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Ready properties to see more demand in the short term: Colliers International

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Although the implementation of various regulatory reforms, such as the Real Estate (Regulation & Development) Act (RERA), Goods and Services Tax (GST) and the Benami Transactions (Prohibition) Amendment Act, 2016, are likely to bring R

Although the implementation of various regulatory reforms, such as the Real Estate (Regulation & Development) Act (RERA), Goods and Services Tax (GST) and the Benami Transactions (Prohibition) Amendment Act, 2016, are likely to bring positive changes in the residential sector in the long term, buyers will remain cautious and wait for further clarity from the union budget 2017-18, according to Colliers International’s India Residential Property Market Overview.

Colliers forecasts that the demand of end-users will remain skewed towards ready-to-move-in properties, at least in the short term. In the aftermath of demonetisation, many banks have reduced the home loan rates to the tune of 8.25% to 9%, which is the lowest in the last 8 years. The government has also announced an interest subsidy to the tune of 3%-4%, for first-time affordable housing buyers in 2017. As per Colliers, the 2017 union budget holds the key to many more incentives for home buyers, in the form of tax cuts and interest subsidies.

In 2016, about 89,000 units were launched across six major cities in India, which is about 34% less than the units launched in 2015. Out of the total new launches, 28% was in Bengaluru, followed by Mumbai (25%), Pune (23%), National Capital Region (NCR) at 15% and Chennai (9%.) The decrease in the number of new launches indicates the waning interest of buyers in the primary market.

“We expect demand for quality stock in areas with good connectivity and social infrastructure to revive in the near term, especially in mid-segment housing. However, realistic pricing will be the key to an early revival as right now, both, buyers and sellers are hanging on in the hope of optimum prices. We think prospective buyers should not delay their decision unduly, since they can negotiate realistic prices in both the primary and secondary markets,” says Surabhi Arora, senior associate director, research, at Colliers International India.

Top residential markets Bengaluru: Bengaluru continued its run in the residential market, with maximum number of new unit launches in 2016.

However, while in 2016, nearly 24,800 new residential units were launched in Bengaluru, it reflects a 35% year on year (y-o-y) decrease over 2015. This slow pace of new launch activity, can be attributed to multiple events that unfolded during 2016 – like the impending finalisation of RERA Act; delays in obtaining approvals due to Bruhat Bengaluru Mahanagar Palike (BBMP)’s citywide drive to tackle encroachment of storm water drains that kept developers cautious and the momentary civil unrest over Cauvery water issue between Karnataka and Tamil Nadu, which hampered new launches in H2 2016.
However, compared to cities like Mumbai and NCR, Bengaluru was the least impacted by the recent demonetisation, as the city’s residential market is primarily driven by end-user demand, comprising the white-collared population employed in the IT/ITeS sector.

Chennai: Chennai’s residential market remained subdued in terms of new launches and sales, as weak buyer sentiments prevailed.

The city’s primary residential market witnessed the launch of nearly 7,750 residential units, a 35% y-o-y decline over 2015. Of the total launches, 94% were concentrated in suburban and peripheral quadrants, while only 6% were noted in the central and non-central locations.

As Chennai’s residential segment was normalising post 2015’s floods, multiple factors such as uncertainty at the state level, political leadership and demonetisation, weakened developers’ confidence to undertake new projects. Also, the Madras High Court’s judgement, imposing a blanket ban on registration of unapproved plots on agricultural lands further cautioned buyers from investing in new launches.

NCR: It remained a muted year for the NCR market. Gurgaon witnessed the launch of around 6,700 units in 2016, about one-third of the 2015 numbers. Colliers expects muted demand and limited number of new launches in H1 2017, as the ongoing slump in the market gets further fortified after the demonetisation move.

Contrary to the general perception of a significant price correction, Colliers does not believe that prices will crash. We anticipate that prices will largely remain stable, while a marginal correction of 5%-7% in emerging micro-markets, such as Dwarka Expressway and Golf Course Extension Road, cannot be ruled out due to high inventory available in the secondary market. The story was similar in Noida, as in the backdrop of muted sales in the primary market and heightened consumer activism on the issue of delays in completion of projects, developers remained focused on execution of projects in 2016. About 6,500 new units were launched in Noida in 2016, which is almost equal to the 2015 figure.

Builders opted for alternative sources of funds and raised money from non-banking finance companies (NBFCs) and a number of private equity players also entered into strategic alliances with developers. In 2016, a few national-level developers, such as Tata and Godrej, signed joint development agreements with local developers to enter into the Noida market.

Mumbai: 2016 began with a promising outlook for Mumbai but as the year progressed, the real estate market in the city was affected by several factors, like the approval of the RERA by the central government, the new Maharashtra Housing Policy and the demonetisation drive. Developers and buyers adopted a wait-and-watch approach and the number of launches reduced considerably.

In 2016, there were about 29,000 new launches in the Mumbai Metropolitan Region (MMR) and its suburbs, a decline of 18.8% over 2015. About 51% of the new launches were in Thane. The remaining share was concentrated in the central suburbs (23%), Navi Mumbai (15%), central Mumbai (9%) and south Mumbai (2%).

New unit launches are expected to be concentrated in Thane and Navi Mumbai in 2017, due to the availability of land at these locations.

Pune: Despite being one of the most active residential markets in 2016, Pune witnessed a slowdown towards the end of 2016, with new launches totalling to about 20,400 – a 36% decrease over 2015. Low enquiry levels, especially in the high-end and luxury segments, echoed prevailing subdued market sentiments, as most launches in 2016 were focused on the budget or mid-end segment housing. Localities adjacent to the commercial hubs of Pune in the west (Baner, Hinjewadi), south (Undri, Handewadi), south-east (Keshavnagar, Hadapsar) and east (Kharadi), constituted an 80% share of the new launches. Ready-to-move-in properties or projects close to completion, are likely to witness increased demand in 2017.

Source:  moneycontrol.

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