Housing project launches declined 40% during the quarter ended December as developers across cities are waiting to gauge the true extent of demonetisation impact on real estate before launching any new projects, realty analytics firm PropEquity said in a report.
Demand for housing across top 8 Indian cities in the fourth quarter of 2016 declined 31% owing to uncertainty post demonetisation. Both primary and secondary market witnessed very few transactions reaching conclusion during the quarter, said the report.
Developers now expect market to stabilize post union budget announcement providing some relief especially in the affordable housing segment. Eight cities included for the study were Gurgaon, Noida, Mumbai, Kolkata, Pune, Hyderabad, Bengaluru and Chennai.
Also during the quarter, cities with significant inventory overhang have seen slight contraction in prices as developers were compelled to reduce prices to clear off high inventory. NCR cities i.e. Gurgaon & Noida exhibit this trend to a great extent.
“Real estate sector in India, especially housing is going through a critical transition phase post demonetization as transaction activity has slowed down considerably. Many buyers, sellers, banks and private equity investors are waiting for the budget announcement as they expect some major positive news from the govt. to boost real estate sector. In our view, the RERA implementation, Benami Act and further push for smart cities across India will bring major respite to the ailing realty sector. Going forward, developers with good track record, strong financials and low leverage to external debt are expected to bounce back quicker,” said Samir Jasuja, CEO, PropEquity.
The report further states that average prices of unsold units almost remain stagnant at Rs 6,683 per sq ft as buyers and sellers delayed their decisions.
Going ahead, the recent budgetary announcement to grant industry status to affordable housing will surely provide ample push for this segment in India, a key initiative under Housing for All. Developers having projects in the affordable segment will benefit greatly with this announcement, the report said.
During the quarter, new launches in Gurgaon nosedived at just 64 units a drop of 95% from the previous quarter. Even absorption declined over 30% at just 938 units.
Gurgaon continues to be in a deep distress as the market is witnessing a significant contraction in both demand and supply due to demonetisation. Total Absorption during the quarter was the lowest over the last 6 quarters. Notably, the market has been severely impacted due to lack of investor’s activity and any growth catalyst.
Noida also saw a decline in new launches as it dropped 94% to just 75 units. However, in this quarter, Noida also saw 2,000 units getting completion certificate (CC) by Noida Authority, majority of them being in markets like Central Noida & Noida Expressway. Prices in this region remained stagnant, the report added.
Mumbai continued to see contraction in demand and supply of housing units. New launches during the quarter saw a rise of 21%. However, majority of it was in the month of October with hardly any launches in December.
Kolkata property market saw a significant fall of 71% in new launches as demand has fallen to its one of the lowest levels in years largely due to poor fundamentals of new launches and lack of investors’ interest. Overall demand also remained under stress, declining by 24% due to weak end-user demand.
Hyderabad market was less severely impacted as new launches fell by 20% and absorption by 31%. For the next quarter, demand may slightly pick up as projects from reputed builders with good fundamentals have hit the market in the recent past.
Bengaluru property market saw 46% decline in new launches, while dip in demand was at 30%. Going forward, PropEquity expects development of few IT Parks in several southern, eastern and south eastern peripheral locations may give a boost to residential sales in these areas.
Pune was least impacted by the recent demonetisation as new launches just fell by 7%. However, absorption fell by 32% indicating low interest from buyers who are withholding their buying decisions for the next few months.
New launches in Chennai were reduced to mere 1,469 units during the quarter. Absorption was down 32% through no significant change in launch supply as compared to previous quarter. Unsold stock saw a marginal dip of 1%.