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Home sales in new launches see slight revival

Livemint:  May 03, 2019

New Delhi: It seems that the rapid decline in sales of residential properties has finally come to a halt. Over the last few quarters, sales numbers have either remained stagnant or improved marginally, but did not fall, according to various real estate reports. One of the major reasons that is likely driving the slight revival in sales is the increasing demand for affordable and low-cost housing. Other contributing factors are — confidence generated by the Real Estate (Regulation and Development) Act, 2016 among homebuyers when it comes to buying apartments in new launched projects, and relaxation in goods and services tax (GST) on under-construction property.

Increase in sales

“Sales across Tier I cities have grown by 5% during FY2019 as compared to FY2018. MMR (Mumbai Metropolitan Region) has posted highest sales of 70,794 units (25.5% of total sales in Tier I cities), followed by NCR (National Capital Region) with 54,174 units contributing 19.5% of total sales," according to the Residential Market Report for the quarter ending March 2019 by Liases Foras, a Mumbai-based real estate research and advisory firm.

Among the eight cities covered by the report—MMR, NCR, Pune, Bengaluru, Ahmedabad, Hyderabad, Kolkata and Chennai—seven cities witnessed sales growth between 6% and 20%. While Hyderabad and Kolkata witnessed maximum growth of 20% each, followed by Bengaluru with 14% increase in sales numbers, NCR witnessed a 13% decline in sales when compared to last year.

While revival in sales will bring some respite to developers, home buyers warming up to newly launched projects is a big plus for them. However, the latter trend is just picking up and most homebuyers still prefer ready-to-move-in houses.

According to a recent report, Consumer Sentiment Survey H1 2019, by Anarock Property Consultants Pvt. Ltd, “While ready-to-move-in homes remained the preferred choice for several homebuyers, new launches (which drew the least consumer interest in the previous survey) saw a decent revival. Over 18% of respondents now prefer newly launched properties as against a mere 5% in the previous survey."

The reasons behind the increase in preference for newly launched projects are “implementation of RERA and lower GST rates", said the Anarock report.

Meanwhile, affordable housing witnessed higher demand compared with other segments, thanks to government incentives. “Like last quarter, close to 54% of the sales of this quarter were contributed by sub- «Á¢Ä?«Á¢Ä?«Á¢Ä???50 lakh segment. Growth in this segment is supported by government initiatives," said the Liases Foras report. About “70% of prospective buyers prefer properties under «Á¢Ä?«Á¢Ä?«Á¢Ä???80 lakh," added the Anarock report.

Taking cues from the trends, developers have been focusing on affordable and mid-range segments. “Over the past five years, developers have been actively focusing on the affordable and mid-range housing segments. The share of new supply in the affordable and mid-segment combined (within «Á¢Ä?«Á¢Ä?«Á¢Ä???80 lakh) stood at 77% between 2017 and 2018—39% in affordable housing and 37% in the mid-range segment," according to the Anarock report.

High Inventories

An increase in sales notwithstanding, inventory of unsold units continues to remain high. “Unsold stock in Tier I cities increased by 4% on year-on-year basis, while the number of unsold units currently across top eight cities is 9,66,591 units," according to the Liases Foras report. Hyderabad witnessed a 16% increase, the highest, followed by Chennai, Kolkata and Pune, showing a rise of 15%, 12% and 10%, respectively. Single-digit growth was observed in MMR (7%), Bengaluru (5%) and Ahmedabad (1%). NCR witnessed a decline of 8%.

High inventory at developers’ end has kept a lid on property prices. According to the Liases Foras report, “Prices have remained unchanged largely across the top cities with some upward movement being recorded only in Hyderabad."

Prices are expected to remain stagnant till there is a significant increase in sales. So if you are planning to buy a house, take your time to mull options.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.