Developers Re-strategise To Revive Sales

Unsold inventory in the Indian real estate market has piled up across many cities. This drop has had a direct impact on the number of new project launches in India, which has dropped significantly, especially in those very cities that have excess inventory.

According to a report by PropTiger Data Labs, the first quarter of 2015 has continued to see 47 per cent drop in new unit launches. Though the new launches are expected to gain momentum during the festive season in October.

The report shares the nine cities that were affected the drop are Mumbai (including Navi and Thane), Pune, Noida (including Greater and Yamuna way), Gurgaon (includes Bhiwadi, Dharuhera and Sohna), Bangalore, Chennai, Hyderabad, Kolkata and Ahmedabad. The new launches dropped from 5.4 lakh in first quarter 2014 to 2.5 lakh in first quarter 2015.

The report by PropTiger Data Labs also shows that, of the nine cities, Mumbai, Bangalore and Noida have the most unsold inventory, accounting for 60 per cent of the total unsold inventory. While the highest number of (15 per cent) ready-to-move-in apartments in Ahemdabad fall under the category of unsold inventory.

Unsold inventory
As many as seven lakh homes are unoccupied across the country. Around 14 per cent of that unsold real estate stock is more than three years old, and Noida contributes majorly to this number. Almost half of unsold inventory was in the under Rs 50 lakh category showing that slowdown is highest in the middle-class and lower middle-class category homes. This is in spite of the fact that Mumbai and Gurgaon have the least number of affordable units.

On the other hand, the demand of apartments in India priced between Rs 25-50 lakh has grown to maximum. The major slowdown, now, is in the demand for premium and luxury apartments in India.

Worst-hit cities
Gurgaon is the worst-hit in terms of fewer realty project launches which went down by 68 per cent. More so because there are least number of affordable apartments in Gurgaon. New launches in Hyderabad too went down by 68 per cent due to the dual effect of state division as well as unsold inventory. Thane, which is a suburb of Mumbai, too was just as affected as the launches here went down by 62 per cent as well as Bhiwandi and Ahmedabad which is at around 61 per cent.
Drop in sales
The fall in new project launches coincides with drop in absorption. Gurgaon saw a 55 per cent drop in sales followed by Bhiwadi at 47 per cent possibly due to slowdown in sar area after the sar expressway construction had faced hurdles. Sales in Hyderabad and Ahmedabad also went down by 45 per cent and 44 per cent, respectively. Sales of apartments in Navi and Noida went down by 43 per cent as well.
According to the PropTiger Data Labs report, the sales have dropped because the home buyers have been holding back purchases in the hope of price reduction. However, since unsold inventory has marginally decreased, prices are likely to stay stable.

Smaller projects with fewer units
The growing inventory and drop in sales, have led the developers to strategically design and launch the projects. For instance, the builders are now choosing to launch buildings with fewer floors and apartments. The average number of units per project is also declining. al estate companies are also converting 2BHK apartments in India to 1BHK apartments. This move, the builders hope, will allow them to sell fewer units faster due to slowing demand.

(Katya Naidu has been working as a business journalist for the last nine years, and has covered beats across banking, pharma, healthcare, telecom, technology, power, infrastructure, shipping and commodities)