The ebb and flow of the Indian real estate landscape continued through Q3 2019. After a two-year-long lull, the market picked up pace in terms of sales, new project launches and price movement in the first two quarters of the year. However, Jul-Sep 2019 was largely marked by restricted sales and new launches.
The looming risk of an economic slowdown and the rising liquidity constraints with the public sector banks made it challenging for the sector to take the road to recovery. Nevertheless, the buying sentiment remained positive in the wake of the upcoming festive season. Resultantly, the average weighted capital prices witnessed a positive movement across metro cities. Hyderabad and Ahmedabad took the lead with a two percent spike, each, QoQ.
Unsold inventory stood at almost 10 lakh units across metro cities. The average number of quarters to sell this inventory stood between 5 and 7. Adding to the woes of the developer community were the NBFC crisis and the absence of Input Tax Credit (ITC) in the GST regime. Cash-strapped developers are now in a dire need for funds to complete the delayed projects, which are estimated to hold almost 5.6 lakh units in metros alone.
Affordable housing continued to rule the roost; however, demand for mid-income and premium housing segments seemed to have picked up pace. Any improvement in sales is anticipated only during the festive season or when the government strikes with a foolproof plan to get the stalled projects up and running towards completion.
After a brief phase of positive transition, the real estate sector exhibited a slowdown, yet again in the Jul-Sep 2019 quarter. The general slack in the economy is touted to be the prime reason for reducing sales volume and restricted number of new launches. While housing sales dipped marginally and stood at nearly 37,000 units, new launches declined by around 30 percent, QoQ, and stood at around 37,500 units in the top eight metro cities. Delhi NCR alone saw sales volume declining by 15 percent, QoQ.
While the quarter remained grim, the overall improvement in sales between January and September 2019 resulted in a marginal reduction in the unsold housing stock, which stands at almost 10 lakh units across the metro cities. With the festive quarter kicking in by the end of September, industry anticipates some improvement in sales volume. Barring Hyderabad and Ahmedabad, which reported a two percent hike in capital prices, each, QoQ, all other metro cities saw prices moving upwards by a marginal one percent, each.
The current state of stalled realty projects inflicted caution amongst homebuyers. Close to 5.6 lakh housing units worth Rs 4.5 lakh crore are stuck at various stages of completion in the top seven cities. Delhi NCR alone accounts for over two lakh such units, closely followed by Mumbai, Chennai and Kolkata. While the Government is pumping in funds to help overcome the crisis faced by Non-Banking Finance Companies (NBFCs), the market is in a dire need for distressed corpus to expedite the completion of pending projects.
The focus of both buyers and developers continued to be on the affordable housing segment; however, enquiries for the mid-income and premium segments, too, improved in the quarter. The subsequent repo rate cuts and the introduction of repo-rate linked home loans are expected to be future game-changers along with a fast-tracked completion of stalled projects.
The quarter Jul-Sep 2019 was testimony to the changing face of the real estate industry with the National Consumer Law Tribunal (NCLT) undertaking insolvency proceedings against defaulting developers and NBCC taking over the completion of stalled projects. With 5.6 lakh stuck realty projects across the country, homebuyers look forward to more such solutions from the Government. Overall, property sales and new project launches declined marginally in Jul-Sep 2019. Average weighted prices of residential apartments across metros, however, stayed firm, possibly due to the upcoming festive season. The pro-buyer reforms in the home loan market, majorly the consecutive repo rate cuts, and the infusion of funds to boost the Public Sector Banks and NBFCs, firmed the market sentiment.