Demand For Houses Near Historic Low, Price Rise Moderates – Financial Express – 25-Nov-2014
November 25, 2014 - Uncategorized
Sales of residential property in the country’s key cities dropped 21% year-on-year in the three months to September, showing consumers continue to shy away from buying homes. However, the good news for those who may be planning to pick up an apartment is that the rise in prices is beginning to taper off. In the September quarter, prices rose just 5% y-o-y, a fairly sharp deceleration from the 12-16% y-o-y seen between Q2FY12 and Q4FY13. Indeed, the NHB Residex for Q1FY15 shows a significant deceleration in prices with the average unweighted price increase of just 2.9% y-o-y across 26 cities.
Mudassir Zaidi, national director, (residential), Knight Frank, believes prices are likely to stay at these levels for another next six months or so since developers won’t raise them before they see a stronger recovery. “Diwali sales weren’t as good as expected,” said Zaidi, who added that the market is somewhat slow with consumers expecting larger discounts and taking longer to close deals.
Ramesh Nair, chief operating officer, Jones Lang LaSalle, pointed out that unsold inventory levels in most parts of the country are at close to 30-40 months and rising. “That is high,” said Nair, who believes that unless the three Is — interest rates, income and infrastructure — take a turn for the better, sentiment will remain muted. As a result of the sluggish demand, new project launches are down 30% in Delhi and Bombay 30% while in Chennai they’ve come off by 50%.
However, while the fall in purchases may appear steep and substantial, the pace of the drop in demand is moderating, said analysts, who pointed out the fall had been a much bigger 39% y-o-y in Q4FY14. A report by Citigroup said that after a brutal decline in FY14, demand is closer to bottoming out though “full recovery is some time away”.
Zaidi confirmed that there was an increase in enquiry levels. “For constructions which have been promoted by developers who have credibility and where the price is reasonable, there are buyers,” he said.
One reason for the subdued sentiment in the residential space is the large number of projects taken up in the last few years.
With demand for commercial space virtually at a standstill, analysts point out that in 2010, 65% of all construction in the top eight cities was residential and that by 2014, this had gone up to 82%.