Res­i­den­tial realty con­tin­ues to strug­gle even af­ter five years of stag­na­tion

Hindustan Times (Chandigarh) - Estates - - ESTATES - Ash­wini Ku­mar Sharma n ash­wini.s@htlive.com

Sales in the res­i­den­tial hous­ing seg­ment has been grad­u­ally com­ing down since 2013-14, and the sec­tor is strug­gling even af­ter al­most five years of slug­gish­ness. As a re­sult, in­ven­tory level con­tin­ues to re­main high in the seg­ment, de­spite fewer pro­ject launches. How­ever, com­mer­cial real es­tate, es­pe­cially the of­fice seg­ment, is in a healthy state if we con­sider de­mand and leas­ing.

RES­I­DEN­TIAL SEC­TOR

Ac­cord­ing to a re­port for the month of July 2018, by Ko­tak Se­cu­ri­ties Ltd, “All-In­dia real es­tate sales across ma­jor cities clocked 22.2 mil­lion sq.ft in July 2018 against launches of 7.9 mil­lion sq.ft.

We high­light that launches in July 2018 were sig­nif­i­cantly lower than monthly av­er­age of 14.5 mil­lion sq.ft seen in the past 12 months. Con­se­quently, in­ven­tory across In­dia dropped 10% to about 1 bil­lion sq.ft from 1.1 bil­lion sq.ft in July 2017, re­flec­tive of the de­creas­ing launch ac­tiv­ity.”

Though there is a de­crease in the lev­els of in­ven­tory across In­dia, it is still very high and it will take months for de­vel­op­ers to clear it at the cur­rent sales vol­ume. The sit­u­a­tion is worse in the Na­tional Cap­i­tal Re­gion (NCR) and Mum­bai Met­ro­pol­i­tan Re­gion (MMR). As per the Ko­tak re­port, “Across all met­ros, launches re­mained the low­est in Delhi NCR with only 1 mil­lion sq. ft re­leased in July 2018 in pe­riph­eral re­gions of Ghazi­abad and Greater Noida. Net un­sold res­i­den­tial in­ven­tory in NCR stood at 243 mil­lion sq.ft as of July 2018 and is equiv­a­lent to 63 months of sales (based on av­er­age sales of trail­ing 12 months).

Sim­i­larly, out­stand­ing in­ven­tory in MMR re­mains the high­est across met­ros at 290 mil­lion sq.ft as of July 2018 (equiv­a­lent to 54 months of sales).”As far as prop­erty prices are con­cerned, it ei­ther re­mained stag­nant or in­creased marginally.

“Across In­dia, av­er­age prices saw a slight in­crease in July 2018 av­er­ag­ing around ₹6,100 per sq.ft (₹6,000 per sq.ft in 1QFY19). On monthly ba­sis, prices re­mained largely flat in NCR in July 2018 at ₹4,521 per sq.ft (up only 1.4% year-on-year),” stated the Ko­tak re­port.

COM­MER­CIAL SEC­TOR

While res­i­den­tial real es­tate is strug­gling, com­mer­cial real es­tate is wit­ness­ing healthy de­mand, es­pe­cially in the of­fice space seg­ment. Ac­cord­ing to a re­cent of­fice leas­ing re­port by Cush­man & Wake­field In­dia, “Com­mer­cial of­fice mar­ket is wit­ness­ing a ro­bust streak, buoyed by strength­en­ing busi­ness con­fi­dence, and op­ti­mistic prospects in the fastest-grow­ing econ­omy in the world. Of­fice leas­ing reg­is­tered strong gains of 15% at 33 mil­lion sq.ft across the top 8 cities of In­dia, dur­ing Jan­uary-Septem­ber, as com­pared to the cor­re­spond­ing pe­riod last year.”

There is ad­e­quate sup­ply in the of­fice seg­ment as well, which is keep­ing rent in con­trol. “NCR re­gion, com­pris­ing Gu­ru­gram and Noida, cur­rently has the high­est va­cancy at about 29 mil­lion sq.ft, which is likely to keep rentals in check, as fu­ture sup­ply is ex­pected to keep pace with in­cre­men­tal de­mand,” stated the Ko­tak re­port.

THE OUT­LOOK

The ques­tion is whether sta­ble and con­tin­u­ous de­mand in the com­mer­cial sec­tor can have a pos­i­tive bear­ing on de­mand in the res­i­den­tial seg­ment.

“Since 2013-14, it was free fall in the res­i­den­tial seg­ment, but things have started set­tling down since the be­gin­ning of 2018,” said Samantak Das, chief econ­o­mist and head of re­search, JLL In­dia.

Be­cause of var­i­ous is­sues, buy­ers’ con­fi­dence is still very low in the res­i­den­tial seg­ment and it will take at least two years to get back that con­fi­dence, be­fore we can ex­pect any sub­stan­tial de­mand, added Das.

Prices in res­i­den­tial real es­tate mar­ket are not ex­pected to in­crease in the near fu­ture and buy­ers have am­ple time to do the due dili­gence to choose a suit­able prop­erty.

Since 2013­14, it was free fall in the res­i­den­tial seg­ment, but things have started set­tling down since the be­gin­ning of 2018. SAMANTAK DAS, chief econ­o­mist and head of re­search, JLL In­dia.

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