Chart Beat: Demand-supply mismatch aids faster sale of housing units
Summary
- It remains to be seen if demand is sustainable enough to absorb the increase in supply, given that interest rate cut hopes are unlikely to materialize any time soon.
Demand for housing units in India's top seven cities rose 21% year-on-year in March, according to Propequity data compiled by Nuvama Research. In contrast, supply at the pan-India level was muted, falling 29% year-on-year, hampered by a prolonged softness in launches. This supply-demand imbalance led to a faster depletion of ready inventory of residential properties. A measure of this - unsold inventory months - stood at 15 in March compared to 19 in the same month last year at a pan-India level. In March of 2022, the reading was at 25.
Simply put, inventory months refers to the number of months needed to sell the currently available inventory, assuming no new supply enters the market. Listed real estate companies have a robust launch pipeline for FY25 and aim for stellar pre-sales or bookings. In this context, it remains to be seen if demand is sustainable enough to absorb the increase in supply, given that interest rate cut hopes are unlikely to materialize any time soon. The rally in real estate stocks, which has been underway for a while now, could stall if companies fail to meet their FY25 pre-sales targets due to delayed launches or waning demand momentum.
