Unsold Inventory: Learnings From PropTiger Q2 Report FY'16

To many home buyers, it may be surprising that in large Indian cities, unsold ready-to-move-in inventory is low. But according to PropTiger Datalabs report for second quarter of financial year 2016 (Q2'FY16), Realty Decoder-Q2'FY16, ready-to-move-in unsold inventory in major Indian cities is in the range of 4-7 per cent.

Here are five facts that the report reveals about unsold inventory in Indian cities:

• Unsold inventory is falling. Anurag Jhanwar, Head , Consulting and Data Insights, PropTiger.com, says, “The silver lining was that number of units sold in the quarter continued to exceed the number of units launched, and hence, the total inventory outstanding is reducing quarter-by-quarter, albeit by only 5,000-12,000 each quarter.” Though the inventory overhang is rising, much of these apartment units are in different stages of completion. Affordable segment is the most hit, as 52 per cent of the total unsold inventory is in the affordable segment (units priced below than Rs 50 lakh), 20 per cent is in the mid-segment (units priced between Rs 50 lakh – Rs 75 lakh), and 19 per cent is in the luxury segment (units priced greater than Rs 1 crore).

• The number of unsold units does not tell us much about how high the demand for homes is in a city. In numbers, Mumbai, Bengaluru, and Noida have the highest unsold inventory. But if you look at the percentage of ready-to-move-in inventory in Mumbai, Bengaluru, and Noida, it is 4 per cent, 6.8 per cent and 1.9 per cent respectively. In the affordable segment, Noida has more unsold units in the affordable segment than any other city. But, if you look at Gurgaon and Mumbai which has a large number of unsold units, much of the unsold inventory is in the luxury segment.

• Many cities with the lowest figures in unsold inventory have the highest ready-to-move-in unsold inventory as a fraction of existing homes. Ahmedabad and Hyderabad have the lowest number of units in the unsold category. But and Hyderabad have the highest ready-to-move-in unsold inventory as a percentage of existing homes, at 13.5 per cent and 11.7 per cent respectively.

• In this quarter, inventory overhang was the highest in Capital gion (NCR) and Mumbai. In , it stood at 54 months (overall overhang) and in Mumbai, it was 43 months (overall overhang). In , inventory overhang was 59 months. In and Pune, it was low, at 29 and 24 months, respectively. Pune has the lowest inventory overhang, and apartments in Pune are not in advanced stages of construction.

• In the first quarter of the financial year 2014, unsold inventory older than three years was merely 8 per cent. In Q1'FY15, this went up to 12 per cent. In Q2'FY16, this was as high as 20 per cent. Noida and Mumbai has the highest unsold inventory that is older than three years, at 33 per cent and 28 per cent, respectively. Sohna and Bhiwadi has the lowest unsold inventory older than three years, at 9 per cent and 8 per cent, respectively.