Many unsold houses despite sharp fall in supply
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Homebuyers these days are holding back their buy decisions even though property prices in many areas, and home loan interest rates in general, have fallen. This shows that buyers are looking at more than just prices and home loan rates. For instance, while many homebuyers believe that prices are still high, many others are holding back as they lack confidence in developers to deliver the project on time. Let’s look into some factors holding back the real estate sector.
Due to low sales, inventory of unsold apartments is still high. In a research report on the third quarter of 2017, Anarock—a real estate consultant—says that there are about 6,85,000 unsold units in the seven cities of: Delhi National Capital Region (NCR), Mumbai Metropolitan Region (MMR), Pune, Kolkata, Bangalore, Chennai and Hyderabad.
Cities that used to be key drivers of sales are today’s most affected markets. Delhi NCR (about 2,00,000 units) and MMR (about 1,80,000) hold about 55% of the total unsold inventory, followed by Bangalore (about 1,08,000). According to the report, “Overall unsold inventory decline of only 8% in the top 7 cities, compared to same quarter last year,” despite a significant fall in the new project launches. PropEquity, a real estate data, research and analytics firm, said in a report: “The new home launches dipped 83% across top 8 cities in Q3 of 2017, from 24,900 units to 4,313 units.”
Low sales have resulted in some price correction. According to Anarock’s report, “NCR has witnessed a 3-5% decrease in average per-square-foot property prices over the last 1 year (Q4 2016 - Q3 2017).” The report also says that excessive delay in project construction and possession has hurt buyers’ sentiments, leading to subdued demand.
Despite a fall in prices, some experts believe that any further decline is not likely and the developers are not going to reduce the asking prices anymore. “Lowering the property prices will not help. The need of the hour is to rebuild buyers’ confidence and transparency in the sector. Then only homebuyers will return,” said Vikram Goel, chief executive officer, HDFC Realty.
Another reason why inventory remains unsold could be that most of these houses are in the suburbs. “There is demand-supply mismatch. Inventories in suburbs will take time to get absorbed,” said Goel. Currently, homebuyers are looking for all the factors such as location of the property, price, schemes and discount on offer, developers track record, stage of project construction and so on before deciding to buy a property. “In the current market, homebuyers are not ready to compromise on even one of these factors,” added Goel.
Most of the experts believe that property prices are not going to increase in the near future, at least in 6-12 months; so you can take your time to make a buy decision.