The real estate sector is going through a slowdown on slow demand and declining sales and this is no big news anymore. The government has been making efforts to boost the sector with many regulatory changes like Real Estate (Regulation and Development) Bill, 2016 and REITs among others. Recently, the sector has been buzzing with consumer action with the help of courts to deal with the delays and possession of the housing projects.
Residential units sales fell for third straight year, indicating a reduction in activity across the primary residential markets. The segment saw a decline of 33 per cent in FY16 from a year earlier – from around 315,000 units in FY’15 to 211,000 units in FY’16, according to PropTiger’s India Realty Report for the financial Year 2016. The new launches in Fy16 fell 46 per cent in comparison to FY15.
“The Indian residential real estate market seems to be getting into a stabilisation mode, with sales in H2 FY’16 falling by 1% over H1 FY 2016, the lowest rate of fall since H2 FY’14. The prices have also remained range bound, with a nominal price increase of around 1% during the same period. The possible downside risk from these levels seems to be limited in the financial Year 2017,” according to the report.
In line with the government’s ambitious plan like ‘Housing for All 2022’, affordable segment (houses under Rs 50 lakh) continued to command the lion’s share with over 50 per cent in launches and 52 per cent in sales in FY 2016. Affordable housing demand could surge in FY17 with several incentives announced in Union Budget FY17 for both developers and first-time buyers.
PropTiger has listed out cities which largely remains affordable and have reasonable inventory overhang:
Hyderabad is poised to emerge as an outperformer among Tier-I cities in the coming years, especially with its growing IT/ITeS opportunities and better infrastructure. In FY16, the latent demand and new launches in the city remained in the high-end segment; there was a noticeable increase in the share of luxury properties in total launches in the city. Amid improved sales and launches, Hyderabad saw the steepest decline among the nine major cities in inventory overhang. It successfully managed to keep inventory overhang at a comfortable level of 29 months. Hyderabad saw a year-on-year price appreciation of about six per cent, with more residential demand coming for projects in proximity to the major IT hubs. The city saw price appreciation of 13 per cent growth as on March 31, 2016 over March 31, 2014. Ahmedabad was second with a five per cent price increase during the year.
Real estate developers in Ahmedabad cut down on new launches in FY16 to tackle the problem of rising unsold inventory. New launches and absorption saw year-on-year declines of 46 per cent and 33 per cent, respectively, with a slight reduction in the share of sales in the cumulative sales of the nine major cities. Despite declining sales, Ahmedabad witnessed a price appreciation of five per cent year-on-year, with some prominent localities of Gandhinagar and Ahmedabad Central witnessing price rise in the range of 12 per cent to 17 per cent.
Bengaluru would continue to be the dominant players on account of reasonable prices and healthy inventory overhang. Given the strong macroeconomic dynamics – driven by IT/ITes sector and e-commerce market- the city may remain a favourite among homebuyers. The city emerged as the largest contributor to launches in the country, with its share in total rising sharply from 20 per cent in FY15 to 26 per cent in FY16. Bengaluru in terms of absorption, Bengaluru accounted for 21 per cent of total sales in FY16, compared with 19 per cent in FY15. The inventory overhang as on 31st March 2016 stood at a healthy range of 28 months. Overall, Bengaluru witnessed a three per cent year-on-year increase in
prices. In the affordable housing segment, the highest price increase was seen in some of the key Bengaluru localities near the economic zones.
Being another IT-centric market like Hyderabad and Bengaluru, Pune is expected to attract IT/ITeS driven workforce in the years to come. Residential demand in the city is expected to remain robust due to the presence of several IT/ITeS multinationals along the Mumbai – Pune corridor and the Hinjewadi IT SEZ. Launches and absorption in Pune declined by 53 per cent and 21 per cent respectively, year-on-year. However, Pune’s share in sales across nine major cities of the country increased from 14 per cent in FY14 to 19 per cent in FY16 and the city continued to show a comfortable inventory overhang of 24 months.