Residential realty sees early signs of green shoots

  • 17Feb 2020

    The country's residential real estate market is beginning to look up. India's top 35 property markets, including tier I and II, recorded 3% year-on-year and 5% sequential growth in sales during the quarter ended December, data from Liases Foras Real Estate Ratings & Research shows.

    Of these, 27 cities saw an upward momentum in sales in the quarter ended December, while new launches--an indicator of confidence among builders to start marketing their projects—climbed 38% from a year ago.

    The dominance of affordable housing continued on both the counts, driven by government incentives which have not only made housing projects attractive but also bolstered the confidence of end users. Apartments priced below Rs 50 lakh accounted for over 58% of the sales in the December quarter. This cost segment saw 66% new launches, according to Liases Foras Real Estate Ratings & Research.

    ''The year 2018-19 had seen marginal decline in both sales and launches. The downward slide has now been arrested and the trend is reflecting an upward movement,'' said Pankaj Kapoor , managing director, Liases Foras Real Estate Ratings & Research. ''Time correction has improved home buyers' affordability, and with inquiry levels going up, builders have garnered confidence to launch more projects''

    Apart from government incentives, home loan rates have also been on a decline. Over the last one year, the Reserve Bank of India has reduced the repo rate by 135 basis points.

    In December, State Bank of India (SBI), the country’s largest lender, reduced its external benchmark rate by 25 basis points. The revised effective benchmark lending rate of 7.8% came into effect from January 1, 2020 and new home buyers have been getting loans at an interest rate starting from 7.9%.

    ''Gradually, the sentiment among the industry stakeholders--be it developers with new launches, fence sitters turning into the actual home buyers, or investors returning back to the sector--shows signs of resuming confidence with cascading effect of a slew of positive economic measures by the government,'' said Niranjan Hiranandani , national president of National Real Estate Development Council (NAREDCO).

    Project launches are increasing as response from homebuyers has been improving. For instance, property developer Sunteck Realty sold 125 apartments worth over Rs 200 crore at its project in Mumbai’s Goregaon suburb in December. The company recently launched another project in Naigaon near Mumbai. On Monday, Piramal Realty also announced it is selling over 300 apartments, with sales value of Rs 200 crore, at its Thane project that offers apartments starting at Rs 57 lakh.

    The highest supply in the affordable housing segment during the quarter was in Pune, followed by MMR and NCR , where the segment accounted for 75%, 49% and 82% of the total new supply, respectively.

    During the quarter, unsold stock in 35 cities increased by 4% from a year ago to 1,315,000 units. This increase can be attributed to the high number of new launches this year. Weighted average price across these markets showed a marginal drop of 1%, both on sequential and annual basis. Prices declined marginally in 16 cities and increased in seven cities, data shows.

    The government recently extended by a year the tax holiday for new affordable housing projects, a move which is expected to increase supply in this segment.





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