Home launches Across India dips 19 percent in Q1

PropEquity Study

Housing demand across key cities declined only 1.2%. Unsold inventory dips by 3.1%, reveals PropEquity Study

Home launches have dipped 19.46%  across top 8 cities in India, in the first quarter of 2017 from 28,428 units to 22,897 units, reveals a just released report by PropEquity, India’s leading real estate data, research and analytics firm. However, the unsold inventory also dipped slightly by 3.12% to 4,71,855 units from 4,87,043 units due to lower new launches and developers focussing on clearing their existing unsold inventories.

Overall the fall in demand and new launches of residential projects slowed down in the Q1 as the impact of demonetisation on the real estate sector tapered down faster than the expectations. Incidentally, Global banks are expecting India’s economy to grow at 7.4% in FY18, and that will have a positive impact on the real estate and allied sectors.

According to the PropEquity report ” Housing demand (absorption) across key cities stayed almost muted and declined by just 1.2 pct at 28,131 units from 28,472 units. Prices also only slightly fell by 1.67 per cent to Rs 6,185 PSF from Rs 6,290 PSF as developers were able to finally sell their earlier inventory and focussed on delivering earlier projects before Real Estate Regulator Act kicks in later this year.”

Eight cities were included for the study including Gurgaon, Noida, Mumbai, Kolkata, Pune, Hyderabad, Bengaluru and Chennai.

During Q1 2017, Cities with significant inventory overhang have seen negligible new launches. This reflects a clear approach by developers to clear off existing inventory before they launch new projects. All NCR Cities i.e. Gurgaon, Noida along with Mumbai and Chennai exhibit this trend.

“Real estate sector in India, especially housing is going through a critical transition phase post demonetization as transaction activity has slowed down. Many buyers, sellers, banks and private equity investors are waiting for the sector to tide over the volatility in the market. With implementation of RERA, we foresee delays in project deliveries to go down as developers rush to complete previously launched projects to avoid penalties. We strongly believe that developers with good track record, strong financials and low leverage to external debt are expected to perform better in the current environment ” Samir Jasuja, founder and CEO at PropEquity said.

MARKET INDICATORS (Top 8 Cities)-APARTMENTS
Q1 2017 Q4 2016 QoQ %
New Launches (Units) 22897 28428 -19.46%
Units Absorbed

(Total Market)

28131 28472 -1.20%
Wt. Avg. Price

(Unsold Units)

6185 6290 -1.67%
Unsold Stock (Units) 471855 487043 -3.12%

Going ahead, the recent budgetary announcement to grant industry status to affordable housing and allowing banks to invest in Real Estate Investment Trusts (REITs) will have a strong positive impact on overall sentiment in the sector.

Cities Stats…

Gurgaon : During Q1, new launches remained similar to previous quarter at 152 units, a fall of 0.7 per cent. Absorption declined by 8.5 per cent at just 931 units indicating a strong focus by Gurgaon developers to clear earlier stock. The market is still in the recovering phase form the impact caused due to demonetization. Demand should increase from the next quarter due to decrease in the interest rates and flexibilities provided in the Budget 2017 to promote Affordable housing. Prices fell by 1.7 per cent.

NoidaL Noida saw a jump in new launches as it increased by 100 per cent to 216 units, which was from a smaller base, but indicating overall positive sentiments to launch new projects. Noida also saw unsold inventory falling by 2.4 per cent to 26,919 units as developers rush to clear old stock. Prices increased slightly by 1.3 per cent to Rs 5,476 psf.

Mumbai: Mumbai continued to see red on all parameters with new launches, absorption and prices falling. But unsold stock also fell by 0.9 per cent suggesting the macro trend to clear old inventories in this region as well. For the next quarter, market should see stable demand across suburbs, while fresh supply will remain under pressure. Developers should see some reduction in unsold stock if prices are lowered. Prices fell by 1.2 per cent to Rs 16,065 psf.

Kolkata: Kolkata saw a significant jump (53.9%) in new launches as developers anticipating demand in the coming quarters launched 3,801 units. However, absorption remained under stress for Q1, declining by 3.8% due to weak end-users demand. Unsold stock in overall Kolkata has reduced minutely (0.5%) to 44,487 units. Prices fell by 1.5 per cent at Rs 3,707 psf.

Hyderabad: During Q1 2017, Hyderabad market fell to overall bearish sentiments  with new launches crashing drastically by 35.6% and sales falling by 0.8%. As a result unsold Stock decreased, marginally by 3.6%. For the next quarter, demand may slightly pick up as projects from reputed builders with good fundamentals have hit the market in the recent past especially in the affordable and mid segment. Prices fell by 1.8 per cent at Rs 3,884 psf.

Bengaluru: This market saw 23.1 per cent decline in new launches, while dip in demand was at 3.6%. As this region has significant presence of end-users, new buyers are waiting to see if prices will go down further. However, demand is expected to moderately recover over the next 2-3 quarters. Prices fell by 1.3 per cent at Rs 4,646 psf.

Pune: Pune was severely impacted by the recent slowdown in Q1 as new launches fell by 40.7 per cent at 6,550 units. Absorption fell by 10.5 per cent while the prices remained mostly stagnant as there was a small dip of 0.3 per cent.  Unsold stock inventory fell by 4.8 per cent at 1,11,947 units.

Chennai: New launches in Chennai were reduced to mere 2,250 units during the quarter, fall of 17 per cent. However, absorption increased by 4.9 per cent as buyers showed interest in buying projects from fundamentally strong developers. Prices fell by 2.5 per cent at Rs 4,867 psf.

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S. Kapeed