New home launches in 2017 fell by 41% to 1,03,570 units from 1,75,822 units a year ago, according to the eighth edition of Knight Frank's flagship half-yearly report.
New home launches in 2017 fell by 41% to 1,03,570 units from 1,75,822 units a year ago, according to the eighth edition of Knight Frank’s flagship half-yearly report. Homes launches in 2017 plummeted by a staggering 78% from the peak of 2010. The volume of new projects entering the market in the second half of 2017 stood at 40,832 units, close to one-fourth of the supply levels in 2015, the report said. “2017 was been packed with uncertainty, volatility and long-term promise of new opportunities. While a battery of reforms tested industry stakeholders, the new paradigm of transparency and consolidation achieved in the process should pave the way for healthy momentum in near future. Until the end of 2017, India’s residential sector had shrunk to a fraction of its size in less than a decade…Nevertheless, the near standstill triggered by demonetisation seems to have tapered with time.
At the same time, stakeholders are growing in confidence with the gradual acceptance of structural reforms such as the Real Estate (Regulation and Development) Act, 2016,” Shishir Baijal, chairman and managing director, Knight Frank India, said. All cities witnessed a fall in launches year-on-year, with Hyderabad being the worst hit at 84%. Other IT/ITeS-dominated markets such as Pune (58%), Bengaluru (37%) and Chennai (33%) also witnessed a massive drop in launches, the report said. Sales volume hit a seven-year drop. It was 62% down from the peak of 2011 with a year-on-year drop of 7% in 2017 at 2,28,072 units, the report said. Sales in Bengaluru were down by 34%. Mumbai (19%) and the NCR (21%) saw a spike on the base effect of demonetisation. Bengaluru, in particular, recorded negative growth in both launches (-37%) and sales (-34%) for the first time in the second half of 2017. Hyderabad also recorded the decadal low in home launches, the report said.
Home launches in the NCR halved in 2017 over the previous year, recording historically low supply in the region. New projects in the second half of 2017 recorded a 25% de-growth year-on-year, it was marginally better sequentially. While residential sales in 2017 dropped by 6%, the second half of 2017 recorded 21% surge year-on-year in comparison to the demonetisation-hit second half of 2016. While Gurugram continued to be the chosen micro-market in the NCR, accounting for more than half (54%) of the homes launches in the second half of 2017, new projects dried up in Noida (77%) and Greater Noida (76%). Weightage average prices saw a sharp fall of 9% in the second half of 2017 in the NCR since the peak recorded in 2015, the report said. While the unsold inventory in the second half of 2017 came down by 13%, “the NCR market would take at least five years to exhaust its stock of unsold homes – one of the highest in India,” the report said.
Weighted average prices fell by an average of 3% across cities, with Pune witnessing the highest decline of 7% year-on-year, followed by Mumbai at 5% year-on-year. Markets high on ready-to-move inventory such as Hyderabad and Ahmedabad saw prices move up 3% and 2%, respectively. This wasn’t bad news for homebuyers. In fact, they benefited more than the above numbers indicate. Effectively, the 5% decline in Mumbai, for instance, translated to a total cost benefit of 11-12% for homebuyers, explained Samantak Das, chief economist and national director at Knight Frank. “Apart from the base price reduction, which developers have been forced to undertake in order to prioritise offloading inventory, a bouquet of incentives such as waivers, free of charge floor rise and assured rental schemes, which are available a-dime-a-dozen in the market lends significantly to the price advantage,” Das said.
For instance, a stamp duty charge waiver, which is a standard discount at present, amounts to an additional 5% cost benefit. Experts continued to express concerns that much of the underlying potential demand is still to be realised because most prospective buyers are sitting on the fence. Besides, there is little incentive to buy now as the unaffordably high prices continue to weaken, the report stated. Industry watchers said recovery will now hinge heavily on the pace at which developers align themselves to new regulatory norms and launch new products in the right ticket sizes that appeal to a majority of homebuyers.