Home >Industry >Infrastructure >Weak consumer sentiment may dampen festive mood for real estate firms

MUMBAI : Real estate firms are likely to see tepid sales during the festive season, despite several developers expecting a revival in demand for housing units.

While builders in Mumbai, the National Capital Region (NCR) and Bengaluru have lined up special offers to entice homebuyers during the festive months—October to December—analysts and brokers expect little improvement in home sales, given the poor market sentiment.

“We can look forward to a minimum housing sales increase of 5-7% in the upcoming Q4 2019 (calendar year)—which nevertheless is still far below the increase of 20-25% witnessed during the boom years," said Anuj Puri, chairman, ANAROCK Property Consultants Ltd, a real estate advisory firm.

Consumer confidence had dipped to a six-year low in September as sentiment around employment, income and discretionary spending declined, according to the Reserve Bank of India’s (RBI’s) monetary policy published on 4 October.

As per the survey conducted across 5,192 households in 13 major cities by the central bank, sentiment for discretionary spending weakened even though people’s expenses on essential items remained strong.

Notwithstanding the weak outlook, builders have thrown open a range of offers and discounts. Bengaluru-based Brigade Group is giving away a free iPhone with every purchase of a housing unit for four of its residential projects. It is also giving straight discounts of 1-2.5 lakh for some projects.

Diwali offers by other smaller firms, such as the Siddha Group, include discounts of up to 19.5 lakh in one of the residential projects, and zero-floor charges for other projects.

“As compared to last year, this year’s festive season comes amid a very different situation. While the industry faces even more fiscal challenges, there have been specific positive moves by the government. So, we expect this festive season to be better as compared to the previous year. Sales uptick is expected to be compounded with festive sentiments," said Niranjan Hiranandani, founder and managing director, Hiranandani Group.

As per ANAROCK, home sales declined 18% year-on-year to 55,080 units during July-September in the top seven cities, hit by a ban on subvention schemes and excessive rainfall.

Real estate firms have been pinning their hopes on improved sentiment during the festive season, especially on the back of recent measures announced by the government, including the cut in corporate tax and creating of separate stressed funds. “There is going to be a lot of push by builders to sell their inventories as customer advances are the only way to fund projects at this moment. My own anticipation was about 20% sales over last year. But given the ongoing slowdown in the economy, I would expect only about 10% improvement," said Pankaj Kapoor, managing director, Liases Foras.

However, other analysts expected flat volume sales or a marginal decline during the October-December period. According to an ICICI Securities report, overall industry volume is likely to remain flat except for a few select organized developers. However, ready-to-move-in projects in the mid-income and affordable housing segments are likely to get strong interest among homebuyers this festive season, said developers.

“Apartments which are completed are gaining a lot more interest among homebuyers as GST is not applied on these homes. We definitely look at this Diwali season to be one of the times when people make decisions," said Boman Irani, chairman and managing director, Rustomjee Group.

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