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After a period of prolonged slump following the coronavirus pandemic, demand for residential real estate has been reviving. Investor sentiment towards the sector is turning upbeat aided by record low interest rates, better affordability, and moderation in property prices.
Latest analysis of real estate data by Edelweiss Securities Ltd showed that unsold inventory dipped 11% year-on-year (y-o-y) in October. “Kolkata witnessed the maximum rate of correction in inventory at 23% y-o-y, followed by Bengaluru, Pune and Mumbai Metropolitan Region (MMR) (down 13-16% y-o-y each). Unsold inventory in Chennai and NCR reduced by 6–10% y-o-y each. Hyderabad was the only city where inventory months were stable y-o-y," said the Edelweiss report.
The said that the unsold inventory split remains broadly stable on a year-on-year basis. MMR continues to account for the bulk of unsold inventory in the country, followed by the National Capital Region, Bengaluru, Hyderabad and Pune. As demand outstripped supply, the rate of absorption also improved with trailing 12-months absorption up 11% y-o-y, inventory levels pan-India reduced to 26 months from 37 months in October 2020. Pune and Hyderabad remain the best markets with 14–18 months of inventory, followed by Chennai, MMR, Bengaluru and Kolkata at 25–28 months. NCR remains the worst real estate market with 57 months of inventory, said the report.
Going ahead, apart from the demand-supply dynamics, investors in real estate stocks will closely monitor movement in prices. As the sector grapples with a steep increase in raw material and labour costs, the market widely expects developers to resort to price hikes, sooner than later. What also remains to be seen is whether price increases weigh on demand for residential real estate.
Meanwhile, real estate companies reported decent sales growth in the September quarter with many developers seeing a meaningful decline in debt levels and easing cost of borrowing.
