Residential apartments sold in 2016 were higher than new units launched, indicating that the real estate sector is heading towards being “realistic”. This also means that more genuine buyers are going for new units and influence of black money on the sector is on the decline.
The trend, seen for the first time after 2008, was witnessed in all the four quarters of 2016 and also in the first quarter of 2017. Experts believe that the trend is likely to continue in the next few quarters as well in the backdrop of RERA (Real Estate (Regulation and Development) Act being implemented, which is expected to usher in an era of greater transparency in the sector, as well as rollout of Goods and Services Tax (GST).
According to a study conducted by JLL (Jones Lang LaSalle), a noted real estate firm, the number of units sold compared to the number of new units launched was the highest in the third quarter of 2016, when it exceeded more new launches by more than 10,000 units at all India level.
Ramesh Nair, CEO and country head, JLL India, said developers have rediscovered the value of end users and have been right sizing and right pricing their products accordingly. “We can say that the real estate sector is becoming more ‘realistic’. In the fourth quarter, demonetisation slowed down speculator activity and after that, sales have been largely driven by end users,” said Nair, in an emailed response.
Asked whether this means that the influence of black money in this sector is on the decline, he said: “Yes, the recent policy reforms such as RERA, Benami Property Act promise to bring down the incidences of black money getting parked in the real estate.” As per the study, the trend is clear across all the metro cities like Delhi-NCR, Mumbai, Bangalore and Chennai, though the situation is different in Kolkata, where the difference between units sold and units announced is negligible.
In case of Pune and Hyderabad, however, new unit launches are greater than units sold. But in Pune, as per the study, these are largely situated in projects along the city’s fringe areas having smaller configurations. In Hyderabad, launches are expected to stabilise through 2017 because a significant increase in launches can lead to unsold units piling up. Both these markets are likely to align to the pan-India trend in one or two quarters, the study adds.
A similar trend was seen in 2008 when the global financial crisis had hit the developers. This time around it is because of the new reality wherein developers are consciously trying to reduce inventory across cities by gradually reducing the number of launches. Similarly, markets are maturing due to the emerging supply-demand realities as well as the changing policy framework.