Home prices in India have risen by a cumulative 72.3% between 2007 and 2015, the highest growth among a group of 18 major economies. Brazil was ranked No. 2 with 61.3% growth in home prices, while Canada, Australia and Germany followed, posting double-digit growth. Russia is the worst performer, with residential prices dropping 41.47% during 2007-2015. Home prices have also not fallen uniformly across markets in the country.
Consumer sentiment subdued, builders are finding it hard to sell apartments, suggesting prices could correct a fair bit. Market watchers say there are few takers for homes especially high-end ones even if these are ready to be moved into. Huge available inventory and new upcoming supply is undermining short term appreciation in capital values, both in the primary and secondary market. Prices have corrected in certain pockets; home prices are lower in cities such as Mumbai, Pune and Delhi-NCR than they were in 2015.
New launches are back in fashion, but not translating into sales even where prices have dropped. Sales at Sky City in Mumbai, for instance, have been dull with only 60 flats sold of the 1,322 on offer, with prices kept lower. The Oberoi Realty property had debuted successfully in October last year with 68% of the apartments sold.
There are few who have not done well – the second phase of Godrej Properties’ Trees, also in Mumbai, too hasn’t done too well. Sobha Developers also reported last quarter performance as the weakest in the last four.
Sales are slow in the NCR region and Gurgaon too. But new launches are required to generate cash flows and developers are highly leveraged.
Data from property consulting firms show launches are picking up pace in Bengaluru, Mumbai and Pune. Launches in the January-March period were sequentially higher by 34% in Mumbai, 32% in Bengaluru and 12% in Mumbai. New launches have escalated by 25% year-on-year, after falling over 60% in the past two years.
Business has been relatively better in Bengaluru; Brigade Enterprises and Prestige Estates have been able to push sales through. But commentary following the March quarter results indicates companies are shying away from sales projections; at best they’re talking of a status quo. Godrej and Oberoi have generated revenues from a big launch or an asset sale. Despite lower risk and smaller transaction costs, buyers are keen on under-construction projects. This also means slower sales in almost completed projects.
For now, buyers are waiting for a further price slash to buy.