The Bright Patches In India's Real Estate Story In Q3

After Prime Minister Narendra Modi declared 86 per cent of the currency notes illegal on November 8, experts were united in predicting tougher times ahead for India's real estate sector. And, data show they were right. Property markets across the country are battling a slowdown for close to three years now, and analysts hoped the third quarter (Q3) of the financial year 2016-17 (FY17) would usher in recovery. Demonetisation suddenly changed the mood right when the festive spirits had begun to spread.

Sample this.

According to PropTiger DataLabs Q3 report, on a quarter-to-quarter basis:

Home sales across nine cities fell 20 per cent

New projects declined eight per cent

From 35 months in Q2, inventory overhang increased 46 months in the December quarter

But, a closer look at the data indicate not everything is wrong with the sector. Let's take note of what is going right according to the report:

PM Modi's government is betting big on affordable housing and has been announcing measures to provide impetus to this segment. This is also the segment which contributed the highest to the quarterly home sales in the quarter ending December.  The report shows that affordable housing accounted for about 54 per cent home sales in Q3. "The affordable segment is likely to continue to drive the residential real estate in the country. With the government broad-basing the scope of the PMAY (Pradhan Mantri Awas Yojana) benefits to include the urban poor, we expect the proportion of launches and sales to increase significantly in the affordable segment, particularly in the below Rs. 25-lakh-budget segment," says the report. What is more? An industry status to the segment is likely to "result in increased private participation."

When compared to the second quarter of the current financial year, the demand for affordable housing has increased in Chennai and Kolkata in Q3. According to the report, of the total property demand in Chennai, 59 per cent was in the affordable segment. In Kolkata, this stood at 46 per cent.

Sixty per cent of the total absorption in Q3 was seen in cities of Mumbai, Pune and Bengaluru. These cities also saw new launches increasing on a quarterly basis. Pune saw a 40 per cent increase in new launches during the quarter while the numbers stood at 15 per cent for Bengaluru and five per cent for India's financial capital Mumbai. This combined growth in launches and absorption indicates these markets are moving in the right direction.

Hyderabad, Kolkata and Pune are emerging as preferred cities on the liquidity front, with declining inventory overhang. Inventory overhang stood at 36 months in Kolkata, 32 months in Hyderabad and 29 months in Pune during the quarter.

As developers shifted focus towards project completion, project delivery increased nearly twice when compared to the previous quarter, says the report.

Real estate prices in Pune, Noida, Kolkata and Gurgaon declined on a yearly basis, making property in these cities cheaper. In other cities, too, prices increased only marginally. At eight per cent, Hyderabad registered the highest price appreciation.

Note: The nine cities included in the analysis 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.

*The affordable housing segment includes units priced between Rs 25 lakh and Rs 50 lakh.