DOWNWARD TREND - Builders go slow as homes remain unsold
Jayaraj Sivan
3 Years Needed To Exhaust Stock In Eight Main Markets Across Country, Says Report
It could take about three years for devel opers to exhaust their unsold stock, pegged at more than seven lakh housing units across eight primary markets -NCR, Mumbai, Pune, Hyderabad, Bengaluru, Chennai, Ahmedabad and Kolkata -says the latest Knight Frank report on real estate trends in India. There are about 40,000 unsold housing units in Chennai which absorbs about half of that every year.
On account of the slump in the residential market over the last two-and-a-half years, developers have been going slow on new launches.From 1.6 lakh units in the first half of 2014, new launches fell to 1.43 lakh residential units in the second half of last year and to 95,000 in the first half of this year.
Sales, too, dipped, from 1.38 lakh units in the first half of 2014 to 1.29 lakh units in the second half. It further dropped to 1.1 lakh units in the first half of 2015. For once, sales have overtaken new launches in most cities.Still, the trend may not be healthy for the market, said Knight Frank chief econo mist and director of research, Samantak Das. If there is a marked dip in new launches, it could ad versely impact the market in future, he cautioned. But developers are unlikely to reverse the trend as there is no likelihood of a market recovery in the next six months, he said.
There was a 20% drop in new project launches in Chennai in the first half of this year in comparison to the corresponding period last year, said Knight Frank Chennai director Kanchana Krishnan. Against a launch of 11,377 new housing units in the first and second quarter of 2014, only 9,102 units were launched this year till June. Fall in sales is 11% -from 10,212 units to 9,091 -during the same period. North Chennai p r o j e c t s and apartments priced above `1.5 crore per unit are the worst hit, said Krishnan.
It is surprising to see residential markets struggle when there is a turnaround in commercial leasing activity, especially in the ITITES, banking and financial services and e-commerce segments, said Das. Demand has outpaced supply in quality office space leasing in Mumbai, NCR, Pune, Bengaluru, Chennai and Hyderabad for more than a year. Vacancy level (much of it is low-grade office space) dropped from 20% to 17% across the country. In the first half of last year as well as this year, 17.9 million sq ft each office space was absorbed in these six primary markets. The weighted average rental growth, which was 2% in 2013, is 9% now, but shortage of quality office space is a major concern, said Das.
The real estate sector is bound to revive in future as the overall economy of the country is showing signs of improvement. Despite the EU-Greece crisis, slowdown in China's growth and the likelihood of flight of investments from developing economies to the US, India's robust forex reserves of $ 360 billion and strong macroeconomic fundamentals would hold it in good stead, said Das.
