New Delhi: This could be the beginning of a revival in the real estate sector. After two dry festival seasons for property launches, developers are gearing up for action this time.
Tapping the positive sentiment of a stable government at the Centre, realty companies have lined up at least 100 new projects for launch across big cities - the highest number of these in the National Capital Region (NCR) - ahead of the festival season. The seasons in 2012 and 2013 went by with hardly any property launches, mainly due to an economic slowdown and a need to clear the backlog.
Discounts were being planned in plenty this time, pointed out analysts. Seeing the surge in enquiry, brokers are offering discounts of eight to 15 per cent, depending on location. In contrast, hardly any discounts were on offer last year, though in some cases value-adds were thrown in. Also, the number of advertisements by real estate players across various platforms - print, electronic media, hoardings, email, phone, social networks - has grown manifold from the previous years.
According to brokers, the new launches have been planned because of rising interest levels following the return of positive sentiment. However, there is still some caution over whether the launches would translate into sales.
Developers like Godrej Properties, Tata Housing, Supertechand Mahindra Lifespaces have launched projects with the festival season in mind, and more are on their way. NCR-based developers Says, M3M and Chintels are also preparing for launches.
Depending on a buyer's bargaining power, a residential unit can come Rs 5-15 lakh cheaper this season. The number of enquires had risen two to three times from six months ago, brokers said. There is also talk of property prices climbing next year.
According to real estate website Magicbricks, 250 property deals are currently on across major cities. Another portal, Indiaproperty, talks of flat discounts of up to Rs 15 lakh and other freebies in various residential projects. Free vacations, gold vouchers and coins, modular kitchens, furnishing up to Rs 5 lakh and no registration fees are also being offered by developers.
The realty market has been hit by an economic slowdown and, coupled with the financial constraints of developers, there has been little activity and low sales in the past two years. Also, the sector was sitting on a high inventory, so developers focused earlier on clearing the backlog instead of new launches.
CBRE South Asia Chairman & Managing Director Anshuman Magazine said the coming festival season would be better than the previous two. But a revival was at least a year away, he added.
"Sentiment is positive and encouraging, but it is too early to assess the impact. Business during the coming festival season is expected to be better than last year. A complete revival might take a year or more. The key is improving liquidity in the market and mobilising investments from domestic and foreign funds and investors," Magazine said.
The festival period from October to December is expected to garner sales of at least 60,000 units across seven major cities, almost double of that recorded in the past two years. "The festival season will be much better in 2014. Sentiment is positive and enquiries have gone up substantially," said Ashutosh Limaye, head of the research and real estate intelligence service at JLL India.
Average annual sales for the sector are expected to reach 200,000 units this year, with a good festival season contributing 30-40 per cent to the total. In last two years, sales were 120,000-140,000 units annually, with very few of those during the festival season, according to industry estimates.
Developers have also been hard-pressed for funds, with not many lenders willing to lend to the ailing sector.
Inventory levels have been rising. The Mumbai Metropolitan Region had an inventory of 53 months at the end of June 2014, while the NCR had an inventory of 45 months, data by research firm Liases Foras showed. Hyderabad had an inventory of 47 months, Pune 23 months and Chennai 26 months. Bangalore had the smallest inventory among major cities, of 19 months. An ideal market maintains an inventory of eight months.
As many as 100 new projects will be launched in this year's festival season
Due to a slowdown, the new launches had come down significantly in the past two years
Brokers are giving discounts of seven to 15 per cent to tap potential buyers
Sales of 60,000 units expected during the Oct-Dec period, contributing 30-40% to total sales