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Realty market: Unsold stock weighs down sales uptick

While sales across eight cities, including Delhi, Mumbai and Bengaluru saw a rise, the sector has little to celebrate as unsold inventory rose 21%

By: ENS Economic Bureau | Published: February 20, 2016 1:25:21 am
real estate, real state in india, prperty sale, real state bengaluru, bangalore real estate, bangalore property, business news, economy news, latest news, According to the data, the aggregate new supply in the market during the quarter stood at 67 msf, primarily led by Bengaluru and MMR region as they accounted for 23.5 per cent and 20.6 per cent respectively, of the new supply in the market. (Source: Illustration by CR Sasikumar)

The real estate sector may not be out of the woods but it certainly is trying to wriggle out of the stress witnessed over the last two to three years and push for growth.

The industry that had little to cheer in recent past, saw a marginal increase in sales during the last quarter that also coincided with the festive season.

As per the sales and inventory data prepared by Liases Foras, a real estate research firm, for the third quarter ended December 2015, for eight major markets shows that the sector witnessed a marginal uptick in activity and demand for housing. While the overall sales in million sq ft (msf) during the quarter went up from 72.9 msf in the quarter ended December 2014 to 78 msf in December 2015, it was primarily driven by sales increase in markets such as Mumbai MMR, National Capital Region, Bengaluru and Ahmedabad. However, despite the pick- up in sales, the eight cities saw their unsold inventory stock jump by 21 per cent following a rise in new supply in the market during the quarter.

According to the data, the aggregate new supply in the market during the quarter stood at 67 msf, primarily led by Bengaluru and MMR region as they accounted for 23.5 per cent and 20.6 per cent respectively, of the new supply in the market.

Mumbai leads sales growth

As for the pick-up in sales, MMR witnessed the biggest rise in sales during the quarter at 13.5 msf up from 10 msf of residential property sold in the corresponding period previous year.

Even the largest market by size — Delhi NCR — that accounted for 18.5 msf of sales in the quarter ended December 2015 — witnessed a pick-up in sales during the festive quarter rising by 8 per cent to 19.9 msf.

The residential real estate market in Bengaluru also witnessed a rise in sales. From 13 msf that was sold in the quarter ended December 2014, it went up by 11 per cent to 14.4 msf in December 2015.

It is interesting to note that out of the total 78.1 msf sold in the 8 cities during the quarter, more than 60 per cent of the sales fell in the price range between Rs 25 lakh and Rs 1 crore. In fact, the category that accounted for largest sale was the Rs 50 lakh to Rs 1 crore bracket.

“All the eight Tier I cities cumulatively recorded highest sales in the cost range of Rs 50 lakh — Rs 1 crore, at 24.4 msf accounting for 31 per cent of the sales. This was closely followed by the affordable segment ( units priced between Rs 25 lakh and Rs 50 lakh) and they accounted for a total area of 23.2 msf. The ultra-luxury segment of more than Rs 2 crore bracket recorded sales of only 12.8 msf in last quarter,” said the Laises Foras report. It also said that the sales in the segment priced below Rs 25 lakh recorded a quarterly growth of 31 per cent though the area sold stood at 6.4 msf in Q3 FY16.

On the other hand the markets that continued to see a decline in sales even in the festive season this year were Pune and Hyderabad. For both, the sold area went down 18 per cent.

Weak sales growth numbers also had an impact on the pricing which remained mostly stable across all the markets. While the 8 cities saw an average increase of 1 per cent over the last one year, the biggest increase was seen in Ahmedabad (11 per cent) followed by Bengaluru that saw a 6 per cent increase in the prices. Delhi-NCR and the MMR markets saw an average decrease in price of residential units by 2 per cent. While it came down from an average of Rs 5,080 per sq ft in December 2014 to Rs 4,957 per sq ft in December 2015 in Delhi, in Mumbai MMR it came down from Rs 13,121 per sq ft to Rs 12,789 per sq ft in the same period.

Unsold inventory continues to rise

Even as the sales have not picked on expected lines and existing unsold inventory remains high, fresh supply during the quarter that amounted to over 67 msf led to an increase in the overall unsold stock in the market. On an aggregate, the unsold stock went up from 932 msf in December 2014 to 1,125 msf in December 2015. The maximum increase in the unsold stock was seen in Pune (36 per cent) Ahmedabad (33 per cent) and MMR (28 per cent). While Delhi NCR witnessed a relatively lower increase (14 per cent) in unsold stock over the last one year, it continues to hold the largest chunk of unsold stock across the 8 markets in review.

The report however points that the pace of addition of new stock has decreased. “Total new launches during the quarter decreased by 11 per cent QoQ to 67.1 msf in December. Bengaluru saw the highest addition with 15.8 msf and MMR saw a 33 per cent QoQ increase in new launches, most of which has been in the Rs 25 lakh–Rs 50 lakh cost bracket,’ said the report.

The unsold stock in Delhi-NCR market stood at 361 msf followed by MMR that accounted for 235.9 msf of unsold stock. Bengaluru is the third largest market having an unsold inventory of 176.5 msf at the end the December quarter.

Even in terms of the inventory holding period, Delhi comes on top with an inventory of up to 58 months and it has risen from 56 months that was estimated a year ago.

The report points that with declining sales and rising inventory across all major cities, the months of inventory at all-India level stood at 43 months and increased by 16 per cent from 37 months at the end of December 2014. “An efficient market maintains 8-12 months of inventory, which indicates downside pressure on price across all the major cities in India,” the report said.

 

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