Anjali Agarwalmoneycontrol.com
The number of new project launches in the residential segment has fallen to its lowest level in Q1, 2015 (Jan-Mar) over a period of two years. According to a report by real estate consultancy Cushman & Wakefield, with a total residential launch of 24,700 units, the decline was recorded to be over 50 percent with 55,500 units launched in the same quarter in 2014.
The decline in new launches have come on the back of less-than-expected sales in the residential sector, due to which developers are holding back on new launches and instead focusing on completing their existing projects. In addition, with a few key cities planning to roll out new development plan (DP), developers are refraining from launching new projects until the new regulations come into effect.
Also Read: Realty Bill to hit Mumbai property market hardest: Broker
“Cost of creating new projects has been on a steady increase as input costs including cost towards statutory approvals from state government, cost of land, land development have been rising," says Shveta Jain, ED, Transaction Services, Residential, Cushman & Wakefield
"In addition, whilst the market sentiments are positive and the enquiries have increased, conversion of interest to sale is low. Developers are increasingly concentrating to deliver their projects and ensure timely exit for themselves as well as their investors.”
She further added that many developers are taking time to restructure their debts and financial liabilities by ensuring that expensive debts are replaced with cheaper debt and attract private equity capital wherever possible. "The primary concern for many developers is that they have either over leveraged their current projects while they are unable to utilise their land bank or future development capabilities to raise more capital. Therefore, there is concentrated effort towards keeping debt exposure low by lowering the number of launches, except in high demand location where sale activities are high and fast paced," Jain added.
Among new unit launches during the first quarter, only the high-end segment registered a YoY growth of 26 percent. While all other segments have seen considerable decline, affordable housing segment units reduced significantly by over 80 percent. Developers are inclined towards the high-end segment where profit margins are typically higher, as builders look to offset increasing land and development costs.The realty industry has also raised concerns over shelving of the proposed Mumbai Development Plan (DP) 2034, saying this may further delay new launches which will ultimately result into a shortage of housing stock.
Also Read: Realty industry fears delay in projects as Maha scraps DP
"Due to uncertainty, developers will be unable to launch new projects. I hope that the new plan is implemented at the earliest to avoid further adverse impact on Mumbai's real estate and its infrastructure," CBRE South Asia Chairman and Managing Director Anshuman Magazine said in an interview to CNBC-TV18.
According to industry experts, the DP lacked a balanced link with the existing infrastructure conditions of the city.
Gulam Zia, ED, advisory, retail and hospitality, Knight Frank believes sellers don't sell land as they don't know the real value of their asset and the buyers too shy away from acquisition for the same reason. "This whole confusion results in no new launch for almost about a year or two," said Zia in an interview to CNBC-TV18
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
