Residential unit launches in March quarter hit 4-yr low

Bengaluru shows sharpest drop

Though 2015 was projected to be a turnaround year in the property market, there are no signs of revival in the residential segment yet. Numbers show home launches have dropped drastically across major cities from that in the previous year. In fact, compared with the past three years, residential unit launches were the lowest in the first quarter of this calendar year.

While data for March is still being calculated, the January-February home supply figures for 2015 bring out a wide gap in supply, compared with the previous years. According to PropEquity Research, a consultancy specialising in real estate analytics, only 3,627 units were launched in the National Capital Region (NCR) during January-February 2015, against 20,093 in the first three months of 2014 and 23,508 during the corresponding period in 2012. In the Mumbai Metropolitan Region (MMR), the number for the first two months of this calendar year was 8,904 against 21,687 in the first quarter of 2014 and 40,712 in the same period in 2012, which was considered a slump year in property sales.

In the south, Bengaluru, which is at the centrestage for both residential and office real estate, has also gone very slow on home launches. January-February 2015 unit supply in Bengaluru was pegged at only 1,966, against 21,562 in the first three months of 2014 and 12,722 in the corresponding period of 2012. Chennai numbers declined to 1,944 in January-February 2015 against 8,066 in the first quarter of 2014 and 11,266 in the corresponding quarter of 2012. Hyderabad slumped to just 943 in January-February 2015, against 5,994 in the January-March period of 2014 and 5,177 in 2012. Pune, a growing property market, showed a decline to 2,179 in the first two months of 2015 from 12,923 in the first quarter of the previous year and 22,264 in 2012.

Kolkata was the only city where the decline in launches was marginal, to 2,725 in January-February 2015 from 5,373 in the first quarter of 2014 and 4,699 during the corresponding period of 2012.    

A monthly averaging of the numbers for the first quarter for four years clearly reflects the drop in launches. For instance, in NCR, home launches are down 73 per cent from 2014 to 2015 and 80 per cent from 2012 to 2015.  In Mumbai, it has slipped 52 per cent in a year and 67 per cent since 2012. The sharpest fall is in Bengaluru at 86 per cent from the previous year and 76 per cent since 2013. Chennai has gone down 63 per cent from 2014 and 74 per cent when compared with 2012. Hyderabad launches have decreased by 66 per cent compared with last year and 72 per cent since 2012.

Pune's slide is the second-highest, after Bengaluru, at 74 per cent from 2014 and highest at 87 per cent since 2012. Kolkata's slipped just 23 per cent compared with last year and only 13 per cent compared with 2012.              

"Our research has shown that there is a supply and demand mismatch of residential projects in India as current market is already a buyer's market," Samir Jasuja, founder and chief executive of PropEquity, said. He explained that many developers, who launched a slew of projects in 2012 and 2013, are now holding back new launches as they are looking at first clearing previous inventory.

Sanjay Dutt, executive managing director, Cushman & Wakefield (South Asia), also reasoned that launches are down because of a combination of reasons-low sales, liquidity issues and high inventory of unsold stocks.  

A Knight Frank India report released earlier this year, showed NCR had an inventory of about 190,000 units as of December 2014. The report said it would take at least 14 quarters to sell that inventory. Similarly, Mumbai had an inventory of 12 quarters, Hyderabad eight quarters, while Pune, Chennai and Bengaluru were with seven quarters of inventory each.     

Markets in MMR and NCR are already at their lowest levels with very few transactions taking place even in the resale market due to expectation of further price correction, according to Jasuja.

"This trend is expected to continue for the next few quarters and after that, the market will start going up."