Residential property project launches halve in Q1; premium segment an outlier: C&W

New project launches have dipped to the lowest level in the last two years with residential project launches dropping by 50 per cent year on year in the first quarter of 2015 (January-March 2015), according to a report by real estate consultancy firm Cushman & Wakefield.

The total number of launches stood at 24,700 units (flats) in the first quarter. The report attributes less-than-expected sales in the residential sector as the reason for the decline and notes that as a result developers are focusing on completing existing projects now.

Project launches in the affordable segment stood at 1,700 units in Q1 2015 against 8,600 units in Q1 2014.

In the mid-income segment, 15,200 units were floated in Q1 2015 against 40,600 units in Q1 2014.

Only at the high-end segment, there was a rise in number of launches—around 7,700 units were launched against 6,100 in Q1 2014.

Among the realty markets, Hyderabad is the only one that saw a rise in launches, which quadrupled to 3,300 units in the first quarter on the back of political stability in the region. All the other markets saw a decline with the highest drop recorded at 76 per cent in Bangalore and lowest at 17 per cent in Pune.

Shveta Jain, executive director, transaction services, residential, Cushman & Wakefield, said, “Cost of creating new projects has been on a steady increase as input costs including cost towards statutory approvals etc. from state government, cost of land and land development have been rising. In addition, whilst the market sentiments are positive and the enquiries have increased, conversion of interest to sale is low. Developers are concentrating to deliver their projects and ensure timely exit for themselves as well as their investors.”

The report adds that developers are taking time to restructure their financial liabilities by reducing exposure to debt and replacing high cost debt with cheaper debt. “The primary concern for many developers is that they have over leveraged their current projects while they are unable to utilise their land bank or future development capabilities to raise more capital. Therefore, there is an effort towards keeping debt exposure low by lowering the number of launches, except in high demand locations where sale activities are high and fast paced,” the report adds.

With a view to complete projects in a shorter span of time, developers are launching projects with lesser number of units. The report says there has been a reduction in the average number of units per project which declined from 287 units in Q1 2014 to 233 units per project. In cities like Delhi-NCR, Kolkata and Pune, comparatively smaller projects with lesser number of units were launched in Q1 2015.

“The number of units launched per project further fell in this quarter, as developers launched smaller projects entailing comparatively lower investments and hoped to garner faster sales,” it says.

(Edited by Joby Puthuparampil Johnson)

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