Property consultant Jones Lang LaSalle says it is still a buyers market in the seven metropolitan cities as absorption rate is expected to hover around 12% of the total supply. According to the real estate consulting firm, the absorption rate climbed from 11% in the first quarter of fiscal 2011 to 12.5% in the third quarter. The primary feelers are that it will not move around much at least in the short term, said Ashutosh Limaye, head of research at Jones Lang LaSalle.
The current overall absorption is significant improvement from the last quarter of 2010 when less than 10% of the apartments were sold, triggering a huge correction in the otherwise torrid real estate market that was basking under the spectacular economic growth India was witnessing for years until a slowdown hit India in late 2008.
During those days, developers could have even sold hundreds of residential units even before they performed the ceremonial earth digging ceremony. No wonder, absorption rate topped 25% prior to 2009. Then it was entirely a developers market, now its a seller market, said Limaye. Tepid sales in following those quarters prompted developers to curtail supply that also helped in improving the overall apartment sale. The number of new launches have gone down as developers realised the lesser velocity in the market and they were not enthusiastic in adding supply, said Limaye.
He said about 2.5 dwelling units come in the market every year in the seven largest cities in India and developers manage to sell half of them and the rest are carried forward for sale in the next year. He said the current inventory is manageable as they will be sold out in eight quarters and, generally, it is considered alarming if any property lies unsold for over two years.
The overall absorption is still slow, but the market is still active as there is limited supply of completed project, said Anshuman Magazine, chairman CB Richard Ellis South Asia. He said not just first time home buyers, but an increasing number of second home buyers are keeping the market ticking.
The stock markets are so volatile and gold is becoming expensive, Magazine said, adding, So people look at real estate as no other asset class has given the kind of returns real estate has given over the years.
Magazine said the New Delhi-National Capital Region, Mumbai and Bangalore will continue to attract buyers even as demand for top-end real estate market in Mumbai is slow. Currently, business is slow for high-end apartment priced at R8 crore plus properties in Mumbai. Magazine of CBRE said most of the unsold up-scale properties in Mumbai are of large-sized apartments that, too, in not so prime locations.
Meanwhile, in the other active markets of north India, inventory situation is okay, said Mudassir Zaidi, regional director north for Knight Frank India. He said currently north India has a stock of around 140,000 apartments and is expected to be sold in four quarters as generally about 35,000 to 40,000 units are sold every quarter in the region. Supply also keeps adding up, but consumption is also happening. So unless there is a real downturn this is very much manageable, Zaidi said.