India’s 9 Key Markets Have Unsold Homes Worth Over Rs 6 Lakh Cr: PropTiger Report

If the much-awaited festive season, with various measures launched to revive housing sales during the October-December period of 2019, left the Indian builder community high and dry, the Coronavirus outbreak came as a bolt from the blue, diminishing any hopes of revival in the near future.

After falling 30 per cent year-on-year(y-o-y) during the festive season, home sales in India’s nine prime residential markets fell by 26 per cent annually in the last quarter of FY20, data available with PropTiger.com show, as the country entered into a 40-day lockdown, to stem the number of COVID-19 infections. To restrict losses and in keeping with the restrictions imposed due to the lockdown, the developer community has put off plans to launch new projects - there was a 51 per cent fall in new launches in the March quarter.

The unsold stock is another problem altogether.

PropTiger.com data show that India’s nine prime residential markets have an inventory stock of nearly 6 lakh housing units, worth approximately Rs 6 lakh crore. At the current sales velocity, it could take builders 27 months to sell this stock.

Nevertheless, this stock that consisted of 8.66 lakh units a year ago has reduced by 15 per cent during the March quarter of FY20. However, considering the steps launched by the government to boost the sector through the revival of sales in the past one year, this may not be enough for builders to survive, at a time when sources of liquidity are seen as drying up.

More importantly, half of this inventory stock is affordable homes—units priced up to Rs 45 lakh that enable buyers to enjoy several tax rebates under various government schemes.

The mounting pressure

Note: Inventory overhang is the time builders are expected to take, to sell off the existing stock, at the current sales velocity.

Source: PropTiger DataLabs

Past efforts

From increasing the tax deduction limit on the loan component to Rs 3.50 lakh on affordable housing, to ushering in a lower interest rate regime, the centre has been busy announcing measures to improve sales. With buyer purchase preferences inclined towards ready-to-move-in homes, builders were also seen offering discounts on such units during the festive season (stamp duty, GST waiver, etc.) despite being under tremendous monetary pressure. Apart from the fact that lakhs of crores are stuck in this unsold stock, builders also have to pay taxes on the notional annual value of unsold inventory if it is over two years old.

In the wake of the contagion and its cascading effect, shedding the unsold stock might become even more challenging for real estate developers in India.

You may also like to read: Taxing Inventory Will Burden Builders Further

Capital problem

Numbers indicate that the Mumbai Metropolitan Region (MMR) currently has the highest unsold stock in the country, at 2,79,229 units, followed by Pune at 1,38,781 units.

The three residential markets in the NCR, Noida, Greater Noida and Gurugram, have a combined unsold stock of 1,02,317 units, data show. Noida has the biggest ready-to-move-in unsold sock—40 per cent of unsold homes here are ready homes. More than 60 per cent of the affordable stock is concentrated in Ahmedabad, Kolkata and Pune markets.

At 57 months, builders in Greater Noida have the highest inventory overhang.