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If it were not for two major deals, Mumbai's commercial property demand could have tanked in the first six months. Image Credit: AP

Mumbai: Sales of homes and leasing of offices across eight of India's biggest cities saw their steepest fall in a decade in the first-half of 2020, according to Knight Frank, as lockdowns to contain the coronavirus pandemic worsened already slowing economic growth and consumer demand.

Residential sales fell 54 per cent and absorption of office space declined 37 per cent between January and June from the same period a year earlier, the research firm said in a report. Although policymakers have slashed interest rates, Knight Frank said higher risk perception has erased these gains on mortgages.

"With income uncertainty for future, demand for housing will take a hit," said Chairman Shishir Baijal.

Even commercial is struggling

Commercial office space, which was the only bright spot in India's otherwise struggling property market this decade, has seen vacancy rise to 14.1 per cent from 12.7 per cent a year ago. Around 6.3 million square feet has been surrendered by occupiers back to landlords as revenue disruptions caused by the pandemic forced them to cut costs, Knight Frank said.

54%

Drop in India's residential sales across major cities in the first six months against H1-2019

Bengaluru accounted for almost 56 per cent of the space surrendered during January to June. Transaction volumes in Mumbai fell by a relatively modest 17 per cent due to two large deals that amounted to almost half of the city's total transactions "and salvaged an otherwise disastrous period," Knight Frank said.

"Most occupiers are expected to hesitate in committing to expansion in the current market scenario and may delay their leasing decisions for later," according to the report. "For the office market, it will be a wait-and-watch till a more permanent solution to this pandemic is found."