It may seem as if the lean period in Indian real estate market could be turning the corner. Based on Knight Frank’s ninth edition of its flagship half-yearly report on Indian Real Estate for the period January-June 2018 (H1), the residential real estate market seems to be making a comeback from the slowdown caused due to ‘testing triplets’ of demonetisation, RERA and GST.
Knight Frank, an independent property consultant which routinely releases its analysis of the real estate markets around the world and India released this report on July 25th, a day when the Maratha Kranti Morcha called for a state and city wide bandh to protest farmer deaths in the Marathwada region. Most retail establishment across Mumbai were shut for the day and roads were remarkably empty for a city that experiences traffic jams all day. Thankfully the bandh was called off by evening so that people could get home safely. However, the scenario sums up the developmental issues our country and leading cities face, in the backdrop of which the positive news of renewed growth in real estate and its ancillary sectors is a much needed balm.
According to Knight Frank report which analyses the 8 cities of Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, NCR and Pune, there was a 46% YoY increase in units launched during the H1 period, while the increase in units sold was at 3% YoY in the same period. This marks the highest level of launches and sales in the last 18 months since demonetisation was rolled out at 124,000 and 92,000 units respectively.
Mumbai saw a staggering 128% YoY rise in residential launches, accounting for 40% of the total launches across the 8 cities covered in the report. However, the sales grew just 1% casting a shadow on positive sentiments. By contrast, Bengaluru saw a modest but very positive 11% rise in launches and even better 22% increase in sales of residential units. Other markets such as Pune, NCR and Hyderabad also saw a boost in the percentage increase of launches.
The key contributor to Mumbai seeing launches to the tune of 35,974 units is the dumping ground reprieve in BMC region and the parallel launches of mega projects in the peripheral suburbs of the financial capital. Dr. Samantak Das, Chief Economist and National Director – Research at Knight Frank noted, “Most developers focused on reducing apartment sizes of their new launches. Accordingly, we have seen shrinkage of 12% in apartment sizes across MMR, with some premium markets witnessing reduction of as high as 31%.”
Some of the key takeaways of the report were:
- Mumbai saw the most number of launches at 128% YoY while NCR and Pune witnessed more than 75% growth.
- Most launches were in the lower ticket size range wherein Bengaluru and Mumbai witnessed significant supply of units priced under INR 50 lakh and 1 crore, respectively.
- Average size of units in MMR shrink by 12% between 2013 and 2018.
- Mumbai, Pune and Kolkata saw prices of residential units drop by 9%, 8% and 8% respectively. The effective price drop was 10-15% after factoring in developers’ sops such as waiver of GST and stamp duty, and no floor rise cost to customers.
- Despite growth in launches, government reforms and reduction in prices, sales continue to stagnate across markets. Bengaluru’s positive growth however prevents a pan-India decline in sales.
- The growth-resistant state of the sector until now has also resulted in a higher Project Life Cycle (PLC) as the Quarters-to-sell (QTS) inventory remains stagnant at around 11.2 or 3 years.
Despite the encouraging numbers across most markets, the analysts at Knight Frank remained circumspect of the future growth of the sector owing to the continuing uncertainty in the market, high inflation and rising interest rates as well as the upcoming general elections.
Shishir Baijal, Chairman and MD, Knight Frank India wrapped up, “It could perhaps still be a rocky way ahead for the real estate industry and we all continue to look ahead for the impetus that is required for the industry to revive.”