Homes sales stagnant despite fall in prices

Mumbai: Falling prices and a flurry of launches failed to lift home sales in India’s top eight property markets in the first six months of the year, real estate advisory firm Knight Frank India Ltd said.

After almost two years of a slump, the January-June period saw the launch of 91,739 housing units, an increase of 46% from a year ago, Knight Frank said in a report.

However, sales in the same period grew just 3% to 124,288 units.

The report included data from Mumbai, Delhi-NCR, Bengaluru and Pune. 

“Sales stagnated despite increased launches, reduced prices, government reforms and incentives,” the report said.

Still, both sales and launches grew in the past 18 months, reaching their highest levels since demonetization in November 2016, added the report. 

Mumbai recorded the most launches, an increase of 128% from the year-ago period, followed by Delhi-NCR and Pune, which grew 75% each.

While Bengaluru recorded the sharpest sales growth with a 22% increase to 22,802 units, Kolkata fared the worst with a 19% sales decline to 6,591 homes.

The report said developers have been trying to free up the “capital locked in inventory” at increasingly lower prices and holding off new launches to alleviate mounting financial stress, the report said. 

According to the report, average home prices have fallen by around 3% across the eight cities, with Mumbai recording the steepest fall. “Effective price drop of 10-15% continues in cities such as Mumbai, NCR, Pune and Kolkata. Hyderabad bucks the trend with an exceptional price growth at 8% on year-on-year,” the report said. 

“The turbulent times starting from 8 November 2016 to the changes in 2017 have really shaped the way the residential market is moving ahead. This, coupled with cities such as Mumbai, where the ban on construction took place, and Delhi, where the NGT (National Green Tribunal) ruling happened, has really stalled the entire industry,” said Shishir Baijal, managing director, Knight Frank India.

In contrast, demand for commercial office space continued to pick up, recording the highest transaction volumes in the last six years. Around 21.5 million sq. ft of office space was absorbed in the past six months, up 12% from a year ago. However, new stock of commercial office buildings declined by 10% at 18.2 million sq. ft.

“New completions continue to be inadequate in the face of robust transactions, keeping vacancy levels low; Bengaluru leads southern region with lowest vacancy,” the report said.

According to the report, monthly rentals of quality office building saw growth of 5% at Rs72 per sq. ft, with Bengaluru showing the highest growth at 17% on an annual basis. While share of information technology companies and IT-enabled and services companies declined in the overall office absorption, co-working service providers accounted for 13% of total transacted space.