Huge inventory levels affect prices of properties
With real estate sales dropping down swiftly, developers are tend to cut the rates of their existing projects, reveals a study conducted by real estate rating and research company, Liases Foras.
Considering the pace of real estate development and prices across six major cities in India, including, Bangalore, Chennai, Hyderabad, Mumbai, Delhi-NCR and Pune, the real estate consultant has arrived at a few estimates.
Lower price tags for new properties
According to the study, the newly launched projects across the six cities have been seeing a significant fall in their prices. The prices of new properties are at least 14 percent lower than the existing ones in the vicinity which offer similar amenities.
Unsold stock piling up
The report states that the real estate market is currently in a bad shape, with several million square feet of properties remain unsold. The overall unsold stock of properties across the six cities sums to around 711 million sq feet. The maximum of unsold stock is piled up in the National Capital Region (NCR) followed by the Mumbai Metropolitan Region (MMR) and Bangalore, reveals the study.
Decrease in property sales
Around 150 million square feet of properties are lying unsold in Mumbai. In the second quarter of 2013-14, Only 7.85 million sq feet of space was sold during the July-Sept 2013 quarter of the current fiscal for Rs 7,233 crore, while properties worth Rs 8,346 crore were sold during the same quarter of last fiscal. At the same time, about 10.8 million sq feet of newly launched properties have come up in the city.
Pricing of new projects get hit
The increasing stock of inventory and declining sales are bound to affect the prices of properties. The developers are forced to rethink the pricing, particularly for the new projects since correcting the existing prices would give them a negative impact.
The study states that the average price of newly launched properties across all the six cities is lower than that of the existing price levels. It points out that the new launches are coming with at least 14 percent lower price tags than the existing ones with similar amenities and located in the same area.
Though the supply of new units remained less, fall in sales have resulted in an unsold housing stock of 58 months. This means that, in the current realty market scenario, it would at least take 58 months to clear the stock of unsold inventory. Last year, this figure stood at around 40 months which increased to 48 months in the first quarter of this year. By the completion of the second quarter the number has increased to 58, which is so far the highest of any other city in India. As per the national average, the unsold inventory stock stands at 37 months.
In general, up to eight months of inventory represents a healthy market, while the present value is way too higher than this number. This surely raises a suspicion as what all would be the possible impacts of this huge stock of unsold inventory.
