Why FY16 May Mark An End Of Home Sales Slump

It was not a good year for developers in terms of property sales volume. In the financial year 2015-16 (FY16), home sales across the nine major cities of the country saw an overall drop of 33 per cent year-on-year (y-o-y), according to a PropTiger DataLabs report. The nine cities include 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.

Battling a slump, developers were, in fact, forced to keep property prices unchanged, while they came up with innovative discount offers to push sales. Running low on money, several developers also failed to deliver projects in time and shelved new launches. New launches across these cities touched a new low, and fell as much as 46 per cent y-o-y, with the national capital region (NCR) seeing the biggest fall at 64 per cent.

While a sense of gloom unfurled posing newer challenges for the government, investors and developers alike, efforts to fight back got a renewed zeal.  A look at why FY16 might put a full stop to these dwindling sales.

A helping hand

The many measures announced in the Budget 2016-17 to push growth in the sector are in the process of getting implemented. They are going to have a long-run positive impact on the market sentiment. The Centre also recently notified 69 of the 92 Sections of the Real Estate (Regulation and Development) Act, 2016. The legislation, which would put in place the Real Estate Regulatory Authority to address any concern, would speed up almost everything in property transactions. Civic authorities across major cities are also simplifying rules to make real estate transactions much simpler. Financial institutions, on their part, have been passing on the full benefits of several cuts in the home loan interest rates by the Reserve Bank of India. They are also coming up with easier home loan schemes. After all, their own profit margins depend on the loans they distribute. All these government-backed efforts would ensure buyers come back to the market, thus, increasing sales figures.

Homing in on sales

The report shows the inventory pile-up in the nine cities has been swelling, with Mumbai, Bengaluru and Noida contributing the most to the increase. Before developers begin to plan their new projects, they would be eager to sell of the old stock. To achieve this, they may come up with fresh marketing strategies and ideas to boost sales. In FY16, too, developers came up with several discount offers and innovative schemes to achieve this and have been successful in achieving the target to some extent.

Consumer is the king

As property prices reached obnoxious levels in the past decade, buyers' confidence took a hit. While there are multiple reasons making things worse for the sector, the primary cause of the current slump is the buyers' passive approach towards the market and their shaken confidence. This is the reason why authorities, investors and developers have been doing their level best to gain the buyers' confidence back. This may have yielded a positive result, for a fourth quarter of the financial year by PropTiger DataLabs showed end users were driving the residential demand, with 97 per cent of the total demand coming from them. When the consumers take charge, the real estate will again bask in the glory of its success.