Residential Absorption getting into range bound zone: Report

Residential Absorption getting into range bound zone: Report
22/04/2016 , by , in News/Views

The residential market has witnessed over 97% of total demand coming from end users, shows online real estate advisor PropTiger’s ‘Realty Decoded’ report for the January-March quarter of financial year 2015-16 (Q4, FY16). The share of end users in total demand has been seeing a continuous increase, with the comparable figure standing at 77% mark from this segment in Q1, FY 16.

The report further highlights that sales have declined over the previous quarter – down to 51,000 units in the fourth quarter of the current financial year. In the four previous quarters, sales have hovered in the range of 49,000 to 57,000 units. However, the pace of decline, at four per cent over previous quarter, has come down to one of the lowest in the past nine quarters.

The study covered nine key Indian cities of Mumbai, Pune, Noida, Gurgaon, Bengaluru, Chennai, Hyderabad, Kolkata and Ahmedabad.

Anurag Jhanwar, business head (Consulting and Data Insights), PropTiger.com, said: “Affordability and end use are going to define rules of the game. The market is seeing a fundamental shift with end users emerging as the key buyer segment across all cities. Given the price sensitive behavior and demand for real use from this segment, the downside on both sales and prices, if any, is expected to be limited from here on”

According to the PropTiger study, Hyderabad was the only city to show a sales increase during the January-March quarter; the sales in the city grew five per cent over the same quarter the previous year. All other cities witnessed sales declines – of four per cent to 44 per cent from Q4, FY15. Hyderabad also recorded an annual residential price appreciation of six per cent closely followed by Ahmedabad with a price appreciation of five per cent. Over the past 11 quarters, Hyderabad has seen a price appreciation of 15 per cent; Bengaluru has been a close second with a 13 per cent increase during the period.

The report indicates that the ongoing lull in the residential market has reflected in a continuous fall in launches and absorption, affecting stakeholder sentiment. The sector is also grappling with a slow inventory movement of existing projects. Launch of new projects has declined 14 per cent from the previous quarter and 51 per cent when compared with the same period the previous year – all cities have seen declines in new launches, indicating a reduction in the activity levels across primary residential markets.

Anurag Jhanwar further added “. While the global economic scenario remains tough, the domestic macro factors of interest rates and inflation have started softening, though at a tepid pace. While the long-term story for residential market remains strong, the short term is expected to be sluggish.”

According to the research and analysis of the report, the affordable segment (sub Rs 50 Lakh budget) continue to command large share of total residential sales, with over 50 per cent of total sales in all four quarters of the financial year coming from this segment. The segment is expected to see further traction with the recent incentives announced in the Union Budget for both developers and first time property buyers. . Also, with RERA (the Real Estate Regulatory Authority) Bill now becoming a reality, the real estate market is expected to witness fundamental changes in the way of its operations.

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