Unsold Inventory Hits Two-year Low in Q4 2018 - ANAROCK

/ -- Significant drop from 47 months of inventory overhang in Q4 2017

NCR still constitutes 52 months' inventory overhang; Bengaluru & Hyderabad at all-time low of 17 months each

Sales exceed number of units launched second year in a row

Avg. property sizes across top 7 cities shrinks by 8% compared to 2017 & 19% since 2016

Despite all headwinds including the liquidity crisis in 2018, housing sales rose by 18% and new launches by 33% across the top 7 cities compared to 2017. ANAROCK Propertty Consultants' research confirms that residential inventory overhang reduced to a year-low from 47 months in Q4 2017 to 33 months in Q4 2018 across the top 7 cities.

 

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The DeMo effect in late 2016 had pushed up unsold inventory to 47 months in Q4 2017 from 40 months in Q4 2016. An inventory overhang of 18-24 months signifies a fairly healthy market.

"Having absorbed a lot of the impact of various structural changes, the Indian real estate sector seemed poised to grow from the previous year," says Anuj Puri, Chairman - ANAROCK Property Consultants.

"However, the issue of stalled projects and liquidity crisis continued to confound the housing sector in 2018, though it continued its transition into a relatively more transparent and end-user driven market. End-users accelerated growth while investors shifted focus towards alternate asset classes such as commercial, retail and warehousing, which did fairly well during the year."

"Builders very extremely cautious about launching projects to align supply with the existing buyer demand. This helped sales pick up momentum in 2018. Simultaneously, builders reduced the average property sizes to align their offerings with the highly-incentivized affordable housing bracket. The affordable segment spearheaded residential growth in 2018."

2018 New Launch Tracker

The top 7 cities recorded new unit launches of around 1,95,300 units in 2018 against 1,46,860 units in 2017. The affordable segment comprised the lion's share at 40%. Major cities contributing to 2018 new unit launches included MMR, NCR, Pune, and Bengaluru, together accounting for 74% new supply.

Bengaluru saw approx. 34,880 units launched in 2018 - a whopping 91% increase from 2017. More than 80% new supply added was in sub Rs. 80 lakhs budget segment. MMR added approx. 59,930 units in 2018, a yearly increase of 12% over the preceding year. Approx. 40% new supply was added in the affordable segment. Chennai added new supply of 15,680 units in 2018 compared to 7,940 units in 2017 - a massive rise of 98%. Approx. 49% new supply was added in the affordable segment. Pune added 24,430 units in 2018, a significant increase of 29% over 2017. More than 90% new supply was added in sub Rs. 80 lakhs budget segment, out of which 52% comprised of affordable projects. Hyderabad added 17,290 units in 2018, a significant increase of 43% over 2017. Approx. 58% new supply was added in the budget segment of Rs. 40- 80 lakhs in 2018. NCR added approx. 26,010 units in 2018, a yearly increase of 17% over previous year. Approx. 47% new supply catered to the affordablesegment Kolkata added approx. 17,290 units in 2018, a significant increase of 25% over 2017. Approx. 73% new supply was added in affordablesegment.

City-wise Supply (In Units) and Y-o-Y & Q-o-Q percentage change

%Change

%Change (2017

Q4

Q4

(Q4 17 Vs

Cities Name

2018

2017

Vs 2018)

2018

2017

Q4 2018)

NCR

26,010

22,180

17%

8,800

3,770

133%

MMR

59,930

53,700

12%

16,590

12,050

38%

Bengaluru

34,880

18,290

91%

11,610

3,510

231%

Pune

24,430

18,950

29%

6,730

2,720

148%

Hyderabad

17,290

12,110

43%

3,940

3,700

7%

Chennai

15,680

7,940

98%

3,900

970

301%

Kolkata

17,080

13,700

25%

4,030

1,660

145%

Total

1,95,300

1,46,870

33%

55,600

28,380

96%

Source: ANAROCK Research

The GST Debacle Haunted 2018 - GST on under-construction properties was a major hurdle in 2018, dissuading buyers from purchasing properties that fell under its gambit. The twin issues of stalled/delayed projects and financial stress within residential real estate augmented interest for ready-to-move-in properties with most buyers preferring to buy what they can see.

Shrinking Flat Sizes - Builders submitted to consumer demand and offered more property options in the affordable segment, along with an overall reduction in average property sizes across segments, to fit the affordability quotient. At the pan-India level, average property sizes in 2018 shrunk to 1,160 sq. ft. from 1,260 in 2017. Surprisingly, Bengaluru saw maximum decline of 13% in average property sizes in 2018, followed by MMR and Kolkata with 11% each. On a two-year basis, the decline in housing sizes was nearly 23% in most key cities, except in Chennai and Bengaluru.

Sales Exceeded New Supply - Another significant trend witnessed is that housing sales numbers have exceeded new launch supply consecutively in 2018. Prior to 2017, sales numbers were far lower than new launch supply. This definitely indicates that the market is managing to shed unsold stock.

In the first three quarters of 2018, sales numbers rose q-o-q, but Q4 saw a mere 4% rise as against Q3 2018. Sales growth was essentially marred by the NBFC crisis in the last quarter of 2018.

Consolidation via mergers and acquisitions dominated all sectors including residential during the year, completely redefining the definition of 'financial health' among players. This trend will continue in 2019 as well.

2018 Housing Sales Tracker

Around 2,48,310 units were sold in 2018 with NCR, MMR, Bengaluru and Pune together accounting for 82% of the sales.

Bengaluru recorded the highest jump in sales in 2018 as compared to other top cities. City sales increased by 33% - from 43,130 units in 2017 to 57,540 units in 2018 due to buoyant commercial activity and realistic property prices dictated by end-users. NCR housing sales increased by 18% - from 37,610 units in 2017 to 44,300 units in 2018. Despite rising sales, the region continues to grapple with the issue of stalled/delayed projects. Pune sales rose by 12% - from 30,730 units in 2017 to 34,460 units in 2018. MMR sales rose by 17% - from 56,970 units in 2017 to 66,440 units in 2018 - the highest number of units sold in 2018. Chennai sales declined by 17% over the previous year and was recorded at 11,340 units in 2018. Hyderabad sales significantly increased by 16% over the previous year with 18,630 units sold in 2018. Kolkata saw approx. 15,600 units sold - a yearly increase by 21% over 2017

City-wise Absorption (In Units) and Y-o-Y & Q-o-Q percentage change

% Change

% Change

(2017 Vs

(Q4 17 vs

Cities Name

2018

2017

2018)

Q4-2018

Q4-2017

Q4 18)

NCR

44,300

37,610

18%

12,730

8,200

55%

MMR

66,440

56,970

17%

20,220

12,460

62%

Bangalore

57,540

43,130

33%

14,820

10,250

45%

Pune

34,460

30,730

12%

9,940

6,310

57%

Hyderabad

18,630

16,110

16%

4,990

3,920

27%

Chennai

11,340

13,680

-17%

3,290

2,600

26%

Kolkata

15,600

12,900

21%

3,860

2,400

61%

Total 2,48,310

2,11,130

18%

69,850

46,140

51%

Source: ANAROCK Research

Overall Unsold Inventory till Q4 2018

Unsold inventory declined by nearly 7% - from 7.26 lakh units in Q4 2017 to 6.73 lakh units in Q4 2018 and 14% from 7.90 lakh units in Q4 2016. An uptick in the traction of ready-to-move-in and nearing-completion properties helped developers clear their existing stock.

City-Wise Unsold Inventory (In Units) and Q-o-Q percentage change

Cities Name

Q4-2018

Q4-2017

% Change (Q4 17 Vs Q4 2018)

NCR

1,86,714

2,05,000

-9%

MMR

2,19,491

2,26,006

-3%

Bangalore

73,337

96,000

-24%

Pune

87,403

97,424

-10%

Hyderabad

25,956

27,289

-5%

Chennai

30,837

26,499

16%

Kolkata

49,471

48,000

3%

Total

6,73,208

7,26,218

-7%

Source: ANAROCK Research

Price Movement

Residential property prices across the top 7 cities increased by a mere 1-2% in Q4 2018 when compared to the previous year Q4 2017 - except Chennai,where prices decreased by 1% and Kolkata, where they remained stagnant.

City-Level Price Trend (INR/Sqft)

Cities Name

Q4 2018

Q4 2017

% Change (Q4 17 Vs Q4 2018)

NCR

4,565

4,520

1%

MMR

10,550

10,337

2%

Bangalore

4,925

4,810

2%

Pune

5,480

5,410

1%

Hyderabad

4,150

4,100

1%

Chennai

4,900

4,955

-1%

Kolkata

4,375

4,430

0%

Pan-India

5,564

5,509

0.01%

Source: ANAROCK Research

Outlook 2019

Despite the numbers suggesting a positive outlook for 2018, the picture may not be as rosy in at least the first half of 2019. The liquidity crisis - further aggravated by the NBFC issue - has caused mayhem in the industry and early 2019 will continue to see its spill-over effect.

Even while various reforms strove to eliminate unscrupulous players from the real estate ecosystem, the issue of stalled projects needs to be seriously addressed by the Government, or else the recovery of the residential sector will remain compromised.

If developers continue to focus squarely on their core business, remain customer-centric and launch the right products at the right prices in 2019, the residential segment will gain traction. Else, the sector will have to solely rely on petty sops offered by the Government to intermittently boost sales.

About ANAROCK Property Consultants Pvt. Ltd.:

The ANAROCK Group is India's leading specialized real estate services company with diversified interests across the real estate value chain. Anuj Puri, the Group's Chairman, is a highly-respected industry veteran and India's most prominent thought leader in the real estate domain. He has over 27 year's expertise in leveraging Indian and global real estate opportunities.

ANAROCK Group's key strategic business units are Residential Broking & Advisory, Retail Transactions & Advisory, Capital Markets, Hospitality, Investment Management, and Research & Consulting. ANAROCK's growing business teams account for 1,500 of the real estate industry's most qualified and experienced professionals. With operations across all major Indian markets and dedicated services in Dubai, ANAROCK also has global business coverage via over 80,000 hand-picked channel partners. Every facet of ANAROCK's rapidly-expanding business portfolio is governed by the Firm's core assurance to its clients and partners - Values over Value.

Visit: http://www.anarock.