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New residential unit launches in Ahmedabad declined by 24 per cent in the first quarter of calendar year 2015 as against the corresponding period last year, the latest report released by real estate consultancy Cushman & Wakefield stated. As compared to 2300 units launched in Q1 2014, Ahmedabad saw only 1750 units being launched in Q1 2015.
As per the report, Q1 2015 (Jan - Mar) saw the lowest number of project launches over a period of two years. With a total residential launch of 24,700 units, the decline was recorded to be over 50 per cent year-on-year (y-o-y) over same time last year.
Ahmedabad contributed seven per cent to the total unit launches across top eight cities during the quarter. Western peripheral locations such as Bhopal, South Bhopal and Ambli comprised nearly half of the total launches in the city during the quarter. Around 65 per cent of units launched in the first quarter of 2015 belonged to the mid segment and an additional 33 per cent were in the high-end segment.
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However, in terms of number of projects launched, Ahmedabad saw an increase of 10 per cent in Q1 2015 over the same period last year. Quoted capital values across various locations and segments continued to maintain status quo due to high levels of unsold inventory. Developers continued to price their projects in the existing ranges to remain competitive in a buyer-driven market. Quoted capital and rental values are expected to remain stable across submarkets in the short term, considering the existing supply situation.
According to Cushman & Wakefield, the decline in new launches have come on the back of less-than-expected sales in the residential sector, due to which developers are holding back on new launches and instead focusing on completing their existing projects. In addition, with a few key cities planning to roll out new development plan (DP), developers are refraining from launching new projects until the new regulations come into effect.
"Cost of creating new projects has been on a steady increase as input costs including cost towards statutory approvals etc. from State Government, cost of land, land development have been rising. In addition whilst the market sentiments are positive and the enquiries have increased, conversion of interest to sale is low. Developers are increasingly concentrating to deliver their projects and ensure timely exit for themselves as well as their investors," said Shveta Jain, Executive Director, Transaction Services, Residential, Cushman & Wakefield.
Among new unit launches during the first quarter, only the high-end segment registered a y-o-y growth of 26 per cent. While all other segments have seen considerable decline, affordable housing segment units reduced significantly by over 80 per cent. Developers are inclined towards the high-end segment where profit margins are typically higher, as builders look to offset increasing land and development costs.
"Many developers are taking time to restructure their debts and financial liabilities by ensuring that expensive debts are replaced with cheaper debt and attract Private Equity capital wherever there is a possibility. The primary concern for many developers is that they have either over leveraged their current projects while, they are unable to utilise their land bank or future development capabilities to raise more capital. Therefore, there is concentrated effort towards keeping debt exposure low by lowering the number of launches, except in high demand location where sale activities are high and fast paced. Selectively inventory sales to PE at 20-25 per cent discount is also being witnessed," said Jain.
