Kapil Khurana, 40, has been hunting for a house in Gurgaon for two years, with little luck. Sky-high prices and interest rates have meant that he is still looking.
Real estate developers have been vocal about dwindling sales, but serious buyers say there is nothing available at reasonable prices.
DLF, one of the country’s leading real estate players, has reported a decline in sales at 350,000 square feet at the end of the December quarter. In tandem, housing property sales in Gurgaon, which is DLF’s main market, reported a 55% drop in 2014 at 10,887 units compared to 24355 units sold in 2013.
Noida too reported a 43% decline from 78,872 units in 2013 to 45,132 in 2014, real estate analyst Proptiger said in its latest report.
Unsold inventory too is on the rise. Mumbai, Thane and Navi Mumbai, for instance, had a total of 127,191 units unsold at the end of 2014. The figure in Gurgaon-Bhiwadi-Sohna was 45,087 units.
However, prices are unlikely to cool in the near term, industry sources said — a cause of worry for buyers.
Barring Noida, prices have only seen an increase, albeit marginal: 2% in Gurgaon, and 5% in Mumbai — the two most premium real estate markets in India.
The average rate for an apartment in Mumbai increased to Rs. 11,783 per square feet at the end of 2014, and to Rs. 7,737 in Gurgaon, from Rs. 11,226 and Rs. 7,613 at the beginning of the year.
Analysts say high prices continue to be a road block in these two markets.
“Residential sales declined by approximately 30% year-on-year by the end of 2014 in the seven leading cities of the country, largely due to high price points. The decline, which was noted across all major cities, was particularly steep in the Delhi-NCR. All major markets witnessed a slowdown in sales. Mumbai saw 7% increase over H1 2014, but a 2% decline on an annual basis,” said Anshuman Magazine, chairman and managing director, CBRE South Asia.
Interestingly, demand — from both end users and investors — remained high across India.
Noida saw a perfect blend of 50:50 ratio of demand coming from end user and investors, where as in Gurgaon 62% demand was from end-users. In Mumbai, the ratio was 77:23. In Hyderabad, the entire demand was end-user driven.
Dipping sales have forced developers to go slow on launches. Of new supplies added in 2014, most was in the ‘affordable’ segment, with unit prices below Rs. 50 lakh. Of the 259,660 units added in 2014, 150,000 were in the range below Rs. 25 lakh, and both developers and analysts see the real growth coming from the affordable housing segment.
Many builders such as Mahindra Lifespaces, Shapoorji Pallonji and Sobha Developers have opened independent verticals for affordable housing.
Said Brotin Banerjee, MD and CEO, Tata Housing Development Company Ltd: “Since the formation of the new government, the plans to provide housing to all is a great opportunity for the developers to tap the market potential of providing affordable homes to the aspirational middle-income group buyers. This year, consumer sentiment is on the rise and the recent RBI move to cut interest rates will encourage buyers to make investment decisions faster. We should see demand picking up in the next two quarters.”