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Office leasing in Pune declines by 47%

Knight Frank India launched the 13th edition of its flagship half-yearly report – India Real Estate: H1 2020 – which presents a comprehensive analysis of the office and residential market performance across eight major cities for the January-June 2020 (H1 2020) period. The report highlights that the new office completion in Pune saw a significant decline of 87% YoY to 200,000 sq ft in H1 2020 due to lockdown related disruptions. The office leasing transaction volumes in the city saw a decline of 47% YoY to 2.1 mn sq ft. In overall office transactions, CBD and off CBD reported the highest growth of 79%, followed by PBD East with 50%. The city also experienced significant tapering of rent growth compared to double-digit growth recorded in recent years. The weighted average rentals recorded a marginal growth of 2% Y-o-Y in H1 2020.

As per the report, the lockdown has impacted the residential sector adversely with the home sales in Pune declining by 42% YoY to 10,049 units in H1 2020. The home launches in the city also recorded a 37% YoY decline to mere 13,435 units. Further, the city also reported a decline in the weighted average prices by approximately 5.4% YoY in H1 2020. Due to slow home sales in Pune, the QTS for increased from 4.8 at the end of 2019 to 5.7 in H1 2020.


  • The Pune office market which has witnessed tremendous growth in office transactions in past years came to a standstill in H1 2020 due to the on-going pandemic and nationwide lockdown.
  • In H1 2020, the office transactions declined by 47% YoY to 2.1 mn sq ft, and new completions were lower by 87% YoY to 0.2 mn sq ft. The second quarter was almost a washout.
  • The market also witnessed, occupiers were giving up the existing spaces, which increased the vacancy level to 4.7% in H1 2020.
  • The somber mood in office transactions and new completions got reflected in the rent growth. The weighted average rentals grew marginally by 2% YoY in H1 2020. SBD East which comprises of Kalyani Nagar, Yerwada, Nagar Road, Hadapsar has reported the highest growth in rentals of 4% YoY followed by SBD West and CBD & off CBD at 3% each. While PBD East & West also reported a growth of 2% each respectively. 
  • Knight Frank India predicts that the city may witness downward pressure on rental in upcoming quarters as occupiers will delay their expansion plans and seeks to renegotiate their existing leases citing loss of business. However, the low vacancy levels of 4.7% will prevent a correction on the lines post-2008 GFC.
  • In recent years, on account of the low vacancy levels in the Pune office market, co-working segments have been witnessing strong demand. This trend continues in the Pune were shares of co-working segment increase from 11% H1 2019 to 38% in H1 2020.
  • A significant percentage of co-working shares comes from Start-ups and SMEs, which are now facing survival issues and giving up office spaces. This will slowdown the new space take up by co-working players.

Paramvir Singh Paul, Branch Director – Pune, Knight Frank India said, “The office market in Pune has been impacted by the on-going pandemic and lockdown. Due to the current economic conditions, many companies are adopting a wait and watch policy in terms of their expansion plans. The market may see further difficulty if occupiers start to give up their existing spaces in the short term as a measure of saving cost or indeed downsizing their businesses. These have started to exert a downwards pressure on rent, however, the low vacancy levels in Pune and delay in upcoming supply due to lockdown related disruptions will help prevent a greater correction. Developers are also likely to delay supply by extending timelines matching the occupier demand.”


  • The lockdown has adversely impacted the Pune residential market where the construction and sales activity were brought to a near halt. Home launches in H1 2020 reported decline of 37% YoY whereas sales were lower by 42% YoY. On account of slower sales velocity, the QTS for the Pune market increased from 4.8 during the end of 2019 to 5.7 in H1 2020.
  • The city’s weighted average prices were also lower by 5.4% YoY to INR 4,072 per sq ft in H1 2020. Developers have reduced quoted prices to some extent and are willing to negotiate further on the negotiation table.
  • To keep the market economics in play in the pandemic hit the industry, developers are also offering many indirect offers such as deferred payment plans, assured rentals, EMI, subvention schemes, PLC waivers, free clubhouse membership and no stamp duty charges.
  • In line with buyer preferences, 56% of the total sales in H1 2020 were below INR 5 mn ticket size, followed by above INR 5 mn ticket size segments with 44% share respectively. Homebuyer continues to prefer ready-to-move-in inventory even today, which helps them to navigate the development risks.
  • Overall the residential selling prices have come down across Pune in H1 2020, Chakan areas in North reported a maximum hit of -9% YoY.
  • Due to low sales, the unsold inventory of the city increased by 43% YoY to 42,855 units in H1 2020. 

Paramvir Singh Paul, Branch Director – Pune, Knight Frank India said,“Manufacturing and Auto sectors which had been important drivers of the Pune economy, are witnessing the impact of lockdown, impacting the purchase capabilities of end-users associated with these segments. Though the IT sector is reportedly stable for now, there too, a loss of confidence is visible with end-users postponing their purchase decisions. To revive sales in the residential market, homebuyers who had been active in the market in the pre-COVID months or had registered for Expression of interests (EOI) during the lockdown are being allured for negotiation with attractive offers and discounts to convert to sales. However, banks have started to go slow on home loan disbursals which will delay the closing of deals.”Paramvir further added, “Pune market has been extremely sensitive to price as well as economic confidence being highly ended user-driven. Thus, until the growth of the economy stabilizes, sales velocity will remain subdued keeping prices under pressure.”

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