Property developers who have been holding onto high prices despite falling demand, especially in the luxury segment, are finally changing course. They are not dropping prices yet, but are holding back new launches and focusing on relatively affordable homes, industy researchers said.
New project launches came down by 16% in 2012 compared to 2011 levels, and high-end and luxury segments saw a drop of 24% and 23%, respectively, says a report by real estate consultants Cushman and Wakefield (C&W). “Of the number of units launched, a majority were launched in the middle segment comprising 83% of total launches,” the C&W report said.
Developers consider one and two-bedroom flats in Mumbai and upto three-bedroom flats in Delhi to be middle income. Those above this are considered luxury property.
Industry experts say that real estate companies are also facing liquidity issues as bankers have become cautious about lending to the sector. While private equity deals were visible till the first half of 2012, it has come down sharply in the second half.
“Banks’ credit exposure to developers has fallen from its peak growth rate of 23.21% in June 2011 to 3.88% as per the latest reported data on September 2012,” a separate report by Knight Frank India said.
“The demand of residential apartments has come down substantially but prices have remained high and in some cases developers have increased prices, especially in the National Capital Region (NCR) and Mumbai. Now a correction is taking place and prices are not likely to increase for next 18-months,” said Pankaj Kapoor, managing director at realty research firm Liases Foras.
Increasing share of peripheral markets are likely to keep prices under check, especially in Mumbai and the NCR, the Knight Frank report said.
The analysts say controlled new supply of apartments in the NCR, primarily in new sectors in the Gurgaon area, will likely keep a check on the quantum of unsold stock.