Despite all headwinds including the liquidity crisis in 2018, housing sales rose by 18 percent and new launches by 33 percent across the top 7 cities compared to 2017. Residential inventory overhang reduced to a year-low from 47 months in Q4 2017 to 33 months in Q4 2018 across the top 7 cities.
The Demonetisation effect in late 2016 had pushed up unsold inventory to 47 months in Q4 2017 from 40 months in Q4 2016. An inventory overhang of 18-24 months signifies a fairly healthy market.
“Having absorbed a lot of the impact of various structural changes, the Indian real estate sector seemed poised to grow from the previous year,” says Anuj Puri, chairman – ANAROCK Property Consultants.
“However, the issue of stalled projects and liquidity crisis continued to confound the housing sector in 2018, though it continued its transition into a relatively more transparent and end-user driven market. End-users accelerated growth while investors shifted focus towards alternate asset classes such as commercial, retail and warehousing, which did fairly well during the year.”
“Builders very extremely cautious about launching projects to align supply with the existing buyer demand. This helped sales pick up momentum in 2018. Simultaneously, builders reduced the average property sizes to align their offerings with the highly-incentivized affordable housing bracket. The affordable segment spearheaded residential growth in 2018.”
The top 7 cities recorded new unit launches of around 1,95,300 units in 2018 against 1,46,860 units in 2017. The affordable segment comprised the lion’s share at 40 percent. Major cities contributing to 2018 new unit launches included MMR, NCR, Pune, and Bengaluru, together accounting for 74 percent new supply.
2018 New Launch Tracker Bengaluru saw about 34,880 units launched in 2018 – a whopping 91 percent increase from 2017. More than 80 percent new supply added was in sub Rs. 80 lakhs budget segment. MMR added about 59,930 units in 2018, a yearly increase of 12 percent over the preceding year. About 40 percent new supply was added in the affordable segment. Chennai added new supply of 15,680 units in 2018 compared to 7,940 units in 2017 - a massive rise of 98 percent. About 49 percent new supply was added in the affordable segment. Pune added 24,430 units in 2018, a significant increase of 29 percent over 2017. More than 90 percent new supply was added in sub Rs. 80 lakhs budget segment, out of which 52 percent comprised of affordable projects. Hyderabad added 17,290 units in 2018, a significant increase of 43 percent over 2017. About 58 percent new supply was added in the budget segment of Rs. 40- 80 lakhs in 2018. NCR added about 26,010 units in 2018, a yearly increase of 17 percent over previous year. about 47 percent new supply catered to the affordable segment. Kolkata added about 17,290 units in 2018, a significant increase of 25 percent over 2017. About 73 percent new supply was added in affordable segment. The GST Debacle Haunted 2018 - GST on under-construction properties was a major hurdle in 2018, dissuading buyers from purchasing properties that fell under its gambit. The twin issues of stalled/delayed projects and financial stress within residential real estate augmented interest for ready to-move-in properties with most buyers preferring to buy what they can see. Shrinking Flat Sizes - Builders submitted to consumer demand and offered more property options in the affordable segment, along with an overall reduction in average property sizes across segments, to fit the affordability quotient. At the pan-India level, average property sizes in 2018 shrunk to 1,160 sq. ft. from 1,260 in 2017. Surprisingly, Bengaluru saw maximum decline of 13 percent in average property sizes in 2018, followed by MMR and Kolkata with 11 percent each. On a two-year basis,the decline in housing sizes was nearly 23 percent in most key cities, except in Chennai and Bengaluru. Sales Exceeded New Supply - Another significant trend witnessed is that housing sales numbers have exceeded new launch supply consecutively in 2018. Prior to 2017, sales numbers were far lower than new launch supply. This definitely indicates that the market is managing to shed unsold stock.
In the first three quarters of 2018, sales numbers rose q-o-q, but Q4 saw a mere 4 percent rise as against Q3 2018. Sales growth was essentially marred by the NBFC crisis in the last quarter of 2018.
Consolidation via mergers and acquisitions dominated all sectors including residential during the year, completely redefining the definition of ‘financial health’ among players. This trend will continue in 2019 as well.
Around 2,48,310 units were sold in 2018 with NCR, MMR, Bengaluru and Pune together accounting for 82 percent of the sales.
2018 Housing Sales Tracker Bengaluru recorded the highest jump in sales in 2018 as compared to other top cities. City sales increased by 33 percent - from 43,130 units in 2017 to 57,540 units in 2018 due to buoyant commercial activity and realistic property prices dictated by endusers. NCR housing sales increased by 18 percent - from 37,610 units in 2017 to 44,300 units in 2018. Despite rising sales, the region continues to grapple with the issue of stalled/delayed projects. Pune sales rose by 12 percent - from 30,730 units in 2017 to 34,460 units in 2018. MMR sales rose by 17 percent - from 56,970 units in 2017 to 66,440 units in 2018 - the highest number of units sold in 2018. Chennai sales declined by 17 percent over the previous year and was recorded at 11,340 units in 2018. Hyderabad sales significantly increased by 16 percent over the previous year with 18,630 units sold in 2018. Kolkata saw about 15,600 units sold - a yearly increase by 21 percent over 2017. Overall Unsold Inventory till Q4 2018
Unsold inventory declined by nearly 7 percent - from 7.26 lakh units in Q4 2017 to 6.73 lakh units in Q4 2018 and 14 percent from 7.90 lakh units in Q4 2016. An uptick in the traction of ready-to-move-in and nearing-completion properties helped developers clear their existing stock.
Residential property prices across the top 7 cities increased by a mere 1-2 percent in Q4 2018 when compared to the previous year Q4 2017 - except Chennai, where prices decreased by 1 percent and Kolkata, where they remained stagnant.
Despite the numbers suggesting a positive outlook for 2018, the picture may not be as rosy in at least the first half of 2019. The liquidity crisis – further aggravated by the NBFC issue – has caused mayhem in the industry and early 2019 will continue to see its spill-over effect.
Even while various reforms strove to eliminate unscrupulous players from the real estate ecosystem, the issue of stalled projects needs to be seriously addressed by the Government, or else the recovery of the residential sector will remain compromised.If developers continue to focus squarely on their core business, remain customer-centric and launch the right products at the right prices in 2019, the residential segment will gain traction. Else, the sector will have to solely rely on petty sops offered by the Government to intermittently boost sales.