Housing sales unlikely to see major turnaround this festive season

Experts say sales will be higher this time but liquidity crunch in HFCs may hinder recovery

Housing sales are unlikely to see major turnaround this festive season, though purchase transactions are expected to be better than last year, with a range of budget options and a competitive interest rate environment.

Sector experts point to a likely reduction in the disbursal target of housing finance companies (HFCs). This is a fallout of the IL&FS defaults, beside the impact from enforcing the strict Real Estate Regulation & Development Act (Rera) and the national goods and services tax (GST).

“We believe demand exists. However, sales are affected by a variety of factors such as market sentiment, effect of policy decisions, Rera, GST and demonetisation,” said Shrinivas Rao, chief executiver for the Asai-Pacific at global realty consultants Vestian. 

“The residential segment has bounced back from its lowest point but a turnaround will take more time than one festive season.” 

According to data from consultants Anarock, the real estate market across the top seven cities in the July-September quarter remained subdued. Overall sales in this period grew nine per cent from the June quarter, to 67,175 units. This tepid sales growth resulted in slower absorption of unsold inventory in the housing segment.

 “Overall unsold inventory declined by only two per cent to 687,000 units, from 702,000 units in Q2 (April-June),” the Anarock report said.

According to company officials, festive sales would be better than last year but the liquidity crunch faced by HFCs could cast a shadow over a meaningful recovery. 

“Some HFCs have reduced their disbursal target, owing to the IL&FS crisis. We have not seen any slowdown in loan disbursal (but) if that happens, it would definitely dampen sales," said a senior official of a Bengaluru-based realtor.

Also, he said, those having a cash flow problem might face project delays. These firms are dependent on non-bank finance companies to tide over liquidity problems.

The Indian housing market has been in a rough patch for three years. According to a Knight Frank report, total housing sales fell seven per cent in 2017, to 228,072 units, from 2016. This translated into a dip in new launches, at 103,570 units in 2017, a drop of 41 per cent over 2016.

However, realtors say buyers are back in the market. 

“Sales will be definitely be better in the second half (October-March) of this fiscal, with first-time home buyers driving the market. As far as liquidity crunch due to the IL&FS event is concerned,  I don't think it is a problem — there are enough of financial institutions to provide loans for home buyers," said J C Sharma, vice-chairman at realty developer Sobha. 

It sold around two million sq ft of housing in the first half (April-September), a fifth higher than the same period of 2017-18.