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Home Banking & Finance

Buyers win in reform-hit real estate

Fiinews by Fiinews
March 26, 2018
in Banking & Finance, Economy, Industry Sectors, Investment, Projects
Reading Time: 3 mins read
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RERA reformed the industry

A spate of policy reforms and structural changes literally crippled the Indian real estate sector in 2017 from which buyers benefited.

“A spate of policy reforms and structural changes literally crippled the sector,” said Anuj Puri, Chairman of ANAROCK Property Consultants.

“Simultaneously and consequentially, it transitioned rapidly into a transparent and buyer-friendly one. With only end-users left to drive the market and investors more or less evaporating completely, developers throttled back severely on new launches to allow the market more scope to absorb the already staggering unsold inventory,” he pointed out.

A series of highly disruptive reforms, coupled with mounting unsold inventory and stringent Real Estate Regulation and Development Act (RERA) norms, kept developers on the back foot in 2017.

Not surprisingly, instead of infusing new supply in the market, developers focused on executing their under-construction projects in order to remain RERA-compliant and remain relevant in the rebooted market scenario.

With an annual decline of almost 50% in new launches and 15% decline in sales across top 7 cities in India, the sector was effectively shattered in 2017, according to a report by ANAROCK Property Consultants.

2017’s Depressed New Launch Readings

The top 7 cities recorded new unit launches of around 1.26 lakh in 2017 as opposed to 2.50 lakh in 2016.
• MMR (Mumbai Metropolitan Region) contributed the maximum fresh apartments supply with 38% (48,400 units);
• NCR’s contribution was 18% with 22,200 units;
• Bengaluru’s contribution was 13% with 16,000 units;
• Pune’s contribution was 11% with 13,800 units;
• Chennai’s residential real estate market was the worst-affected in 2017, with an annual decline in new launches of around 72% – from 15,700 units in 2016 to 4,400 units in 2017;
• Pune, Bengaluru and Hyderabad recorded an annual decline of 67%, 64%, and 57% respectively in new launch units;
• NCR and MMR recorded a drop of 45% and 33%, respectively.

“In terms of sales during 2017, almost all the cities recorded a decline when compared to 2016 – except Hyderabad, which recorded a 21% increase,” said Puri.

“The decline in sales can be primarily attributed to weak buyer sentiments amidst the rather confusing new policy environment,” he added.

Uninspiring Sales Figures:
• Chennai recorded the highest dip in sales at 26% – from 17,800 units in 2016 to 13,200 units in 2017;
• MMR sales dipped by 24% – from 69,600 units in 2016 to 52,600 units in 2017;
• Kolkata’s sales dipped by 23% – from 16,800 units in 2016 to 12,900 units in 2017;
• NCR’s sales dipped by 22% – from 47,900 units in 2016 to 37,700 units in 2017;
• Pune’s sales dipped by 6% – from 31,200 units in 2016 to 29,400 units in 2017;
• Bengaluru saw the lowest dip in sales at 2% – from 43,300 units in 2016 to 42,300 units in 2017.

Restricted new launches in 2017 resulted in a significant reduction of unsold inventory levels across the top 7 cities.

Overall unsold inventory decreased by 10% from 8.04 lakh units in Q4 2016 to 7.27 lakh units by Q4 2017.

An uptick in the traction of ready-to-move-in and nearing-completion properties helped developers to clear a lot of the existing stock.

Prices across the top 7 cities remained largely range-bound during the year, primarily due to the presence of significant unsold stock and cautious buyer sentiments.

In 2017, the market clearly made a shift towards the affordable housing segment, with 44% of unit launches (55,000 units) coming in with price tags under INR 40 lakh.

This is a major shift in the Indian real estate sector, and developers are now visibly aligning their supply with the budget ranges dictated by demand, so as to avoid any mismatch.

The seeds of reforms sown in 2017 will doubtlessly reap consummate benefits in the future, according to the report.

Although they caused nothing short of mayhem in the sector, these reforms serve the important purpose of eliminating unscrupulous players from the real estate ecosystem.

Moreover, developers are likely to focus squarely on their core business and be customer-centric by launching the right kind of supply at the right prices, said the report. fii-news.com

Tags: Real Estate Regulation and Development Act
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