Focus Shifts On Execution As Developers Rush To Finish Work In Q2
India's real estate sector, data show, may be headed for a more sustainable approach towards growth. While real estate developers slogged to finish what they had begun, buyers are seen investing in such projects on which the work is progressing at a fast speed. This could be a great way to move ahead if the sector has to fully shake off the troubles imposed on its during the past couple of years; a decline in property prices may not be an ideal way to deal with it.
According to the PropTiger DataLabs report for the second quarter (Q2) of the financial year 2016-17 (Realty Decoded Q2'FY17) , developers across the nine cities have been “reluctant to reduce prices” while they made the best of their efforts to sell off the unsold inventory. As a result, barring Ahmedabad, Kolkata and Pune, unsold inventory across cities saw a dip. Property prices, on the other hand, remained range-bound.The nine cities surveyed are Ahmedabad, Bengaluru, Chennai, Gurgaon (including Bhiwadi, Dharuhera and Sohna) , Hyderabad, Kolkata, Mumbai (including Navi Mumbai and Thane) , Noida (including Greater Noida and Yamuna Expressway) , and Pune.
When compared to the previous quarter, new launches saw a 14 per cent spike. The nine cities witnessed the launch of about 47,000 units when compared to about 41,000 in Q1. According to the report, these numbers may shoot further up in the coming quarter as developers have been waiting for the festive season to launch new projects. Like the previous quarters, the affordable segment lead the pack with about 61 per cent new launches being made in this category.
From about 55,000 units in Q1 to about 54,000 units in Q2, homes sales in the second quarter saw a marginal quarterly decline of one per cent. Buyers' restraint in this quarter could be attributed to the approaching festive season which is expected to throw attractive discounts. Apart from that, home buyers are also expecting a further rate cut by the Reserve bank of India (RBI) . Sales are likely to shoot up further when the Real Estate (Regulation & Development) Act, 2016, is fully implemented.
"From spot discounts, flexible payment plans, waiver of registration, stamp duty and other charges to free white goods, gold coins, luxury cars, buyers across the country are spoilt for choices this festive season. This is coupled with developers focus on execution and launches only with approvals is expected to bring the fence-sitters into market," says the report.
On the other hand, home sales in Ahmedabad, Chennai, Hyderabad, Kolkata and Pune saw an uptick. At 35 per cent, West Bengal capital Kolkata saw the highest increase in sales over the previous quarter. Know more about the star real estate performers of Q2 here.
However, when it comes to absorption, Mumbai, Pune and Bengaluru stole the show. The three cities together accounted for 58 per cent of the total absorption in Q2, with Mumbai being the frontrunner at 21 per cent. According to the report, “buyers inclination continues to be higher towards projects which are showing visible construction progress”.
However, under-construction projects continued to account for nearly 70 per cent of the absorption. This is an indication developers are burning midnight oil to complete projects. By the time the Real Estate Regulation Authority (RERA) is in place, things might be right on the track for the sector.
"The impact of recent repo rate cut by the RBI, the Real Estate Act, the GST (Goods and Services Tax) Bill, relaxation of rules for REITs (real estate investment trusts) , the Seventh Pay Commission recommendations is expected to positively affect the sector over the next few quarters," says the PropTiger DataLabs report. Things will look up sooner than later.