With no buyers in sight, unsold houses pile up

Written by Shubhra Tandon | Mumbai | Updated: Oct 17 2014, 14:55pm hrs
Real estateData from Propequity show inventory in the New Delhi market has risen to 41 months this year. Reuters
Even if the festive season sees some pick-up in interest for residential property, it will be a long while before inventories are liquidated given how they have risen to record highs. Data from Propequity show inventory in the New Delhi market has risen to 41 months this year compared with 12 months in 2013 while for the Mumbai it is at 50 months compared with 34 months last year.

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Meanwhile, sales in the first half of the year have dropped sharply. Nearly 1.67 lakh residential units remained unsold in the National Capital Region (NCR) market, which would take more than two years to be fully absorbed, research by Knight Frank revealed. The study showed a steep 37% drop in absorption in the six months to June. The pile-up is even bigger in the Mumbai Metropolitan Region (MMR) market at 2.14 lakh units which, market observes say, will take three years to sell.

Mudassir Zaidi, national director Knight Frank India, observed that developers have continued to add to supply in the hope that the market would rebound. Zaidi also explained that demand has slowed down both from the end users as well as investors. While the higher prices scared home buyers, investors have stayed away due to the weak economy, which has deprived them of meaningful appreciation.

While a slowing economy and drop in confidence is probably the overriding factor pulling down sales, Chirag Negandhi, MD, Institutional Equities at Axis Capital, points out that large unit sizes, above 3,000 sq ft, are proving to be a stumbling block. Having sold half the apartments in a block, its difficult for builders to reduce the area of the remaining flats, Gandhi said, adding that several dealers are, therefore, stuck with inventory.

Om Ahuja, CEO, residential services, Jones Lang LaSalle India, drew attention to the fact that much of the market in the NCR, Noida and Greater Noida regions is driven by investors and sees very little end-use demand, which has led to high inventory build-up. Prices have not moved much over the last few years and most of the unsold stock is in Noida, Greater Noida and Yamuna Expressway and New Gurgaon, Ahuja said.

One reason for supply outstripping demand in the MMR market, industry experts say, is that in the past few years developers have converted land meant for commercial construction into residential property.

Developers believe the inventory is exaggerated. We launch fewer units than we plan but it's the planned numbers that gets calculated in the inventory, Brijesh Bhanot, director, marketing and sales at Lotus Greens, a Delhi-based developer, told FE. Bhanot believes whatever properties are under construction will all get sold.