News

Unsold Inventory hits two-year low in Q4 2018

January 2019
  • Significant drop from 47 months of inventory overhang in Q4 2017
  • NCR still constitutes 52 months’ inventory overhang; Bengaluru and Hyderabad at all-time low of 17 months each
  • Sales exceed number of units launched second year in a row
  • Avg. property sizes across top 7 cities shrink by 8 per cent compared to 2017 and 19 per cent since 2016

Despite all headwinds including the liquidity crisis in 2018, housing sales rose by 18 per cent and new launches by 33 per cent across the top 7 cities compared to 2017. Residential inventory overhang reduced to a year-low from 47 months in Q4 2017 to 33 months in Q4 2018 across the top 7 cities.

The DeMo effect in late 2016 had pushed up unsold inventory to 47 months in Q4 2017 from 40 months in Q4 2016. An inventory overhang of 18-24 months signifies a fairly healthy market.

“Having absorbed a lot of the impact of various structural changes, the Indian real estate sector seemed poised to grow from the previous year,” says Anuj Puri, Chairman – ANAROCK Property Consultants.

“However, the issue of stalled projects and liquidity crisis continued to confound the housing sector in 2018, though it continued its transition into a relatively more transparent and end-user driven market. End-users accelerated growth while investors shifted focus towards alternate asset classes such as commercial, retail and warehousing, which did fairly well during the year.”

“Builders very extremely cautious about launching projects to align supply with the existing buyer demand. This helped sales pick up momentum in 2018. Simultaneously, builders reduced the average property sizes to align their offerings with the highly-incentivized affordable housing bracket. The affordable segment spearheaded residential growth in 2018.

2018 New Launch Tracker

The top 7 cities recorded new unit launches of around 1,95,300 units in 2018 against 1,46,860 units in 2017. The affordable segment comprised the lion’s share at 40 per cent. Major cities contributing to 2018 new unit launches included MMR, NCR, Pune, and Bengaluru, together accounting for 74 per cent new supply.

  • Bengaluru saw approx. 34,880 units launched in 2018 – a whopping 91 per cent increase from 2017. More than 80 per cent new supply added was in sub Rs. 80 lakhsbudget segment.
  • MMR added approx. 59,930 units in 2018, a yearly increase of 12 per cent over the preceding year. Approx. 40 per cent new supply was added in the affordable segment.
  • Chennai added new supply of 15,680 units in 2018 compared to 7,940 units in 2017 - a massive rise of 98 per cent. Approx. 49 per cent new supply was added in theaffordable segment.
  • Pune added 24,430 units in 2018, a significant increase of 29 per cent over 2017. More than 90 per cent new supply was added in sub Rs. 80 lakhs budget segment, out of which 52 per cent comprised of affordable projects.
  • Hyderabad added 17,290 units in 2018, a significant increase of 43 per cent over 2017. Approx. 58 per cent new supply was added in the budget segment of Rs. 40- 80 lakhs in 2018.
  • NCR added approx. 26,010 units in 2018, a yearly increase of 17 per cent over previous year. Approx. 47 per cent new supply catered to the affordable segment
  • Kolkata added approx. 17,290 units in 2018, a significant increase of 25 per cent over 2017. Approx. 73 per cent new supply was added in affordable segment.

City-wise Supply (In Units) and Y-o-Y and Q-o-Q percentage change

Cities Name

2018

2017

per centChange (2017 Vs 2018)

Q4 2018

Q4 2017

per centChange (Q4 17 Vs Q4 2018)

NCR

26,010

22,180

17 per cent

8,800

3,770

133 per cent

MMR

59,930

53,700

12 per cent

16,590

12,050

38 per cent

Bengaluru

34,880

18,290

91 per cent

11,610

3,510

231 per cent

Pune

24,430

18,950

29 per cent

6,730

2,720

148 per cent

Hyderabad

17,290

12,110

43 per cent

3,940

3,700

7 per cent

Chennai

15,680

7,940

98 per cent

3,900

970

301 per cent

Kolkata

17,080

13,700

25 per cent

4,030

1,660

145 per cent

Total

1,95,300

1,46,870

33 per cent

55,600

28,380

96 per cent

Source: ANAROCK Research

The GST Debacle Haunted 2018 - GST on under-construction properties was a major hurdle in 2018, dissuading buyers from purchasing properties that fell under its gambit. The twin issues of stalled/delayed projects and financial stress within residential real estate augmented interest for ready-to-move-in properties with most buyers preferring to buy what they can see.

Shrinking Flat Sizes - Builders submitted to consumer demand and offered more property options in the affordable segment, along with an overall reduction in average property sizes across segments, to fit the affordability quotient. At the pan-India level, average property sizes in 2018 shrunk to 1,160 sq. ft. from 1,260 in 2017. Surprisingly, Bengaluru saw maximum decline of 13 per cent in average property sizes in 2018, followed by MMR and Kolkata with 11 per cent each. On a two-year basis, thedecline in housing sizes was nearly 23 per cent in most key cities, except in Chennai and Bengaluru.

Sales Exceeded New Supply - Another significant trend witnessed is that housing sales numbers have exceeded new launch supply consecutively in 2018. Prior to 2017, sales numbers were far lower than new launch supply. This definitely indicates that the market is managing to shed unsold stock.

In the first three quarters of 2018, sales numbers rose q-o-q, but Q4 saw a mere 4 per cent rise as against Q3 2018. Sales growth was essentially marred by the NBFC crisis in the last quarter of 2018.

Consolidation via mergers and acquisitions dominated all sectors including residential during the year, completely redefining the definition of ‘financial health’ among players. This trend will continue in 2019 as well.

2018 Housing Sales Tracker

Around 2,48,310 units were sold in 2018 with NCR, MMR, Bengaluru and Pune together accounting for 82 per cent of the sales.

  • Bengaluru recorded the highest jump in sales in 2018 as compared to other top cities. City sales increased by 33 per cent - from 43,130 units in 2017 to 57,540 units in 2018 due to buoyant commercial activity and realistic property prices dictated by end-users.
  • NCR housing sales increased by 18 per cent - from 37,610 units in 2017 to 44,300 units in 2018. Despite rising sales, the region continues to grapple with the issue of stalled/delayed projects.
  • Pune sales rose by 12 per cent - from 30,730 units in 2017 to 34,460 units in 2018.
  • MMR sales rose by 17 per cent - from 56,970 units in 2017 to 66,440 units in 2018 - the highest number of units sold in 2018.
  • Chennai sales declined by 17 per cent over the previous year and was recorded at 11,340 units in 2018.
  • Hyderabad sales significantly increased by 16 per cent over the previous year with 18,630 units sold in 2018.
  • Kolkata saw approx. 15,600 units sold - a yearly increase by 21 per cent over 2017

City-wise Absorption (In Units) and Y-o-Y and Q-o-Q percentage change

Cities Name

2018

2017

per centChange (2017 Vs 2018)

Q4-2018

Q4-2017

per centChange

(Q4 17 vs Q4 18)

NCR

44,300

37,610

18 per cent

12,730

8,200

55 per cent

MMR

66,440

56,970

17 per cent

20,220

12,460

62 per cent

Bangalore

57,540

43,130

33 per cent

14,820

10,250

45 per cent

Pune

34,460

30,730

12 per cent

9,940

6,310

57 per cent

Hyderabad

18,630

16,110

16 per cent

4,990

3,920

27 per cent

Chennai

11,340

13,680

-17 per cent

3,290

2,600

26 per cent

Kolkata

15,600

12,900

21 per cent

3,860

2,400

61 per cent

Total

2,48,310

2,11,130

18 per cent

69,850

46,140

51 per cent

Source: ANAROCK Research

Overall Unsold Inventory till Q4 2018

Unsold inventory declined by nearly 7 per cent - from 7.26 lakh units in Q4 2017 to 6.73 lakh units in Q4 2018 and 14 per cent from 7.90 lakh units in Q4 2016. An uptick in the traction of ready-to-move-in and nearing-completion properties helped developers clear their existing stock.

City-Wise Unsold Inventory (In Units) and Q-o-Q percentage change

Cities Name

Q4-2018

Q4-2017

per centChange (Q4 17 Vs Q4 2018)

NCR

1,86,714

2,05,000

-9 per cent

MMR

2,19,491

2,26,006

-3 per cent

Bangalore

73,337

96,000

-24 per cent

Pune

87,403

97,424

-10 per cent

Hyderabad

25,956

27,289

-5 per cent

Chennai

30,837

26,499

16 per cent

Kolkata

49,471

48,000

3 per cent

Total

6,73,208

7,26,218

-7 per cent

Source: ANAROCK Research

Price Movement

Residential property prices across the top 7 cities increased by a mere 1-2 per cent in Q4 2018 when compared to the previous year Q4 2017 - except Chennai, where pricesdecreased by 1 per cent and Kolkata, where they remained stagnant.

City-Level Price Trend (INR/Sqft)

Cities Name

Q4 2018

Q4 2017

per centChange (Q4 17 Vs Q4 2018)

NCR

4,565

4,520

1 per cent

MMR

10,550

10,337

2 per cent

Bangalore

4,925

4,810

2 per cent

Pune

5,480

5,410

1 per cent

Hyderabad

4,150

4,100

1 per cent

Chennai

4,900

4,955

-1 per cent

Kolkata

4,375

4,430

0 per cent

Pan-India

5,564

5,509

0.01 per cent

Source: ANAROCK Research

Outlook 2019

Despite the numbers suggesting a positive outlook for 2018, the picture may not be as rosy in at least the first half of 2019. The liquidity crisis – further aggravated by the NBFC issue – has caused mayhem in the industry and early 2019 will continue to see its spill-over effect.

Even while various reforms strove to eliminate unscrupulous players from the real estate ecosystem, the issue of stalled projects needs to be seriously addressed by the government, or else the recovery of the residential sector will remain compromised.

If developers continue to focus squarely on their core business, remain customer-centric and launch the right products at the right prices in 2019, the residential segment will gain traction. Else, the sector will have to solely rely on petty sops offered by the government to intermittently boost sales.