PROPGUIDE − A Complete Property Guide

An Explainer: Absorption Rate

Loading video...


In the past couple of years, we have heard quite often that India’s real estate market is suffering from a piling inventory due to a low absorption rate. But what is absorption rate and how is it calculated?

The absorption rate is the rate at which available homes are sold in a specific real estate market during a given time period. It is calculated by dividing the average sales in the market by the total number of available homes, and multiplying it by 100.

This rate of absorption basically indicates the likely time required for the total supply of homes on the market to get sold.

Suppose there are 100 houses available in the real estate market of Noida. In the month of January, some 10 units were sold. So, 10 divided by 100, multiplied by 100, would yield 10 per cent. This implies the absorption rate in Noida's market in January was 10 per cent. Also, from this calculation, we know that it took one month to clear 10 per cent of the stock, so it should take 10 months for the entire inventory to get sold.

If developers achieve the target of clearing their entire inventory in close to a year, this indicates a slow absorption rate. An absorption rate of 20 per cent or above is considered good for sellers. Real estate developers plan new projects based on the absorption rate. A slow rate of absorption is an indication that developers need to exercise caution while launching new projects.

On the other hand, a phase of low absorption rate could be good for buyers. An absorption rate of, say, 15 per cent or lower would mean that the supply is high but the demand is low. That gives a buyer better prospects of landing a good deal.

Tags: Real Estate, developers, Video, Apartments, propguide, Property market, Absorption Rate, Property Sale

An Explainer: Work Order

PropGuide simplifies complex real estate jargons for you.

June 29 2016

+ Click Here To Read This Article

An Explainer: Amenities

PropGuide decodes complex real estate jargons for you.

May 04 2016

+ Click Here To Read This Article

Is The Time Ripe For NCR Buyers To Book Their Dream Homes?

The Q2'FY16 report by PropTiger Data Labs suggests that now might be the right time to invest in NCR. Here's why.

November 10 2015

+ Click Here To Read This Article

Is NCR Losing Out To Mumbai, Bengaluru, Pune?

The National Capital Region, for very long, has been the largest residential real estate market in India. But, is NCR losing out to Mumbai, Bengaluru and Pune?

November 10 2015

+ Click Here To Read This Article

Unsold Inventory: Learnings From PropTiger Q2 Report FY'16

Unsold inventory in major Indian cities have been declining, quarter by quarter.

November 10 2015

+ Click Here To Read This Article

NRI Investments In Indian Real Estate: How To Get This Right?

With the government keen on strengthening Indian economy including investments, the process of investing in the real estate sector will become easier for NRIs. So if you are planning to invest, read what would be the dos and don’ts.

July 29 2015

+ Click Here To Read This Article

5 Creative Eco Resorts Around The World

If luxury housing are eco-friendly then what else could you want? It's like having your cake and eating it too!

May 04 2015

+ Click Here To Read This Article

Property To Become More Accessible For Common Man, Says Gulshan Homz Director

Primary real estate market will be unaffected, says Deepak Kapoor, who is also the president of CREDAI- Western UP.

November 18 2016

+ Click Here To Read This Article

Here are the week’s top news stories from the real estate sector.

Categorised into four, the Supreme Court approved these codes today.

PropGuide lists prime factors that makes KR Puram an emerging real estate market.

Rs 500 and Rs 1,000 were banned from November 8 midnight. What will be the impact on real estate...

Due to many reasons, real estate developers will not reduce property prices in the coming future.

An ancestral property is the one which one inherits from one’s forefathers.

The Modi government has decided to demonitise currency notes of Rs 500 and Rs 1,000. That has left...

A building code is a set of norms that govern construction of buildings by stipulating minimum...

Proptiger has released it's quarterly review report on India's real estate sector. Ankur Dhawan,...

Sunil Mishra, Chief Business Officer, PropTiger, talks on new online realty platforms for NRIs.

PropGuide dejargons complex real estate terms for you.

Subscribe Now

To stay tuned with real estate updates


x +

Drop Your Query here