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Sale of residential plots at 2-yr low
Property sales have hit rock bottom in Mumbai with the latest figures showing that only 7,800 residential units were sold in October-December 2011, the lowest quarterly figure in the last two years. At its peak in the quarter beginning July 2009, it was 21,000 units.
The figures, showing a steep decline in sales in the overpriced Mumbai Metropolitan Region (MMR) real estate market, have been compiled by the real estate research agency Liases Foras. The database shows despite sluggish volumes, prices have risen by 75 per cent over the last two years from December 2009 to December 2011.
Regardless of the huge pent up demand for housing, MMR is presently sitting on an unsold housing stock of 95,000 apartments, a direct fallout of the unaffordable rates. The average per sq ft price of a new house in MMR has soared to Rs 10,559 per sq ft. In comparison, the price rise has been far less volatile in other major cities such as the National Capital Region-Delhi (NCR), Pune, Hyderabad, Bangalore and Chennai where the average rates have hovered in the range of Rs 3,000 per sq ft.
“For MMR, the last quarter of 2011 has been the worst in terms of sales,” said Pankaj Kapoor, CEO of Liases Foras. He added this continued price rise is unsustainable in such a bleak scenario and prices are bound to correct over the next two years. Kapoor explained that infusion of private equity money in the residential market has allowed developers to carry on so far without resorting to any price reduction. “But now, even the private equity funds are finding it difficult to raise money in the market. The developer is not the one who is going to be at the receiving end as his own equity in the project is very low. Investors and funds will now find it difficult to make a profitable exit,” he said.
Kapoor predicted that with construction finance from banks no longer easily available, developers will be forced to soon launch their new projects at lower rates. While there have been a spate of such launches at relatively lower than market rates in recent past, they have mostly been in the pre-launch or pre-sales category where the developer sells a particular number of flats even before the basic building approvals are in place. Due to the element of risk involved, such pre-launches attract only seasoned investors with no real respite in prices for the end-users.
According to Reserve Bank of India’s third quarter review of macro-economic and monetary development released this week, despite the central bank increasing key policy rates 13 times since March 2010, housing loans have continued to grow at a higher rate.
The RBI report states, “Higher housing loans coupled with price rigidities in the housing market reflect the continued pricing power with the developers as also the increasingly stretched balance sheets of residential buyers. The lower volume of transactions implies that many other households are getting priced out from the housing market.” The RBI’s quarterly House Price Index show a quarter-on-quarter increase in property transactions in six cities including Delhi, Kolkata, Chennai, Bangalore, Lucknow and Ahmedabad. The only city to register a decline in volumes is Mumbai.
Source: http://www.indianexpress.com/news/sale-of-residential-plots-at-2yr-low/904033/0
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