RERA, GST a big challenge for builders; sales may pick up during festive season
The residential market witnessed a 17 percent decline in the number of new launches since the second half of 2016 with 40,600 new units introduced in the first half of 2017 in prime cities.
RERA and GST compliance will remain a challenge for several developers for the next six months. Project launches will decline in the second half of 2017 but sales are expected to pick up during the festive season. Traction likely to be highest in the case of affordable and mid segment properties, says a report by Colliers Research.
Supply of new projects will remain restricted in the market in short to medium term but this will help to mitigate the oversupply situation in most markets. Capital values are likely to remain stable; muted sales in the primary market should keep a check on prices, it says.
As far as pace of construction of projects is concerned, developers are likely to speed up construction post RERA but uncertainty with regard to prices of construction material may impact the pace of construction in the short term, it says.
The residential market witnessed a 17 percent decline in the number of new launches since the second half of 2016 with 40,600 new units introduced in the first half of 2017 in prime cities. Mumbai and Bengaluru were at the forefront with 35 percent and 33 per cent share of the total launches respectively, while Chennai, Pune and NCR accounted for the remaining 13 percent, 10 percent and 9 percent share. The luxury market has been affected the most by the number of new launches going down considerably, it says.
Post GST, prices of the luxury housing may see an increase in construction cost as most of the luxury input materials are in higher tax brackets of 18 percent and 28 percent.
Developers are likely to remain focused on clearing their unsold inventory in under-construction and ready-to-move-in projects in the second half during the festive season in the month of September and October and offer attractive payment plans, it says.Planning To Buy A House? Here are 10 Things To Keep In Mind
“Supply of new projects will remain restricted in the market in short to medium term but this will help to mitigate the oversupply situation in most markets. After the recent bank rate cut by RBI in July 2017, we do not expect any further rate cut in second half of 2017. Also, the prices have been stabilised in most markets, and any further reduction is unlikely. Thus, buyers should expedite their buying decisions and take advantage of lower interest rate regime. The first-time homebuyers can also get benefit from the incentives under Pradhan Mantri Awas Yojna (PMAY),” says Surabhi Arora, Senior Associate Director, Research, Colliers International India.
Micro market analysis
NCR (National Capital Region)
As many as 3,900 units were launched in NCR in the first half of 2017. In Gurgaon, new launches in Gurgaon fell to an all-time low of only 3000 new units in the first half of 2017. About 90 per cent of the total unit launches were in the affordable category under the government initiative of Pradhan Mantri Awas Yojna which was specifically designed for the affordable housing segment. A majority of units launched in the first half of 2017 were priced above Rs 25 lakh.
Colliers expects new launches to remain subdued in the second half of 2017, but sales are expected to revive during the festive season primarily in the case of ready-to-move-in projects as most developers would provide discounts and attractive payment plan options.
In Noida, end-user interest in ready-to-move projects kept the market alive in the first half of 2017. Much of the demand was concentrated in newly developing sectors such as 72 to 78, 100, 107, 137 and Greater Noida West. Developers refrained from launching new projects in the first half and focused on completing existing projects. About 3,000 units received completion certificates in the last six months, while new launches dipped below 1,000.
In the first half of 2017, there was a slight improvement in supply in this market. There were 14,000 new launches (including 3,800 pre-launches) in the Mumbai Metropolitan Region (MMR) and its suburbs representing a 16 per cent increase over the second half of 2016.
About 58 percent of the new launches were in the mid-end segment, whereas luxury and high-end properties formed only 17 percent and 25 percent share in the total new launches.
With about 13,400 new unit launches in the first half of 2017, the city ranked second in the total number of residential launches in India, next to Mumbai. Most of the new launches were in the mid-segment category.
ChennaiAs many as 5,300 residential units were launched in this market, representing a rise of 19 percent from the second half of 2016.