Sales of new homes across India (except Noida) have fallen 10% sequentially in the quarter ending June, as per international property consultants Jones Lang LaSalle (JLL), quoted in a recent Morgan Stanley report.
The number of new units sold in the quarter across India (excluding Noida in NCR) was 27,000, down 10% from 30,000 units sold in the quarter ended March 2011, which was up 5.6% compared to 28,400 units sold in quarter ended December 2010. December quarter sales were flat compared to the quarter ended September 2010 during which 28,500 units were sold.
The absorption rate (new sales divided by total unsold inventory) across the country remained 14% in the second quarter against the 17% seen in the first quarter of the calender year (CY) 2011. It was 17% in Q4CY10, down from 20% in Q3CY10, which in turn was down from 21% in Q2CY10.
The absorption rate was the lowest in Mumbai at 6% in the June quarter, the highest being in Pune with 20% and NCR with 16%. The absorption rate takes into account any unsold inventory previously present in the market too.
Market observers say high prices of residential property are keeping customers away from the market. ?Economic growth and pricing has a far greater impact on demand than mortgage rates since 90% is a floating rate which gets normalised over 15 years of loan tenure,? says the report.
?Residential prices that the Mumbai market has seen in less than one year are not sustainable.
The market showed resilience during the economic crisis of 2008. But since then property prices have shot up to unaffordable levels and are currently quoting more than 20% over their 2007 highs,? says Samantak Das, national head of research, Knight Frank India. He added that absorption in other cities still remains high as the maximum demand is for middle-income and lower-income housing, which is not the case in Mumbai.
?Mumbai is a sentiment-driven market and right now uncertainty is suppressing demand. There is uncertainty for consumers due to speculation on price corrections and execution risks and for developers on regulation and material cost inflation,? says a spokesperson for Piramal Realty.
Commenting on the situation in Pune, Kruti Jain, director, Kumar Builders says, ?Proximity to Mumbai has worked to Pune?s advantage. It has a self sufficient economy and isn?t dependent on only one industry. This unique mix has given a boost to migration into Pune and the need for real estate. Also, property prices in Pune are still quite affordable.?