Home launches in January-June fall 41% in biggest decline in seven years
While home launches fell 41%, sales volumes declined 11% due to weak market sentiment and the lingering effect of demonetisation, says Knight Frank
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Mumbai: Home launches in India’s top eight cities fell 41% in the first half of 2017, the biggest drop in the last seven years, property consultant firm Knight Frank said. During this period, developers focused on ongoing projects and worked on complying with new real estate regulations, remaining cautious about new launches, the report said.
As per the half-yearly report released on Wednesday, sales volumes declined 11% in eight cities to 1,20,755 units, due to weak market sentiment and the lingering effect of demonetization.
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In the top eight cities, residential launches in the January to June period stood at 62,738 units as against 1,07,120 recorded a year earlier. The National Capital Region (NCR) and Ahmedabad were the worst hit, with new launches falling by 73% and 79% respectively, compared with the same period last year.
Knight Frank has compiled the numbers for Mumbai, Delhi-NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata and Hyderabad.
Affordable housing or homes priced below Rs50 lakh contributed around 71% of the total launches, up from a share of 52% in the first half of last year. NCR, Kolkata, Pune and Ahmedabad drove the revival of affordable housing projects—80% of the launches in the sub Rs50 lakh segment were in these cities, the report showed. “With developers re-directing efforts from launches to Real Estate Regulation Act (RERA) compliance, the pace of launches was lower in the first half of 2017,” the report said.
As launches slowed down, unsold inventory levels across the eight cities in the first six months also fell by 10% to 5,96,044 units, as against 6,60,239 recorded in the previous year.
According to Samantak Das, chief economist and national director research, Knight Frank India, there may be a slight improvement both in new launches and sales in the second half of this year as there will be more clarity on RERA and as more states are likely to notify the new rules in the coming months.
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So far, only Maharashtra and Madhya Pradesh have set up real estate regulatory bodies although the new regulations came into force from 1 May across the country.
Developers also agreed that with more clarity over the new laws, both launches and sales may improve in the later part of this year even as most of them will still be focused on getting RERA-compliant and understanding Goods and Services Tax (GST) that was rolled out on 1 July.
“No developers want to be on the wrong side of the law at this moment though many states are yet to bring in their rules. So even if developers have got approvals, they are cautious and stay away from launching till registrations of these new projects are done,” said Irfan Razack, chairman and managing director, Prestige Group, a Bengaluru-based real estate firm.
He said most states are expected to be ready with new rules and regulatory authorities in place by the end of July, and new residential projects will come into the market by September-October.
The commercial office segment also saw a decline in both supply and demand. Office transactions fell by 10% to 18.1 million sq. ft in the January-June period in 2017 as against the same period last year.
Supply saw a decline of 5% with 17.9 million sq ft added to the office space inventory in the first six months.
The share of information technology (IT) and IT-enabled services in the total office transactions was down to 43% as against 39% due to supply crunch as well as industry and industry headwinds.
However, average rental values across the six cities grew 7% year-on-year during the first half, with Hyderabad and Bengaluru posting the strongest growth at 14% and 8% respectively.
“The demand pipeline for office space is quite steady but transactions have taken a hit mainly because supply for grade-A buildings in prime locations is extremely low. We don’t see much supply coming in the next one year as well ,” Das said.