

The demand momentum remains strong according to the latest release of JLL Q1 2022 with all markets reporting a sequential growth in sales, and all markets except Mumbai, Pune and Chennai reported a YoY growth during the quarter. Stamp duty cuts were a significant mediation applied during the pandemic to extraordinary impact by the state legislatures of Maharashtra, Karnataka, and West Bengal to support private deals. While the cuts in Karnataka and West Bengal still remain in effect, their repeal in Maharashtra did not make a significant dent in sales volumes in Mumbai and Pune where the sales grew steadily over the past three quarters.

Home buyers have been more inclined to acquire ready or near-ready inventory to minimize completion risk in recent quarters. The QTS (Quarters to Sell), which had surpassed 10 quarters at the beginning of the pandemic, plunged to single digits to 9.1 during the quarter.

Residential Properties: Trend

New Launches During Q1FY22

As per data complied by JLL, new launched during Q1 2022 seen 3 percent growth. The higher launches seen in Kolkata, Ahmedabad and Chennai ranges from 25 percent to 141 percent YoY. However Mumbai launches contracted by 24 percent and also prices seen tepid according to data complied by NHB . New launched in Pune also declined during the Q2FY22 due to higher base.

Hyderabad tops the list as new launched property volume jumps to 304 percent as compare to Q12019 (Pre Covid). Along with that, Kolkata, NCR and Ahmedabad tops the list of new property launches. However transactions in the major cities like Mumbai and Pune seen significant impact due higher prices and limited demand as per the data complied by JLL.

Office Transactions During Q1FY22

As per data complied by JLL, office transaction volumes in Q1 2022 are 3x of Q2 2021 and over 4x of Q2 2020. The office transactions grew most in cities like Ahmedabad, Chennai and Hyderabad with significant growth between 72 percent to 165 percent YoY. Mumbai and Bengaluru transactions remain tepid due to lower apatite of buyers to pay higher prices.

In each parameters, Ahmedabad tops the list as the transactions have reached at 130 percent as compare to Q12019 (Pre Covid). Means recorded 30 percent growth versus pre covid levels. However transactions in the major cities like Mumbai, Kolkata and Hyderabad seen significantly lower during Q1FY2022 as per the data complied by JLL.

Office Properties: Trend

Sector-wise Transactions

Sector-wise BFSI and Co-working have witnessed growth during the Q1FY2022. Because of the developing pattern of remote working, cooperating spaces are likewise seeing a flflourishing request. Leasing activities are gaining traction across multiple cities across India, including Tier II and Tier III cities, since a significant number of workers have migrated to their hometowns in such smaller cities because of work-from-home options. Due to the work from home trend in technology sector, the office transactions seen contracted by 5 percent YoY.

Official Property Market: Summary

Indian official property market has been exponentially growing post the COVID-19 pandemic. The calendar year 2020 and 2021 caused by the pandemic-induced shutdown of cafes, restaurants, clothing stores, supermarkets, shops, multiplexes and offices. The consistently expanding request from occupiers from various enterprises has been enlarging the development of the business land area in India. The steady demand for commercial real estate is also paving the way for a bright future for the segment.

The Ahmedabad tops the list of transactions of commercial assets across the India. Notably, this has occurred even as the ongoing ‘Return to Office’ was impacted by the pandemic. All markets, besides Mumbai, have seen a YoY growth in transaction volumes with Ahmedabad, Chennai and Hyderabad growing 165%, 124% and 72% YoY respectively. So we expects the office property prices to remain on northward journey, both in terms of transactions and price momentum.

Conclusion: Recent Trends in Real Estate Sector

Residential: Northward Trend Continued

As we have seen earlier that despite of multiple headwinds, Indian real estate market remains vibrant. The prices in tier 1 cities except Delhi and Mumbai continued to remain in northward directions. The Q1 transactions also improved YoY helped by lower base year.

Gujarat and Gift Properties: Leading the Trend

The Gujrat office property market outperforming in terms of value and volume. Ahmedabad, Gandhinagar and Vadodara leads trend. Gift city remains on top focus as many corporates stated operations at Gift City and which also supports the residential demand.

Rupee Depreciation: An opportunity for NRIs

The rupee has approached almost 80.0 levels and currently trading at all time low. Indian real estate market always remains a most favored investment class for NRIs, so recent depreciation of INR should be consider as an better opportunity.

Co-working: Leading Trend for Office Properties

The Indian office space market has been especially sensitive to the economic upheavals, however remained transitional for the property market. Demand of office properties from Co-working seen as the emerging and promising sector now- a-days.

NCR: Strongest recovery post pandemic

Along with Gujarat, the NCR also seen as a major destination which have noted the sharpest recovery in terms of transactions and launches (both residential and office property market). NCR, Hyderabad and Ahmedabad remains top in the property sales.

Rising Interest Rates:

Due to the surge in inflationary pressure, major central banks across the world have started to raise their benchmark interest rates to prevent the prices. The Reserve Bank of India have raised benchmark Repo rate by 90bps and is expected to rate the hike cycle to continue in tandem with global central banks.