Colliers: Demand to remain skewed towards ready to move in properties


Colliers, properties, RERA, GST, union budget, Mumbai, NCR, Chennai, Pune, Bangalore
Budget key to residential market revival
Highlights
  1. 2017 union budget holds the key to many more incentives for homebuyers in the form of tax cuts and interest subsidies.
  2. In 2016, about 89,000 units were launched across six major cities in India.
  3. Ready to move in properties or projects close to completion shall witness an increased demand in 2017.

New Delhi: Although the implementation of various regulatory reforms such as the Real Estate (Regulation & Development) Act (RERA), Goods and Services Tax (GST) Act, and the Benami Transactions (Prohibition) Amendment Act, 2016 are likely to bring positive changes in the residential sector in the long term, buyers will remain cautious and wait for further clarity until the Union budget 2017. Colliers forecasts that the demand of end users will remain skewed towards ready to move in properties, at least in the short term. As per Colliers, the 2017 union budget holds the key to many more incentives for homebuyers in the form of tax cuts and interest subsidies.

 

In 2016, about 89,000 units were launched across six major cities in India, which is about 34% less than the units launched in 2015. Out of the total new launches, 28% were concentrated in Bangalore followed by Mumbai 25%, Pune 23%, National Capital Region (NCR) 15% and Chennai 9%. The decrease in the number of new launches indicates the waning interest of buyers in the primary market.

 

“We expect demand for quality stock in areas with good connectivity and social infrastructure to revive in the near term, especially in mid-segment housing. However, realistic pricing will be the key to an early revival as right now both buyers and sellers are hanging on in the hope of achieving optimum prices. We think prospective buyers should not delay their decision unduly, since they can negotiate realistic prices in both the primary and secondary markets” says Surabhi Arora, Associate Director Research at Colliers International India.

 

It remained a muted year for the NCR market. Gurgaon witnessed the launch of around 6,700 units in 2016, about one-third of the 2015 numbers. Colliers expects a muted demand, and a limited number of new launches in H1 2017, as the ongoing slump in the market, gets further fortified after the demonetisation move.

 

Contrary to the general perception of a significant price correction, Colliers does not believe that prices will crash. According to the report, prices will largely remain stable while a marginal correction up to 5-7% in emerging micro markets, such as Dwarka Expressway and Golf Course Extension Road cannot be ruled out due to high inventory available in the secondary market.

 

The story was very similar for Noida, as in the backdrop of muted sales in the primary market and heightened consumer activism on the issue of delay in completion of projects, developers remained focused on execution of projects in 2016. About 6,500 new units were launched in Noida in 2016, which is almost equal to the 2015 figures. Builders opted for alternative source of funds and raised money from Non-Banking Finance Companies (NBFCs) and a number of private equity players also entered into strategic alliances with developers. In 2016, a few national level developers such as Tata and Godrej signed Joint development agreements with local developers to enter into the Noida market.

 

2016 began with a promising outlook for Mumbai, but as the year progressed, the real estate market in the city was affected by several factors, like the approval of real estate (Regulation and Development) Act (RERA) by the central government, the new Maharashtra Housing Policy and the demonetisation drive. Developers and buyers alike adopted a wait and watch approach and the number of launches reduced considerably. In 2016, there were about 29,000 new launches in the Mumbai Metropolitan Region (MMR) and its suburbs, a decline of 18.8% over 2015. About 51% of the new launches were in Thane. The remaining share was concentrated at other locations namely Central suburbs (23%), Navi Mumbai (15%), Central Mumbai (9%) and South Mumbai (2%). Colliers forecasts, new unit launches shall be concentrated in Thane and Navi Mumbai in 2017, due to the available land reserve at these locations.

 

Despite being one of the most active residential markets in 2016, the Pune market slowed down towards the end of 2016, with new launches totalling to about 20,400, witnessing a 36% decrease over 2015. Low enquiry levels especially in the high-end and luxury segment echoed prevailing subdued market sentiments, as most launches in 2016 were focused on the budget or mid-end segment. Localities adjacent to commercial hubs of Pune in West (Baner, Hinjewadi), South (Undri, Handewadi), South East (Keshavnagar, Hadapsar) and East (Kharadi) constituted an 80% share of the new launches. Colliers forecasts, ready to move in properties or projects close to completion shall witness an increased demand in 2017

 

Bangalore continued its run in the residential market with maximum number of new unit launches in 2016. However, while in 2016, nearly 24,800 new residential units were launched in Bangalore, it reflects a 35% year on year (y-o-y) decrease over 2015.

 

Chennai’s residential market remained subdued in terms of both new launches and sales as weak buyer sentiments prevailed due to a series of events in 2016. The city’s primary residential market witnessed the launch of nearly 7,750 residential units, a 35% year-on-year (y-o-y) decline over 2015. Of the total launches, 94% were concentrated in suburban and peripheral quadrants while only 6% were noted in the central and off central locations.

 

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