The continuing effect of demonetisation and introduction of Real Estate (Regulation and Development) Act, 2016 disrupted the residential real estate market in the first six months of January-June 2017. Despite the disruptions, the residential prices have witnessed only a time correction. The new unit launches hit lowest in seven years as they fell by a sharp 41% on a year-on-year basis to 62,738 units across top eight cities of India. The sales volumes also came under pressure which were down by 11% y-o-y at 1.21 lakh units, recording lowest first-half sales in the past five years, according to the latest report by Knight Frank India.
Meanwhile, the stock of unsold units stood at 5.96 lakh units, which is a drop of 17% from the peak of 7.20 lakh units recorded between July-December 2014. However, the fall is due to the decline in launches and not that the sales are improving, which as experts say is not a desirable scenario. While the decline in launches mean that the new stock is not ballooning the unsold inventory, for any visible improvement in the residential real estate market, the sales have to start picking up. NCR was the worst market in terms of unsold inventory, as it will take over four years to sell at the current pace of sales.
The top eight markets include Mumbai Metropolitan Region (MMR), Pune, National Capital Region of Delhi (NCR), Bengaluru, Hyderabad, Chennai, Kolkata and Ahmedabad.
“The residential market had barely come out of the demonetisation shock when the need for RERA compliance put breaks on a large section of new projects,” the report said.
City-wise, NCR and Ahmedabad markets were the worst hit with new unit launches crashing by 73% and 79% respectively. Samantak Das, national director (research), Knight Frank India observed that the NCR market has “decimated”. “From the levels of 1 lakh-1.2 lakh units witnessed about five years back, there are just 4,800 units launched between Jan-June, so that market is really looking to have come to a grinding halt,” Das said. Mix of high inventory levels and lack of sales momentum has had the developers slow down the new project launches, he added.
Mumbai region too was impacted albeit to a lower extent. The new unit launches were lower by 36% at 15,763 units. Chennai was the only market to record a marginal 4% y-o-y rise in launches during the period.