Despite offers, residential sales stay sluggish

This story first appeared in DNA Money edition on Saturday, May 4, 2013.

The residential real estate sector in India continues to witness a lull despite discounts and schemes on offer by developers.

Sales in Mumbai Metropolitan Region (MMR) grew a mere 1% to 10.45 million square feet in January-March quarter from 10.3 msf in the preceding quarter, while they declined in Hyderabad and Pune, according to Liases Foras Real Estate Rating & Research.

Only National Capital Region (NCR) and Chennai markets saw 24% and 36% rise in sales, respectively.

Pankaj Kapoor, managing director, Liases Foras, said, “Residential sales in Bangalore and Pune decline by 16% and 7%, respectively, while Hyderabad presented a gloomy picture with sales plunging 46% sequentially.”

Housing prices rose across cities, with the highest increase seen in Bangalore at 6% to Rs 5,004 in Q4 over the preceding quarter.

The Mumbai market saw price gain of 3%.

Pune and Bangalore markets suffered mainly due to escalation in prices.

The sluggish IT industry in these markets indicated the private equity investments, cash-out deals and high land valuations were the main reasons for price rise.

On the whole, the price of new supply was lower than that of existing supply.

While the Mumbai market saw maximum number of launches, NCR, Pune, Hyderabad and Bangalore showed significant shrinkage in their numbers.

“Maximum new supply in MMR is in the cost range of Rs 1-2 crore and it is affordable housing that led the pack in NCR. Other markets saw a mix of budget and affordable housing in terms of new supply,” Kapoor said.

“With unabated price rises and limited launches this quarter, it remains to be seen whether the cash strapped developers are successful in selling out their existing unsold stock with the prevalent schemes and waivers. The lowering of interest rates would also prove to be a boon in the long run,” said Kapoor.

While inventories declined in Chennai and NCR markets, Hyderabad painted a dismal picture with inventories at 49 months compared with 23 in the preceding quarter.