Sales up 11%: Is residential real estate coming out of the note ban shock?

The real estate sector has been hit hard by demonetisation, RERA and the GST, said Ghulam Zia

Hit by the double whammy of demonetisation and RERA compliance, sales of new residential projects in the top eight cities – Ahmadabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, National Capital Region (NCR) and Pune – hit a seven-year low, suggests the latest Knight Frank report on the sector titled India Real Estate: Residential and Office.

 

According to the report, the sales in these cities hit a seven-year low between January – June 2017 (H1CY17) at 1,20,755 units – down 11% as compared to the previous corresponding period.

 

New launches, too, hit a seven-year low, crashing 41% year-on-year (y-o-y) to 62,738 units during the period under review. The decline was 9% compared to the demonetisation period of H2-2016 when 68,702 units were launched.

 

Barring Chennai, new projects dried up in all the eight cities, the report says. Ahmadabad and the NCR were the worst hit with launches falling by 79% and 73%, respectively.

 

However, when compared on quarter-on-quarter basis, the sales have grown 11%, suggesting that the real estate industry is slowly coming out of the demonetisation impact. A large chunk of this, the Knight Frank report says, is attributed to the pick-up in the affordable housing segment with 71% if the launches under the Rs 50-lakh price segment rising 52% in H1-2017 on y-o-y basis.

 

“The real estate sector has been hit hard by three tsunamis – demonetisation, RERA and the GST. Going ahead, the GST will bring more down the cost of construction for the developers, but it remains to be seen whether they will pass on the benefit to the consumers or not. RERA, on its part, will usher in transparency. Global investors are now looking at the Indian real estate sector as an attractive proposition given the regulatory / policy changes,” said Gulam Zia, executive director for advisory, retail and hospitality at Knight Frank.

 

Unsold inventory, according to the report, at 5,96,044 units was lowest across these eight cities, and witnessed a drop of 10% compared to the previous corresponding period (H1-2016). NCR, again, was the worst market with four years of unsold inventory. From peak levels inH2-2014, the unsold inventory has dipped a huge 17%, the report suggests.

 

“With the baggage of unsold inventory and the state of the residential property market, weighted average property price has stagnated. Developers in most markets have been forthcoming in offering freebies and discount for sales closure,” the Knight Frank report says