Comments
April saw a significant fall in sales and supply of houses compared to the previous month as demand slowed with the relentless hike in interest rates by the Reserve Bank of India since May 2022 and price hikes by developers.
Despite the upbeat sales projections by real estate players for the current year and the future, April data across the top seven cities show that demand for houses was down 13 per cent sequentially, though it was up 4 per cent on the year. Launches have dipped both sequentially and annually, and supply fell 26 per cent on month and 9 per cent on year, according to data culled from industry reports.
The trend was already discernable in the March quarter, when launches fell over 10 per cent from the December quarter, while sales fell 1.4 per cent, according to Knight Frank data. The April figures show the downward momentum has worsened.
The Mumbai Metropolitan Region, which accounts for half of the real estate market in India in terms of value, saw sales in April fall by a fourth sequentially, while it was down 16 per cent on year. A quick overview of the sales in Mumbai from April 2022 to April 2023 showed that in six of the months, there was a dip in sales sequentially. During the festival-packed months of November and December, sales rose 6 per cent and 4 per cent, respectively, largely driven by new launches and the festival discounts offered by builders.
Some developers have intentionally slowed down their launches to balance out demand and supply. A Mumbai-based developer, who makes affordable homes said: “With lower supply we can also manage the prices better.”
Sales in Delhi fell 22 per cent, while Chennai and Pune saw an 18-20 per cent dip in sales and it dipped 12-14 per cent in Kolkata and Bengaluru. In Hyderabad there was marginal dip of 2 per cent. Analysts said Bengaluru had been a resilient market through most of the pandemic, and was one of the major markets to have taken price hikes early. But recent job lay offs, especially in the technology sector, has most likely dented demand. A senior executive in a leading real estate company in Bengaluru said, “we are seeing this as a temporary blip. We know that demand is still there.”
New launches
In terms of new launches Kolkata and Chennai saw the most declines, followed by Bengaluru. While demand does drive the launch trajectory, higher regulatory activism has slowed the pace of launches in many areas. State real estate regulatory authorities have started cracking down on developers, and getting approvals has become more protracted, delaying launches. Nuvama Institutional Equities in a note on the sector said that while demand momentum may continue, albeit at a subdued level, “launches are likely to lag due to liquidity constraints.”
After hiking rates 250 basis points on the trot, the RBI put a halt to the rate hike cycle. While this is expected to bring in relief in the form of stable interest rates, the fact is the rates are holding at a high level and banks and housing finance companies are not reducing them. Home purchase financing has become unaffordable for the lower and mid-income segments.
The other factor that has affected home affordability is the rise in prices to the tune of 11-39 per cent, except in Chennai where there was a decrease of 11 per cent.
With launches slowing, unsold inventory has dipped to 18 months (to sale) from 24 months a year ago, though sequentially it has remained stable.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.