New Delhi: Poor home sales in the past few months, the inventory overhang of unsold units, high interest rates and a slowing economy have hit the realty markets of the National Capital Region (NCR), the Mumbai Metropolitan Region (MMR) and Bangalore, as the three metro markets reported a sharp fall in sales in the January-March period, according to Gurgaon-based real estate research firm PropEquity Analytics Pvt. Ltd.
If the trend is maintained, prices may start dropping, it said.
NCR comprises Delhi and the adjoining areas of Gurgaon, Faridabad, Noida-Greater Noida and Ghaziabad.
MMR comprises Navi Mumbai, Mumbai and Thane.
While MMR reported the sharpest drop of around 58%, NCR slumped 57% from the year earlier. Bangalore witnessed a drop of 18% in sales, the report added.
Sales in NCR dropped to 15,104 units from 35,420 units and it fell to 11,473 units from 27,676 units in MMR.
The two regions saw a residential supply of 107,731 and 89,461, respectively, in the first quarter.
A Kotak Institutional Equities report corroborated that the sales momentum for most, big real estate firms has remained flat despite regular launches.
Samir Jasuja, founder and chief executive officer, PropEquity Analytics, said, “In the coming quarters, there would be strong pressure on many micro markets and we expect inventory overhang to increase and absorption could continue to slow down. Mumbai in MMR and Gurgaon in NCR have seen the sharpest falls in absorption.”
“If this trend continues, there could be a price correction of 5-20%, especially in the micro markets of NCR, MMR and Hyderabad,” he added.
Bangalore hasn’t been as badly hit because of demand from genuine homebuyers and end-users, apart from the fewer unsold properties.
Sales in the southern city fell 18% to 7,704 units from 9,410 units.
The other two markets are largely investor driven.
“Generally, investor-driven markets would see downward risks than end-user driven markets,” added Jasuja.
High interest rates have also discouraged potential homebuyers from investing in property.
“A cut in the policy rates alone would not be impactful on the real estate sector, and the third quarter (July-September) of the calendar year could bring serious challenges for the sector, especially for the listed tea estate firms that have large debts,” said Gaurav Pandey, senior vice-president and head of research and consulting at PropEquity.
The drop in sales momentum is a reaction to overall development in the respective micro markets in each of these regions, according to some analysts.
“All the micro markets have witnessed such a drop in sales and movement of property rates in the past. What some regions in Gurgaon are witnessing now has been a trend some years back in the Panvel pocket of Navi Mumbai,” said Ashutosh Limaye, head of research and real estate intelligence services, Jones Lang LaSalle India, an international property consultant firm. “These trends are largely driven by various factors including poor sentiments, high interest rates and certain announcements related to infrastructure.”
Real estate companies such as DLF Ltd and Unitech Ltd reported a drop in profit for the quarter ended 31 March.
Most real estate companies, including the country’s largest, DLF, have not been able to reduce their debt significantly.
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