Home Sales Up 8% in Q1, Launches Rise 14%: DataLabs Report

Residential real estate sales in the first three months of this financial year (FY17) grew by eight per cent over those in the last quarter of FY16, show data compiled by PropTiger DataLabs for the nine major cities of India. In a clear sign of a comeback, both sales and new launches saw an uptrend during the quarter.

According to the latest PropTiger DataLabs report, launches across the major cities during the first quarter (Q1) were 14 per cent higher than those in the previous quarter. The nine cities covered in the report 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.

What drove sales in Q1?

Even as all efforts were made by the government and developers to revive the sector, the fourth quarter data had shown homes sales declining on a quarter-to quarter (QoQ) basis, albeit at a low rate of three per cent . However, an eight per cent QoQ increase in Q1 is an indication that the recovery is going to be slow but steady. From 51,500 units in Q4, sales went up to 55,500 in Q1. Among the key reasons seen behind this uptrend are the passage of the Real Estate (Regulation & Development) Bill, 2016, and the several provisions made in the Union Budget FY17 for the real estate sector. Also, the Centre recently announced a major pay hike for central government employees and pensioners by implementing the suggestions of the Seven Pay Commission. That is not all. Civic bodies across the nine cities have also been doing their bit to encourage home buyers to come back to the market. Authorities in Gurgaon, for instance, recently announced a reduction of 15 per cent in circles rates across segments to make real estate more affordable.

Key findings of the DataLabs report

Sales drivers: The sales volume during the first quarter was primarily driven by Bengaluru, Pune and Mumbai, which together accounted for 61 per cent of the total sales across the nine cities. In Fact, Mumbai, one of the worst hit during the slowdown that the real estate sector suffered for about two years, contributed the most (23 per cent) to the total sales volume.

Bright spots: The Ahmedabad and Hyderabad markets, which emerged as bright spots in several earlier quarterly reports, too, performed exceedingly well during the first quarter. While they recorded their highest sales increase of the past eight quarters, the two cities also saw property prices going up. In Ahmedabad, quarterly sales grew over 61 per cent, and property prices saw year-on-year growth of seven per cent. Hyderabad, similarly, saw a y-o-y price increase of eight per cent, and Q-o-Q home sales growth of over three per cent.

Bounce-backs: Gurgaon and Noida, clearly the worst-hit markets during the recent slump, made a strong comeback, reporting home sales growth of 42 per cent and 20 per cent, respectively. For Noida, this was the highest increase rate in four quarters, while for Gurgaon it was the highest in seven quarters.

What triggered fresh launches?

More than homes sales, new launches across major real estate hotspots had seen a weak phase in the past couple of quarters. That seems to be over now, as new unit launches during Q1 touched 41,000, compared with 36,000 in Q4 of FY16. The demand for affordable housing in the country was evident from the fact that 53 per cent of the total launches were made in the affordable segment.

According to the DataLabs report:

Major launches: Ahmedabad reported a whopping 413 per cent year-on-year growth in launch of new units -- from 840 units in the first quarter of FY16 to 4,312 units in the first quarter of FY17. Gurgaon (30 per cent) , Mumbai and Pune (both 58 per cent) also registered a healthy Q-o-Q growth in new launches.

Range-bound? The report, however, says that the surge in launches is likely to be range-bound, as developers look to align supply to meet the Real Estate Regulatory Authority (RERA) directives.