1. RERA impact: New home launches slide 16 pct in 8 cities

RERA impact: New home launches slide 16 pct in 8 cities

New home launches have been reduced to a trickle as the real estate industry grapples with the new RERA regulations.

By: | Mumbai | Published: June 6, 2017 5:39 AM
RERA, RERA news, RERA latest news, RERA impact, RERA benefit, benefit of RERA, RERA regulations RERA puts a stop of pre-sales.

New home launches have been reduced to a trickle as the real estate industry grapples with the new RERA regulations. The top eight cities reported launches of approximately 25,800 units in the January-March period, a 16% decline over Q1CY16, data from Cushman and Wakefield showed. Since May, project launches have declined by 8%, the report detailed.

A closer look at the trend indicates, launches have seen a steady quarter – on – quarter (Q-o-Q) decline for the last 4 quarters, corresponding with the announcement of Real Estate Regulatory Act (RERA) 2016 in March last year and the demonetization exercise in November 2016. Interestingly, between April 2016 and March 2017, the share of the affordable segment improved to 30% compared to 25% in 2015-16. The share of high-end and luxury segments reduced to 11% from 13% during the same period.

While sales have been weak across segments, it is weakest in the high-end and luxury segments owing to bigger demand-supply mismatches.

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“Developers are re-calibrating their models with the new rules, leading to fewer launches,” Ashish Shah, COO at Mumbai based, Radius Developers, said. Companies must engage with their stakeholders and financiers to figure out their capital flows, Shah said adding that they might need credit lines for longer periods.

RERA puts a stop of pre-sales. In other words, companies cannot monetize projects at launch before having requisite permissions, which has so far been an attractive proposition for developers.

The environment is unlikley to change soon, say developers. “Launches in the residential sector are expected to remain restricted over the next two to three quarters as developers make intrinsic changes to their business structure, operations and marketing strategies to comply with RERA norms,” Anshul Jain, managing director, India, Cushman and Wakefield, observed. Consumers will continue to remain restrained in the first half of the year, Jain added.

What might deepen the crisis is the sentiment around news of massive layoffs in the IT and ITes segment. Jain said sales velocity is expected to reduce due to the downsizing in the IT segment. Earlier in the month, Shubhranshu Pani, managing director of strategic consulting, JLL India said that residential demand in the IT hubs, mainly Bangalore, Hyderabad and Pune is expected to be affected, with some impact in the micro markets of Navi Mumbai in Mumbai and Noida in the NCR. “Typically, home buyers who run the risk of losing their jobs target apartments priced between R4,000 a sq. ft and R10,000 sq. ft, making this a vulnerable segment now”, Pani added.

The report also stated that a combined impact of prolonged slowdown in sales and the pressure of mounting inventory has led to a price decline in cities such as Delhi-NCR, Bengaluru and select markets in Mumbai.

In Delhi-NCR, quoted capital values softened by 1-3% in both the mid and high-end segments across most of the submarkets from the previous quarter. Bengaluru too witnessed rationalization of prices in most of the submarkets across mid and high-end segments.

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