Who’ll blink first: buyers or builders?

Home developers and buyers are playing a waiting game. While builders are going slow on new projects to hold prices, buyers are putting off purchases hoping prices will drop.

Property firms cut back on launches even in promising markets in the September quarter, data from property consultant Cushman and Wakefield (C&W) shows.

Bangalore, which has been a steady market, saw a 27 per cent drop in new launches, compared to last year. Data from real estate consultancy JLL shows there is enough supply to take care of 29 months’ demand, up from the usual 21 months.

The recent launches are focused in the eastern and northern suburbs, where IT-related demand is strong. Seventy-seven per cent of the launches in the July-September quarter were in these areas. Chennai, Delhi, and NCR (National Capital Region) have also seen launches slow down in this period.

In Mumbai, data from C&W shows launches have doubled sequentially, but are still down from last year. Builders attribute this to approval coming through for several long delayed projects.

But this trend may not point to pent-up demand. In Mumbai, “the residential luxury space is currently carrying four years (worth) of unsold inventory,” says Rohit Poddar, Managing Director, Poddar Developers.

Stagnant prices

Even as developers are curtailing new launches, property prices have continued to flatline. With investors staying out of the market, demand has been low. In NCR, once a booming market, new home project launches have been cut in half, with only 4,500 new units launched in the September quarter.

“Developers have made a conscious effort to keep the number of units in a project small, so that they can deliver on time and meet the expectations of the purchasers,” says Gaurav Yadav, Founder, Uday Homz, a real estate consultancy. On-time project delivery could help boost buyer sentiment.

Muted sentiment in cities such as Chennai may be due to other local factors. For instance, the report said project completions were down by half in the September quarter, compared with the previous quarter.

This can be attributed to approvals slowing down after an 11-storey building collapsed in late June. “On a relative basis, Bangalore is doing better than Chennai,” says M Murali, MD, Shriram Properties, a developer active in both cities.

Affordability remains an issue for buyers as prices are still high. Brajesh Parnami, Chief Executive Officer, Destimoney, a home loan advisory firm feels steep corrections are unlikely.

Home prices are unlikely to move in the short-term, barring a few sub-markets, says Naveen Nandwani, Executive Director, Cushman & Wakefield. Data on future launches from Knight Frank India paints a sobering picture. Their July-September quarter survey shows a dip in new home launches over the next two quarters.