Luxe home sales bear brunt of GST, RERA

The luxury home segment seems to be bearing the brunt of RERA and GST with fewer launches lined up for the upcoming festival season.

According to various industry reports, the segment has not recorded any growth and the inventory has piled up.

“There is a huge inventory pileup with close to six years of inventory available across all major markets. Absorption is minuscule and investors are still not participating in the segment.

Additionally, RERA and GST have made it difficult for the luxe segment with rules such as input credits,” said Pankaj Kapoor, MD, Liases Foras, a real estate consultancy. A Colliers International India report said the residential market witnessed a 17 per cent decline in the number of new launches since the second half of 2016 with 40,600 new units introduced in the first-half of 2017 in prime cities.

Mumbai and Bengaluru were at the forefront with 35 per cent and 33 per cent of total launches, respectively, while Chennai, Pune and the National Capital Region accounted for the remaining 13 per cent, 10 per cent and 9 per cent respectively.

Collier said the luxury market was affected the most, and the number of launches dropped considerably in this segment.

Colliers forecasts the subdued sentiment to prevail in the next six months, with new launches happening mostly in the affordable housing segment.

“Supply of new projects will remain restricted in the market in short to medium term but this will help mitigate the oversupply situation in most markets,” said Surabhi Arora, Senior Associate Director, Research, Colliers International India.

In Mumbai alone, about 58 per cent of the new launches were in the mid-end segment, whereas luxury and high-end properties accounted for only 17 per cent and 25 per cent of the total new launches.

A Knight Frank Prime Global Cities Index Q2 2017 said luxury homes prices in Bengaluru and Delhi dropped while Mumbai saw a marginal rise.

Samantak Das, Chief Economist and National Director – Research, Knight Frank, said: “The prime residential market in the top three markets of Mumbai, Bengaluru and Delhi is under tremendous pressure. Indian metros rank quite low among 41 global cities.”

“Year-on-year, only Mumbai could manage a price index growth, while Bengaluru and Delhi slipped. It is interesting to note that Bengaluru, the most resilient market, has also suffered a decline,” he added. “The pressure will continue for some more time because we believe that the catalysts for growth pertaining to prime residential markets are yet to come back.”