New home sales fall in Delhi NCR, Pune, Chennai, Mumbai; sales picked up in Bangalore
A home loan rate cut could be the trigger to get back sales
Jul 26, 2013
Source : The Economic Times


DELHI: New home sales fell in Mumbai, Pune, Chennai and Delhi-National Capital Region in the June quarter but picked up in Bangalore, according to data from property research firm Liases Foras.

In spite of attractive home purchase schemes, sales in Delhi-NCR were down 13% from the January-March period, while that in Mumbai, Pune and Chennai were lower by 12%, 15% and 7%, respectively. The worst hit segment was that of luxury homes.

However, Bangalore, which witnessed a spurt in NRI demand for homes and new launches in the affordable housing segment, bucked the trend with a 25% rise.

 "When markets are down, nothing works as buyer sentiment is extremely low," said Lalit Kumar Jain, chairman of Confederation of Real Estate Developers Associations of India. "A home loan rate cut could be the trigger to get back sales."

Liases Foras' data for the April-June period show that property prices have stagnated across the top markets in the country and inventory of unsold homes has touched a new high of 669.95 million sq ft. Experts say such an inventory level could take up to 32 months to be sold.

New home sales fall in Delhi NCR, Pune, Chennai, Mumbai; sales picked up in Bangalore

With market sluggishness tending to aggravate the funding problem for several developers, and the RBI's liquidity tightening measures this week set to increase borrowing costs, experts say a price cut could be round the corner.

According to Ask Group's managing director Sunil Rohokale, developers would want to focus on cash flows rather than margins. "With sales going down, they are scared their cash flows will not be enough even to cover their loan servicing. We expect a reduction in prices to push sales," he said.

There are already some signals. In the June quarter, prices in Bangalore, Chennai and Mumbai increased just 1%. The rise was 3% in Delhi-NCR and 9% in Pune.

"We are very close to the bottom now and price cuts could be round the corner," said Pankaj Kapoor, managing director of Liases Foras, a non-brokerage real estate research and rating firm, which services clients like HDFCBSE 0.84 %, Deutsche Bank and Standard Chartered Bank.

Some real estate brokers say that hard negotiating homebuyers could even manage a bargain as developers are keen to push up sales.

"They might not reduce price officially but they are giving offers like bank subvention and possessionlinked plans," said Abhay Khemka of Khemka Investments & Properties, a real estate brokerage firm in Gurgaon.

"This means a discount of 7%-10% for the buyer. Also prices have not been increased, which is another saving for the buyer."

In Mumbai, some high-end projects launched by developers like Lodha and Indiabulls Real EstateBSE 1.94 % have been priced 10%-15% lower and come with offers like an 80:20 financing scheme, where the customer pays 20% at the time of booking and the rest at the time of possession.

Unsold inventory levels in most large cities have been alarming high in the June quarter. In Mumbai, unsold inventory is up from 139. 33 million sq ft in the January-March period to 146.10 million sq ft, could take 48 months to clear.

 In Delhi-NCR, it is 277.31 million sq ft, which could take 38 months to reach a healthy level. Even Bangalore has seen unsold inventory levels rise to 88.68 million sq ft, from 62.56 million sq ft in the previous quarter.

"Fewer and fewer developers can hold on to such high inventory levels. Cost of finance is becoming unaffordable. PE funds are pressurizing developers to hasten sales. The only way to improve cash flow situation is to moderate pricing," said Ashutosh Limaye, head of research at Jones Lang LaSalle.




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