Friday, 24 April 2015

Sharp dip in new residential projects

The first quarter of calendar year 2015 has seen the lowest number of real estate project launches over a two-year period, a recent report released by real estate consultancy Cushman & Wakefield (C&W) has said.

With a total 24,700 units residential units launched, the decline was over 50% compared to those in the same period last year. The decline comes on the back of less-than-expected sales in the residential sector, due to which developers are holding back on new launches and instead focusing on completing their existing projects, the report said.

New Regulations:
Also, with a few key cities planning to roll out new development plan (DP), developers are withholding new projects till the new regulations come into effect, it added.

Shveta Jain, Executive Director, Transaction Services (Residential), C&W, said: “Input costs including those towards statutory approvals, etc, from the State government, cost of land, land development have been rising. In addition, whilst the market sentiments are positive and the enquiries have increased, conversion of interest to sale is low.”

Among new unit launches during the first quarter, only the high-end segment registered a y-o-y growth of 26%. While all other segments have seen considerable decline, affordable housing segment units have reduced significantly by over 80%. Developers are inclined towards the high-end segment where profit margins are typically higher, as builders look to offset increasing land and development costs.

According to the report, Hyderabad saw a massive surge in high-end segment launches that rose to 3,300 units of which about 98% were in the north-west quadrant of the city, mainly Madhapur and Gachibowli, where corporates are increasingly looking to set up offices.

As corporates move in, residential developers expect senior management of firms to shift there, driving the demand for high-end residences over the next few years.

Bengaluru witnessed a y-o-y decline of 76% in unit launches with nearly 4,100 units launched during the first quarter of 2015.

Cautious Approach:
Due to cautious investing attitude, the absorption rate here declined leading to a lot of unsold inventory and thereby a restrained supply. However, almost 41% of the total units were launched in the south-east submarket, primarily along Sarjapur Road and Hosur Road and an additional 25% in the North submarket, in Yelahanka and around Kogilu.

There has also been a reduction in the average number of units per project which has declined from 287 units in Q1 2014 to 233 units per project. The average number of units per project was highest (669) in Hyderabad, followed by 567 in Mumbai. In Delhi-NCR, Kolkata and Pune, comparatively smaller projects with lesser number of units were launched in Q1 2015.

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