NEW DELHI: The slowdown in India's real estate sector continues with the number of new construction projects declining sharply in the three biggest realty markets in the third quarter of this year, global real estate consultancy firm Cushman and Wakefield has said in a yet-to-be-released report.
New launches were down 54% in the national capital region, 27% in Bangalore and 11% in Mumbai during July-September 2014, as compared to the same period last year. The country as a whole saw a decline of 21% in new projects. The drop was steeper — more than 50% — in the affordable housing segment.
However, relatively smaller markets such as Pune, Hyderabad, Chennai and Kolkata bucked the trend and witnessed an increase in new launches.
Realty sector experts attributed a number of reasons to the decline in new construction projects. "There is oversupply in most of these cities due to weak market sentiment and slower growth rate in sales, due to which new launches have remained checked," said Shveta Jain, executive director, Residential Services, India. Capital values in most locations remained stable, she said, with a few exceptions like Bangalore and Pune.
Getamber Anand, president (elect) of Credai, a body of real estate developers, said unavailability of land due to the tough land acquisition law had also played a role in the decline. The government has not auctioned any land in the recent past as no land is available in these cities, he pointed out.
The cost of construction has gone up sharply, said Manoj Gaur, MD of realty major Gaursons. He said this has led to a peculiar problem — with unsold inventory available, it is not possible to increase prices while launching new projects at old prices is not sustainable. Therefore, developers are waiting for prices to firm up to unleash new offerings. Gaur said sales have picked up in the past couple of months and it is hoped that by March 2015 most of the old stock will be sold.
The Cushman and Wakefield report said the third quarter saw the launch of 33,800 new housing units across the top eight cities, with Chennai recording the highest 45 projects while Ahmedabad recorded the lowest number, five. In the same period last year, 41,700 apartments were launched.
The sharpest decline in launches was recorded in the affordable segment which declined by 52% in Q3 2014. Developers and consultants said margins in the affordable segment were very thin and it is often not possible to pass on escalation in construction costs to the customers. So, venturing into the affordable segment is a loss-making proposition at the moment even though demand remains the highest in this segment.