Festive Season Fails to Bring Cheers for the Real Estate Sector
During the festive season in India, people's decision to buy or invest in a real estate property is influenced by two factors— first, the offers on the market like discounts, freebies and attractive payment-plans; and second, the emotional quotient, as the festive season is considered an auspicious time to buy a new home. Every year, the real estate industry eagerly awaits the festive season as the sales are 20-25% higher as compared to the non-festive period. However, this year the industry had very little to celebrate.
To offload inventories in their existing projects, festive season offers and schemes were launched by the developers. While many builders in Mumbai offered smaller upfront investments, a few builders in Gurgaon allowed hefty discounts on the price per sq ft. Noida witnessed subvention schemes and 10-80-10 payment plans in many of its projects. Possession Linked Plan (PLP) was also commonly seen in the NCR market.
But despite the recovery in the market scenario backed by attractive offers, festive season could not bring the expected cheer to the industry. If we compare the new real estate supply of Q3-2014 to that of Q3-2013, the downturn figure is as high as 61%. DDA offered additional 25,034 units in its scheme which is 62% of total the new supplies offered by other builders. With 11,853 new units, Bangalore tops the list of new supplies in this quarter.
However, the sales came down by 28% as compared to the last quarter. The trend of quarterly new home sales across the top 9 cities ( Mumbai, Pune, Bangalore, Noida , Gurgaon , Chennai, Hyderabad, Kolkata and Ahmedabad) seems to be consistent. Supertech Eco Village 4, Lodha Lakeshore Greens and Gulshan Homz Bellina are the top three projects that outperformed the market with sales of 520, 511 and 454 units respectively. While the BSE Realty Index and Sensex both experienced a gain of 35% as compared to Q3-2013, the property price stagnation gave negative returns against inflation. But the PE funding is returning back to the realty sector with an increase of about 27%.
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With respect to the failure of festive season offers in India, the property experts suggest that the demand for property has surely increased but it is not actualizing into transactions. Main catalysts for this demand are the new and favorable policies launched by the government but due to the long term impact of these policies, the buyers in short term are indecisive about investing . Apparently, they have become cautious and are relying on the 'wait and watch' approach. So, the realty market will have to wait for some time to reap the benefits of these policies.
Though the festive season sales did not perform as expected, one can predict that the market conditions in the future will only get better. Several infrastructure projects were launched in the last quarter that should bring good news for the industry in the long run. The approval of the Diamond Quadrilateral Railway Program, SEZ at JNPT in Navi Mumbai and several highway and metro rail projects across the country will make the scenario better. Also, affordable housing schemes launched by the municipal authorities will be the highlight of the next quarter. Considering the above factors, our property specialists suggest that the market will stabilize in the next quarter.
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