Realty Decoded Q4 FY16: Up Is The Only Way Housing Sales Can Move From Here

On the first look, PropTiger DataLabs' 'Realty Decoded' report reveals that real estate sales across nine major cities of India dropped to 51,550 units in the fourth quarter (Q4) of 2015-16 – down by four per cent from 53,457 units in the previous quarter and by 22 per cent from 65,789 units in the same quarter a year earlier. However, a closer look shows that the extent of decline has been arrested to a large extent. The quarter-on-quarter sales drop in the January-March period was the lowest in nine quarters, suggesting there is a resistance close to the current level.

An even closer look would show that sales figures have hovered between 49,000 and 57,000 units in the past four quarters. This, according to the report, could be an “indication that the downside is limited from here onwards”.

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The report takes into account the housing markets in nine major cities – Ahmedabad, Bengaluru, Chennai, Gurgaon (including Bhiwadi, Dharuhera and Sohna), Hyderabad, Kolkata, Mumbai (including Navi Mumbai and Thane), Noida (including Greater Noida and Yamuna Expressway), and Pune.

PropGuide takes a look at why housing sales figures across top cities are likely to move up from here:

Affordable push: The affordable housing segment forms the largest part of the housing demand across top-nine cities. According to the report, over 50 per cent of the total sales continue to be in this segment. In what may further boost demand in this segment, the government has proposed several measures in the Union Budget. The Reserve bank of India has also affected a number of cuts in the repo rate – the rate at which the central bank lends money to commercial banks – over the past year. This is seen as an encouragement for buyers to come back to the market.

Besides these, civic bodies across the country are implementing measures to make the home buying process easier. The Noida authority, for example, has decided to make project details in the city available on its official website. The authority has also simplified its property registration process. Based on the support from the government and its agencies, the affordable housing segment is likely to see a positive change in terms of sales.

Inventory: According to the DataLabs report, developers in the nine major cities are sitting on a huge unsold inventory. In fact, January-March saw the fewest project launches in 12 quarters, thanks to “limited demand” and tight cash flow”. To attract buyers and liquidate this inventory, developers are likely to come up with innovative discount offers. At a time when housing prices have not increased and developers are offering discounts, buyers may get off the fence and invest.

Regulation: The government recently passed a legislation that proposes to set up a Real Estate Regulatory Authority (RERA) to govern the sector. The authority will bring more transparency in the sector, apart from pushing developers to deliver projects within deadlines. This will go a long way in improving buyers' sentiment. Besides, when the process to deliver projects picks up, developers will also up their marketing strategies to sell those quickly. With increased marketing activities, they should be able to raise the sales figures to a great extent.

Hyderabad's shine: According to the report, Hyderabad was the only city that in the fourth quarter saw a sales increase, even as property prices in the city rose six per cent over the same quarter in FY15. The unsold inventory in the city declined, too, with new launches seeing a decline. The city's booming information technology and pharmaceutical sectors have attracted more and more people to invest in Hyderabad. This demand revival in the city seems to build overall sentiment and augur well for the real estate sector across India.

To download PropTiger DataLabs' Realty Decoded Q4, FY16 report, click here.