Despite the fall in absorption rate, the residential prices have remained sticky
According to Jones Lang LaSalle, India, the absorption rate of residential houses in India in the first quarter of this financial year dipped from 14.9% to 13.6% in the second quarter of this financial year.
In other words, out of every 100 houses available for sale, only 12 get ideally sold. Which means, developers will further require 8 more quarters or two years (because 12.5% houses sold in 3 months) to sell their unsold homes. Hence, a lower absorption rate means developers requiring more time to sell houses.
Despite the fall in absorption rate, the residential prices have remained sticky and are expected to remain at same levels till December of this calender year.
The absorption rate in the ongoing October-December quarter is expected to remain between 14 and 15%, but the industry is still not expected to witness any price changes. This will leave developers with lot of unsold inventory on their books.
“During such times, developers usually sell only those many flats which will help them procure enough to work on their other projects. This helps them infuse money into their other projects leading to supply remaining constant or even more at such times. Hence, developers prefer this method than selling flats at discounted prices. This inturn enables developers to keep their residential prices unchanged,” says Ashutosh Limaye head research & real estate intelligence services, Jones Lang LaSalle, India.
'The ongoing third quarter being the festive season, is likely to impact the fourth quarter's absorption rate positively. Hence, the current quarter will decide if there can be any correction in the residential prices early next year,” adds Limaye of Jones Lang LaSalle, India.
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