Luxury housing market observes drop in sales
The economic slowdown has not spared luxury real estate market too, as unlike before; the number of sales in luxury property market has started declining in the last few quarters. Till recently, the sector had been witnessing huge demand surpassing its supply.
According to research firm Liases Foras, the luxury sector in Gurgaon has witnessed a 40 percent drop in sales while the sales of luxury homes in Mumbai, with price tags over Rs 5 crore, have dropped by 35 percent. Bangalore has observed a minimum of 20 percent decline in the sales of properties priced over Rs 2.5 crore.
A regional director for global property consultant Knight Frank opined that selling luxury units in major markets like Mumbai, Gurgaon and Bangalore is gradually becoming tougher.
CREDAI Chairman Lalit Kumar Jain said that this is the outcome of the sluggish economic scenario of the nation. Once the economy is down, spending is cut and this is a major harm to real estate. Many property agents and advisory firms also admit that the sales have dropped in luxury property market.
Business class makes the majority of buyers for luxury housing units. But the declining value of rupee and slow economy have tightened the liquidity of cash with many businessmen, which is stopping them from investing their surplus funds in realty market. The end-users are also in a wait and watch mode, as they are concerned with the after effects of the present economy, and are hesitating to invest in property market.
In the last one year, many new luxury projects have been launched in cities like Mumbai, Bangalore and Delhi-NCR. Golf Course Road Extension and Gurgaon-Faridabad Road have also seen a number of new luxury projects. In 2012 alone, around 3,144 luxury units had been launched in South Peripheral Road, Gurgaon, around 1330 luxury units were launched in Hebbal in Bangalore and 624 luxury units were launched in Malad, Mumbai.
Most of the investors are struck with apartments which they had bought earlier and are not buying more. While most of them are not able to sell the earlier bought units due to which they are facing cash-crunch situation, some of them are concerned about the unstable market conditions. They are scared if the market continues to move slowly, then they might even lose their actual investments.
Some investors are ready to sell off units, particularly in under-construction projects, with even 20 percent discount compared to what the developers are offering in those projects. For instance, an investor in Golf Course Road Extension is ready to sell his apartment for Rs 3.6 crore while the developer is selling similar unit in the same project for Rs 4 crore.
The unit prices in luxury market have hiked very high in Mumbai, according to Liases Foras. He opined that, not realising that the market for this segment is very small, developers launched projects in recent months, which has also had its effect.
A number of luxury projects have been launched in areas like Worli, Lower Parel, Juhu, Bandra, Mahalaxmi and Lokhandwala. While the supply of homes in this segment in Mumbai has increased by over 30 percent in the past year, the volume of sales has dropped owing to high prices and sluggish economy.
Bangalore has also been facing the same situation, wherein, supply has surpassed demand in case of luxury housing market. A number of luxury projects have been launched in Bangalore in areas like Whitefield, Outer Ring Road, Bellary Road, Devanahalli, Doddaballapur Road, etc.
Liases Foras reports that, Bangalore has witnessed 35 percent rise in luxury segment, in the past three quarters, which along with high prices and a slowdown in the IT sector has dropped the sales.
For instance, Puravankara Group, which is among the top developers in Bangalore, has all approvals in place for a luxury housing project in the city, but yet, the realtor has decided not to launch the project, for now. As currently there is a supply-demand mismatch in this segment, the developer is planning to launch it at a more suitable time.
Even many brokers in Bangalore have admitted that the existing demand for apartments in this segment is very low.
