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| Source: Moneycontrol.com

Property launches drop to 7-year low in India; Mumbai, Chennai see prices fall by over 10%

As on December 31, the number of unsold units stood at 528,494, and going by the current rate at which properties are getting sold, it would take 11.2 quarters to sell all of them.

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The number of new housing projects launched in the top eight cities of India fell by 41 percent to 103,570 units in 2017, as against 175,822 units in 2016, according to a report by property consultant Knight Frank.

The report, titled ‘India Real Estate Residential and Office (July-December 2017)’, stated that the Indian residential housing market was hit hard by the slowdown in the wider real estate market, leading to sales and supply continuously falling every year this decade.

As on December 31, the number of unsold units stood at 528,494, and going by the current rate at which properties are getting sold, it would take 11.2 quarters to sell all of them.

The report was based on a survey conducted in eight major cities—Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, National Capital Region (NCR) and Pune.

"At the end of 2017, India’s residential sector appears to have shrunk to a fraction of its size in less than a decade. While the market has been on a steady decline, the past 12-odd months were an acid test of sorts for the real estate sector in India. Nevertheless, the near standstill triggered by demonetisation seems to have tapered with time," Shishir Baijal, chairman and managing director of Knight Frank India, said in a statement.

Prices of residential properties have fallen by an average of 3 percent across cities, with Pune registering the steepest decline of 7 percent year-on-year (YoY), followed by Mumbai, which saw prices dropping by 5 percent for the first time in a decade.

According to the report, home affordability in most cities has come closer to or has gone below the Knight Frank Affordability Benchmark of 4.5 times of an annual household income in 2017. Home affordability remains the highest in Mumbai at 7.8 times a family’s annual income, compared to 11 times annual income in 2010.

Mumbai

The number of new launches in Mumbai Metropolitan Region (MMR) has seen an 83 percent fall from its peak of 1.38 lakh flats in 2010 to a mere 23,253 flats in 2017.

In a bid to boost demand, developers in Mumbai have even offered potential homebuyers freebies like 24-month rent assurance, stamp duty waiver, no floor rise charge and waiver of other charges, along with a discount in the base price. Flats are effectively being offered at a discount of 11-12 percent on the original price.

Delhi NCR

The National Capital Region saw a 68 percent drop in sales in 2017 from its peak in 2010, and the number of new launches in the region fell by 93 percent over the same period.

Factors such as piling up of inventory, lack of consumer confidence due to litigation and infrastructure delays, and policy initiatives like RERA and GST have adversely affected market dynamics, resulting in a break of momentum for new project launches in the region.

Developers have been known to offer steep discounts in the range of 10-15 percent in the NCR region to close a deal and most of the units sold were in the micro market of Gurugram and Greater Noida, which offer greater affordability.

Chennai

The number of new project launches in Chennai fell by 86 percent between 2011 and 2017. Even sales in 2017 were 56 percent lower than they were in 2011, when the city's real estate market was its peak.

The market has been weighed down by the ongoing slowdown in the country's real estate market. Issues ranging from political uncertainty, building collapses (due to flouting of development norms), and catastrophic floods in the city have sent residential property prices in a downward spiral over the past three years.

The average drop in prices across areas in the city is around 3 percent but hard bargainers have been known to get a discount of as much as 10-15 percent from the developer. Buyers have been seen inquiring about projects nearing completion, priced between Rs 25 lakh to Rs 40 lakh.
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