Mumbai: Real estate developers in 2018 shook off the previous year’s lethargy with 76% higher home launches, even as sales grew at a more sedate 6%, as a cash crunch in the latter part of the year crimped a sustained recovery.

The surge in home launches—1,82,207 units across eight cites including Mumbai, Bengaluru and the National Capital Region (NCR)—came after a slump in 2017 when the sector struggled under the impact of demonetisation and a tough real estate law, according to the half-yearly India Real Estate report by property consultancy firm Knight Frank India.

Around 60% of homes launched in 2018 were priced below 50 lakh, Knight Frank said.

In new launches, Mumbai saw the sharpest growth of 220%, followed by Pune (157%), which Knight Frank attributed to successful implementation of the real estate law in both these cities and the Supreme Court allowing resumption of construction in Mumbai, overturning a Bombay high court ban that cited inadequate dumping grounds in the city.

However, sales did not pick up as expected, despite a strong start in 2018, as the crisis at non-banking financial companies (NBFCs) towards the end of the year cast a shadow over housing finance. For full year, home sales rose 6% to 242,328 units, powered by strong demand for affordable and mid income homes. Bengaluru saw the sharpest sales growth of 27%, followed by NCR (8%) on the back stronger sales traction in Noida and Greater Noida.

“Sales in the third quarter of 2018 rose by 15% but it contracted by 16% in the following quarter post the NBFC crisis,"said Arvind Nandan, executive director (research), Knight Frank India.

Though unsold inventory is down by 11% to 468,373 units in 2018, it has continued to put pressure on home prices. Weighted average prices across the eight cities continue to stagnate with Mumbai seeing the steepest fall of 7% while home prices in NCR and Bengaluru have improved by 2% on a year-on-year (y-o-y) basis.

The effects of the NBFC crisis will spill over to the next few quarters of 2019 both in demand and supply, according to Shishir Baijal, chairman and managing director, Knight Frank. “Markets will remain in a cautious mode because of the upcoming general elections and the after-effects of NBFC crisis through most of the first half of 2019. On the positive side, the anticipated downward revision of GST (goods and services tax) on under-construction houses should provide a boost to the buyer sentiment," Baijal said.

However, commercial real estate segment saw see a robust growth, seeing a record office lease transactions. Demand continued to outpace supply. By the end of 2018, around 46.8 million sq. ft were leased, the highest space transacted in the last decade while fresh supply stood at 36.9 million sq. ft.

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