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Inventory is declining, but it’s taking longer to clear unsold homes

A slew of companies, including Mumbai-based Oberoi Realty, Godrej Properties Ltd, Bengaluru-based Sobha Ltd and Prestige Estate Ltd, have new projects scheduled in the March quarter. (A file photo of a Sunteck Realty project in Mumbai. )Premium
A slew of companies, including Mumbai-based Oberoi Realty, Godrej Properties Ltd, Bengaluru-based Sobha Ltd and Prestige Estate Ltd, have new projects scheduled in the March quarter. (A file photo of a Sunteck Realty project in Mumbai. )

Steady new launches by listed developers and strong transaction data mirror the positive momentum in housing markets in Q4

Various state governments and realty developers are enticing customers by offering concessions to ease the burden of high unsold inventory. This seems to have done the trick.

As indicated by the December quarter earnings of many listed companies, pre-sales growth was in double-digits and at a record high. The sales momentum in the residential property market in the December quarter has continued in January.

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Steady launches by listed developers and strong transaction data mirror the positive momentum in housing markets in Q4, said Jefferies India Pvt. Ltd.

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A slew of companies, including Mumbai-based Oberoi Realty and Godrej Properties Ltd, as well as Bengaluru-based Sobha Ltd and Prestige Estate Ltd, have new projects scheduled in the March quarter.

Inventories are down at their fastest pace in a decade as industry-wide consolidation plays out, Jefferies highlighted in a report dated 8 March. This analysis is based on the primary industry sales data from Propequity. The data shows that for the top seven cities for January 2021, inventory levels declined 3% month-on-month and 11% year-on year.

The headline inventory data paints a rosy picture, but the details are not as encouraging. Inventory is declining only in some cities and particular segments, according to industry experts.

“The inventory exhaustion is happening in select cities and in select segments because of a combination of factors. Sales in markets such as Mumbai continue to be driven by stamp duty cuts and developer discounts. In other cities, the decline in inventory is more a function of limited new supply,"said Gulam Zia, executive director at real estate consultancy firm Knight Frank India.

“Among segments, the mid-ranged housing is lagging because in that ticket-size, there has been no government intervention. Sales are taking place in the lower-end segment. In the luxury segment as well, there has been a pick-up, which according to us is related to the wealth creation in the stock market, finding its way into real estate. Still, none of these segments are close to recovery. We are some quarters away from a full-fledged revival," Zia added.

Apart from these factors, cheaper home loan rates have also brought fence-sitters to the property market. Investors also need to monitor the sales velocity to understand whether demand will persist, according to analysts.

The inventory level is declining, but the inventory months have increased, which means that it is taking longer to offload existing housing units, they said. Inventory months on a pan-India basis rose to 34 in January 2021 from 30 in the same month last year, according to the Propequity data.

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