This festive season, there is hardly any reason for real estate developers to celebrate. Even though new launches in the residential segment during the first quarter of this year reached the highest level since last quarter of 2012-13, buyers continue to adopt an extremely cautious approach refusing to take the bait of attractive pricing schemes and discounts.

According to a recent study by the Associated Chambers of Commerce and Industry of India and Jones Lang LaSalle, a global real estate services firm, new launches in the residential segment increased 30 per cent quarter-on-quarter in 2014-15 leading to the inventory further going up by 6.7 per cent in the same period.
The study projected a slower growth of 4-8 per cent in Tier-I cities in the current year, depending on the micro markets, but said capital values in Pune, Kolkata and Hyderabad could grow at a comparatively faster pace because of their low floor prices.  “After four consecutive quarters of muted launches, such activities showed improvement at the country level. Ahead of general elections, developers had launched many projects to gain competitive advantage and, at the same time, anticipated a recovery in market conditions post-polls. However, a slump in demand led to buyers taking a cautious approach. The number of unsold units rose 6.7 per cent quarter-on-quarter because of the large number of new launches amid a prolonged slump in sales. New launches increased by approximately 30 per cent quarter-on-quarter in Q1, 2014-15,” the study said.  The study pointed out that while there was an improvement in new launches, sales continued to remain low despite developers offering attractive pricing schemes and discounts to attract buyers.  Developers in Tier-I cities, the study noted, were likely to continue liquidating their stocks through good pre-launch and pricing promotions.  On the pricing front, it expected pan-India residential real estate ticket prices to grow at 10-12 per cent in 2014, factoring in inflation.  “Liquidity and high level of leverage remain big issues with the real estate developers. These two issues can ultimately get resolved with pick up in the economy and a smart recovery in demand for housing units. But there is a lag between improvement in macro picture and its impact on the real estate market, particularly in the residential segment which is highly sensitive to the interest rates and the job market, which needs to be robust for the demand rebound,” said D.S. Rawat, Secretary General, ASSOCHAM.
In terms of return on investment, average capital values across residential markets in the top seven markets of the country have been showing signs of recovery since 2009.

“Since the trough in second half of 2009-10, Mumbai has led the increase in average capital value with nearly 59 per cent growth, followed by Bangalore with 43.5 per cent rise in ACV and the NCR-Delhi 33.9 per cent. In the case of Chennai it was 41.09 per cent while it was only 25.2 per cent for Hyderabad. However, Kolkata and Pune have been major movers, showing appreciation of 50.7 per cent and 47.8 per cent respectively during this period,” the study said. In the NCR, Noida ACV remained low owing to large number of residential launches in the affordable and low-mid segments, it revealed.

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