New launches in India’s property market clocked whopping growth in the last financial year as developers came up with new products after grappling with a slew of policy changes such as RERA (Real Estate Regulatory Authority), GST (Goods and Services Tax) and demonetisation.
According to a recent report by real estate consultancy Liases Foras, new launches grew 80% in the financial year 2018-19 across the top eight regions of the country. This comes months after the market hit pause for new launches due to inventory glut and policy initiatives by the government.
The top eight regions are MMR (Mumbai Metropolitan Region), Delhi-NCR (National Capital Region), Pune, Chennai, Bengaluru, Ahmedabad, Hyderabad, and Kolkata.
The just-concluded financial year saw the markets launch 237,903 units, up from 132,526 units in the financial year 2017-18. The new launches activity needs to be seen in the context of the changes that took place in the sector over the last couple of years. A slew of policy initiatives such as RERA, GST and demonetisation forced developers to hit pause and align their businesses with the new regime. This, in effect, led to a slowdown in new launches in the market.
Mid last year, the realty market met with a liquidity crunch issue after the Infrastructure Leasing & Financial Services (IL&FS) debacle. The liquidity crunch forced non-banking financial companies (NBFCs) to take a cautious stance and virtually stop lending to the housing market of India. Analysts say that NBFCs have taken an extremely cautious stance on lending to developers and the market will take months before attaining normalcy from a financing perspective.
The spike in new launches is an encouraging sign given the state of affairs in the real estate housing market. However, the new launches will lead to further addition in inventory even as the market is still struggling to get back on track.
Consider, for example, the sales numbers. Going by the same report, sales grew by a meagre five per cent year-over-year in 2018-19 across the top eight regions.
Bengaluru, Hyderabad, Ahmedabad and Kolkata managed to clock sales growth above 10%, while MMR, NCR and Chennai continue to be in a spot.
The affordable and mid-income segment, which is largely driven by end-users, has gained the most share in sales in recent quarters. By the report, in the fourth quarter of 2018-19, sales in the price bracket of Rs 25-50 lakh captured 37% of the market. This was followed by the price bracket of Rs 50 lakh-Rs 1 crore, which took up a market share of 30%.
Given the momentum in the mid-income and affordable-housing segments – with the central government extending a slew of incentives and perks for owning such units – developers have also tweaked their strategies and are launching units for end-users as against investors in the upper end of the price cycle.
Most of the supply, around 33%, came in the Rs 50 lakh price segment, followed by Rs 50 lakh-Rs 1 crore bracket.
The report said that despite the challenges in the market, the outlook seems positive.