Demand For Homes Likely To Remain Stable
Times Of India [ 04-01-2013 ]

Demand for residential realty in the city is likely to be stable during the year, but the slow pace of absorption of stock may bring down the number of new launches and prices may stagnate.

This is amid a GDP growth decline from 9.3% to 6.5%, which has crippled the residential sector across the country, with the number of launches declining 30% in 2012 compared to 7% in 2011 and banks' credit exposure to developers falling from 23.21% to a mere 3.88%, experts have pointed out.

Realty advisory Knight Frank has said in a research note that the residential market in 2012 was plagued by high property prices, relatively higher mortgage rates, weak business sentiments and a bleak employment scenario.

Knight Frank said the Mumbai residential market has witnessed a phenomenon of rising property prices and declining sales volumes. High prices, coupled with a stagnating job market, have adversely impacted sales momentum, the firm said. It added that going forward, the price growth in Mumbai would be muted on account of the unsold inventory and increasing share of peripheral markets.

"West and east Pune, where majority of new jobs are being created, will continue to witness the maximum amount of traction in the residential space going forward . A comparatively higher number of unsold units in 2012 will ensure a marginal drop in new launches for the next year. Additionally, the prices will also stagnate as the supply overhang decreases," Knight Frank said.

Cushman & Weikfield said Pune saw a significant increase of 34% in the number of new launches in 2012 over the last year. With over 24,000 new units in the market, supply has complemented the demand in the market, the firm said. Owing to the city's increasing commercial importance, the city has witnessed increased demand for residential units in the last few years, it said.

Sanjay Dutt, Cushman & Wakefield's executive managing director for South Asia, said, "In 2012, the residential market saw proactive and innovative marketing and new launches of specialist projects on one side, but restrained activities in terms of large scale development as most developers were cautious not to overestimate the end user demand market. Aspects like high consumer inflation, existing high home loan interest rates and slower growth of the economy had a strong impact on the end users making them more price sensitive than previously experienced. On the other hand, cash-strapped developers were not willing to take up projects that may fall short in interest from end users, thereby keeping their risk exposure to minimum."

Rohit Gera, managing director of Gera Developments and vice-president of Credai, said while the drop in the GDP and political uncertainty over the last quarter of the last year has affected the real estate sector on the whole, there was an increase of nearly 20% on unit terms and 11% in project terms in 2012. "The total inventory in Pune as on December 2012 continues to be at 79.33% sold (the sellout ratio in December 2011 was 79.69%). This indicates a positive scenario for the Pune realty sector."

"Our research shows that the total inventory in December 2012 was 2,14,115 apartments spread over 1,882 projects. The total inventory in December 2011 was 1,78,775 apartments spread over 1,695 projects. This information, when viewed with the increase in the ready reckoner rates for stamp duty where prices increased by 10% to 20%, also indicate a less pessimistic scenario," Gera said.

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