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Housing demand slows despite good loan deals. Source: The Times of India (Bangalore)

Top 8 Cities, Including Bengaluru, Register A 16% Drop In Launches From Last Year.


Top eight cities witnessed residential launches of about 25,800 units in the first quarter of 2017, registering a 16% decline from the corresponding period last year, said Cushman & Wakefield. Other than affordable housing, most segments like mid and highend saw a sharp decline. This trend is expected to continue over the next two-to-three quarters, as large sets of unsold inventory continue to burden the real estate market.
Most cities including Chennai and Hyderabad saw a decline, while Mumbai and Ahmedabad were the only markets which saw growth.Delayed launches in many cities was not so much due to a lack of inventory , but because developers want better price realisation for their unsold stock. Developers have also started bundling in incentives and add-ons to clear inventory backlog.

This trend of declining interest in residential apartments -despite lower rates on mortgage loans --has been seen since last March, when the government announced the Real Estate Regulatory Act (RERA), 2016.

Decline in launches has peaked when demonetisation was announced last November, said Cushman & Wakefield. In this tepid environment, affordable housing has seen the biggest increases -with share in total launches up 30% from 25% earlier; compared to decline in the share of highend and luxury segments to 11% from 13% during the same period. “With mild change in end user sentiments due to news of downsizing in IT ITeS segment, sales velocity is expected to reduce. A gradual improvement in buyer sentiment is expected towards the second half of 2017 as the impact of real estate reforms will begin to play out in the market. Capital values which are already reduced in selected locations within markets such as Delhi NCR, Bengaluru and Mumbai, will continue to remain under pressure in the coming quarter as the markets readjust in the post RERA and GST regime,“ said Anshul Jain, managing director, Cushman & Wakefield.

“We expect investors' and homebuyers' interest to revive in the residential sector post the enforcement of RERA and GST as transparency and accountability improves,“ he added.

With cities like Chennai seeing a 6% decline in sales, developers have launched a higher number of subvention schemes such as paying 5% now, 95% on delivery . “Some developers are going a step further and offering assurances of compensation refund of difference, if prices decline in the future,“ he added.

Small appears better seems the new motto; with the average ticket size of new launches across top eight cities seeing an average decline of 14% year­on­year in 2016.
 

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