In a report released on Wednesday, by PropEquity, India’s leading real estate data, research and analytics firm tracking over 85,000 projects of 21,000 developers across 42 cities, housing demand stayed muted across top 8 cities in the third quarter of 2016.
Housing demand across key cities declined by 22% largely on account of muted end-users demand even when developers continue to offer heavy discounts & benefits.
Only Noida (2%) and Mumbai (1%), registered marginal price increase mainly in projects nearing completion on QoQ basis, while in Hyderabad, prices were static.
“Real estate sector in India, especially housing is going through a critical transition phase which will eventually weed out unethical and unprofessional developers. The third quarter reiterated our view that prices continue to stay weak, and in our view are bottoming out. Developers especially in North India will aggressively clear out their unsold inventories before focusing on new launches,” Mr. Samir Jasuja, CEO and Founder at PropEquity said.
New launches in sequential quarter dropped over 22 per cent to 22,745 units while absorption dropped over 21 per cent at 33,304 units in the eight cities combined.
Average prices of newly launched units as expected dropped by over 22 per cent at Rs 4,693 per square feet. (See below)
|MARKET INDICATORS (Top 8 Cities)-APARTMENTS|
|Q3 2016||Q2 2016||QoQ %|
|New Launches (Units)||22,745||29,189||-22.1|
|Wt. Avg. Price
|Unsold Stock (Units)||4,43,378||4,55,976||-2.8|
Going forward, for the next quarter, developers’ s are expected to target higher sales on the expense of pricing and slash their inventory levels.
During Q3, 2016, Cities with significant inventory overhang have seen contraction in prices as developers are compelled to reduce prices to clear off high inventory. NCR cities i.e. Gurgaon & Noida exhibit this trend. In comparison, Southern Cities of Bengaluru and Hyderabad had comfortable inventory levels and hence did not witness drop in prices (YoY).
During Q3, total no of new launches & total absorption were abysmally low at 1,070 Units and 1,277 Units respectively.
Gurgaon continues to be in a deep distress as the market is witnessing a significant contraction in both demand and supply due to larger inventories. Average price of newly launched units drooped by over 35 per cent to Rs 5,963 per square feet.
Noida saw a decline in absorption QoQ basis with new launches increasing due to low base effect. In this quarter, Noida also saw close to 5,000 units getting completion certificate by Noida authority which will lead to positive demand for ready to move in apartments.
Mumbai continues to see contraction in demand and supply of housing units. New launches in Q3 dropped almost 59% owing to the high inventory overhang.
The capital values also remain stable across the city as fresh supply witnessed a 10% increase in price over the previous quarter.
Kolkata saw a significant rise (74%) in new launches with large scaled projects getting launched in New Town & Rajarhat. However, these new launches have not seen matching demand, largely due to comparative poor fundamentals of new launches & lack of investors interest.
Overall demand also remained under stress, declining by 17% due to weak End-users demand. As a result, unsold stock in overall Kolkata has risen marginally (3%) to 40,355 units.
For the next quarter, Kolkata is likely to see an increase in developers offering big discounts to conclude transactions for potential clients.
Hyderabad market fell prey to overall bearish sentiments as transaction volumes witnessed slight decline after consistent show in the previous few quarters. During the quarter, new launches halved and sales fell by 17%. Further, unsold Stock fell, marginally by 3%.
This market saw 38% decline in new launches, while dip in demand was at 22%. The new project launches have happened at about 7% higher than last quarter‘s prices therefore, marginally contributing to the dip in the demand in the current quarter.
Pune showed signs of inactivity as market continues to see lower activity in both demand and supply during Q3, 2016 even though IT/ITeS companies continue to acquire spaces at newer locations like Kharadi, Bavdhan and Yerwada.
Chennai witnessed torrential rains in the last quarter of 2015 disrupting residential sales activity across the city. Market doesn’t seem to have recovered from the same as it continues to see contraction in key indicators.
New launches in Chennai were reduced to mere 1,497 units during the quarter.
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