Decline in new home sales in Metros
NEW DELHI: In accordance with data collated by internationally renowned property research firms, new home sales declined in Chennai, Mumbai, Delhi-National Capital Region and Pune within the June quarter, however the real estate market of Bangalore picked up.
Despite of alluring home purchase schemes, sales were down by almost thirteen per cent in Delhi-NCR from the period of January to March, while that in Chennai, Mumbai and Pune were lower by seven, twelve and fifteen per cent, respectively. The segment of luxury homes was the worst hit.
Howbeit, Bangalore bucked the trend with a significant rise of 25 per cent. A spurt in NRI demand for homes along with new launches in the segment of affordable housing have been credited for driving up the prices in Bangalore.
As per the Chairman of Confederation of Real Estate Developers Associations of India (CREDAI), marketing strategies and other techniques fail when markets are down, as buyer sentiments are extremely low. Although a reduction in the rate of home loans could be the trigger to get back the sales figure soaring.
The collated data for the period from April to June suggests that prices of properties have stagnated across the top markets within the country and the unsold inventory of homes has reached a new high of 669.95 million square feet. According to realty experts, such high levels of inventory could take up more than 32 months to be sold.
With market drowsiness tending to aggravate the funding problem for several developers along with the RBI’s liquidity tightening measures is set to increase the cost of borrowing, realty experts believe that a price cut could be imminent.
As per the managing director of top construction companies, rather than margins it would be cash flows which would be the point of focus for developers. With the increasingly declining sales, developers fear that their cash flows might not be enough to even cover their loan servicing.
Property prices in Bangalore, Mumbai and Chennai had increased by just one per cent in the June quarter. Delhi-NCR recorded a rise of three per cent while Pune had nine per cent. As per real estate brokers, tough bargaining home buyers might even manage to accomplish a significant bargain as developers are extremely keen on driving up their sales. Additionally, realty experts also believe that developers might not officially reduce the prices but instead offer bank subvention and possession linked plans to bring down the prices. This could easily translate into a discount of seven to ten per cent for the buyer. Also since the prices have not been increased, it could be an additional saving for the buyer.
Few high-end projects in Mumbai, which are being launched by developers such as Indiabulls Real Estate and Lodha have been priced ten to fifteen per cent lower and come bundled with offers such as an 80:20 financing scheme, where in the customer is required to pay only twenty per cent at the time of booking and the rest at the time of possession.
In most large cities the unsold inventory levels have been alarmingly high within the June quarter. Unsold inventory in Mumbai is up from 139. 33 million square feet in the period from January to March, to 146.10 million square feet, might take more than 48 months to sell.
It is 277.31 million square feet in Delhi-NCR, which might take up to 38 months to reach a healthy level. Even Bangalore which has witnessed unsold inventory levels rise to 88.68 million square feet, from 62.56 million square feet within the previous quarter.
Lesser and lesser developers are capable of holding on to such high inventory levels with the cost of finance becoming increasingly un-affordable. Furthermore, private equity (PE) funds are also pressurizing developers to hasten their sales. The only way to improve cash flow situation is to moderate pricing.
