India’s real estate sector is witnessing a healthy turnaround with rising sales and declining inventory, numbers from Anarock Property Consultants revealed.
According to the market tracker, there has been a 24% jump in real estate unit sales in the latest quarter (April-June 2018) compared to the previous three months.
The jump comes on top of the 12% increase reported by the previous quarter (Jan-Mar) over the preceding three months (Oct-Dec), indicating a steady and strong recovery in real estate sales in India.
As a result, said Anarock, the total number of unsold units in India’s top seven cities fell to 700,000 at the end of June from 711,000 at the end of March and 770,000 at the end of December 2017.
On the other hand, the rising sales are encouraging real estate companies to announce new projects (launches), which have also risen fast in the last nine months.
SALES
According to Anarock, a total of 60,800 units are estimated to have been sold in the Apr-Jun quarter in the top seven cities of India, up from 49,200 in the previous quarter and 43,800 in the three months before that, Anarock said.
The improvement has been steady in all markets except Chennai.
The Mumbai region, for example, saw sales of 15,200 units in the latest three-month period compared to 12,300 in the quarter before and 11,000 in the one before that, indicating a steady improvement in sales.
The story was similar for the second biggest real estate market — Bangalore — as well. Here, sales increased to 14,600 from 11,500 and 10,000 before that.
Pune, and even the much-suffering National Capital Region, too saw strong increases in offtake.
Anarock said the reason seems to be increased confidence by buyers from the IT industry.
The IT industry has seen receding worries about mass layoffs in recent months as many companies in the sector have been able to win large contracts in emerging technology areas such as digital and artificial intelligence, though it remains to be seen if revenue and profit growth at the companies will mean job safety for workers.
“End-user driven Bengaluru led the pack on the back of re-ignited interest from IT/ITeS professionals reacting to the mitigated job risks and overall favourable economic environment,” Anarock said.
“Hitherto abstaining home buyers are back on the market,” it added. “Developers are working hard on clearing unsold inventory with attractive schemes, freebies and discounts.”
NEW LAUNCHES AND INVENTORY
The real estate sector has been in the grip of concerns over rising inventory levels as flats that were announced 2 or 3 years ago come online now, even as investors and buyers remain cautious.
In what may be seen as both good and bad news, the rising sales are also accompanied by the announcement of an increasing number of new projects.
On a positive note, the number of new flats on which work is getting started continues to be lower than the number of flats that are being sold, indicating that inventory will continue to thin out.
For example, against 43,800 flats sold, developers announced the launch of 26,300 new flats in Oct-Dec quarter. In other words, the industry was able to sell 17,500 more flats than were added to the pipeline via new launches.
However, this difference narrowed to 15,900 units in the Jan-Mar quarter and to 10,700 units in the latest period (Apr-Jun) as more and more new projects started getting announced.
For example, the number of new units announced in the latest quarter was 50,100, nearly double the 26,300 new flats announced in Oct-Dec period. It was also 50% higher than the 33,300 new flats announced in Jan-Mar period.
Not surprisingly, the unsold inventory — flats that are at various stages of development, but remains unsold — fell only marginally to 7 lakh in last month from 7.11 lakh three months earlier.
At the current sell rate of around 2.4 lakh units per year, the 7 lakh units should be enough to supply the market for close to three years. At one time, the number was between 4-5 years.
CHANGING MIX
Anarock’s quarterly numbers also give insights into the changing composition of the market, starting with the new projects.
The difference can be seen when comparing the latest quarter (Apr-Jun) with the preceding one (Jan-Mar).
Flats costing less than Rs 40 lakh made up about one third of the total new launches in the Jan-Mar period, while they made up nearly 45% of the new projects announced in Apr-Jun period.
The government has been keen to avoid a decline in house prices, and has announced a new scheme to provide Rs 2.6 lakh subsidy to people who want to buy a flat using a home loan.
PRICE
Due to the abundance of supply, prices in the market did not show any real increase.
Compared to the overall inflation rate of around 1.25% per quarter, prices of houses increased by around 1% in five cities, while they remained flat in Chennai and Kolkata.
Flat prices are bad news for developers waiting to clear out inventory, especially those who hold apartments and villas in the premium category.
Most of the demand for premium category used to come from investors and speculators who booked or purchased these units with the intention of selling it for a higher amount 2-3 years later.