Residential Projects in downtrend
Residential Projects Are Feeling The Heat: register a 25% slump
Till recently, houses were selling like hot cakes, naturally driving up the realty prices. While some builders might still be quoting high prices, the fact is the number of transactions have fallen. In fact, after land prices, residential projects are feeling the heat of the US subprime crisis and poor market sentiments. The most hit is the North India property market with project sales witnessing a steady dip in transaction volumes.
New project launches and even the ones that were announced earlier are not finding enough buyers. Even figures from RBI are a glaring evidence of the slowdown in transaction volumes over the last year. As per RBI data for 2007-08, growth in bank credit in housing has gone up from Rs 2,24,758 crore to Rs 2,51,668 crore, an increase of just 11%. Compare this with bank credit growth in FY07 and FY06 that stood at 24.72% and 38.31%, respectively.
Projects in prime markets such as Delhi/NCR, Chandigarh, Amritsar, Lucknow and Bangalore have been witnessing a 15-20% dip in transaction volumes over the last nine months.
"If I compare it with the situation two years ago, the transaction volumes have for sure gone down. Earlier, there were days when we would sell 10,000 flats in a day. But now owing to the absence of speculators in the market, the sale numbers per day have fallen," says Omaxe CMD Rohtas Goel.
Take the case of Delhi NCR. Market sources and brokers say that there has been a 20-25% dip in sale of residential projects over the last six months. These include even upscale projects such as Emaar MGF's Palm Street Project in Gurgaon, Uppal Group's Plumeria group housing project in Greater Noida, Jaypee Greens in Noida Sector 128, Unitech's project on Taj Express Highway in Noida and BPTP's Parklands project in Faridabad.
Gurgaon and Noida which were abuzz with activity once, are feeling the jitters too. "Gurgaon alone has seen a dip of 25-30% in residential project sales. High residential rates in Noida by developers at around Rs 5,000-6,000 per sq ft are driving buyers away. Plus a situation of oversupply and decrease in demand has further compounded the problem," says a source.
Analysts agree that the slowdown impact is more pronounced in the North as compared to the South. Developers, though hesitant about agreeing with the recession don't deny the fact that sales have been on the decline.
Says Parsvnath Developers COO BP Dhaka, "We have new projects coming up in Dharuhera, Jammu and Lucknow. A 15% slowdown in bookings has been seen. Short-term investors are absent from the market. Plus, genuine home buyers are waiting to see if there is a further dip. Adding to that is the subprime crisis, the psychological impact of which has been felt here. That has also led to a lot of people backing out from buying."
Adds Suncity Projects MD Ajay Agarwal, "Transaction volumes have especially gone down in tier II and III cities. Though we have ongoing projects in Indore, Bareilly and Raipur, if I have to come up with new projects, I will have to think twice."
Analysts agree that the speculators' absence from the market owing to the tough season in the stock market, has led to the slowdown in residential project sales. Cushman & Wakefield India associate director (residential) Shveta Jain feels that a lot of investor demand was driving the market around eight months back against only end-user demand now.
"Now, the market is seeing a lot of demand from long-term investors who are not speculators. Developers are also being more realistic on pricing levels. New projects are taking much longer to be sold, mostly they are offloaded within a year or 18 months now as compared to an earlier time period of only 3-6 months."
So as the euphoria led by speculators has taken a beating, the worst hit are satellite towns such Kundli and Sonepat which had seen lot of action in the last three years. Cities such as Mohali, Chandigarh, Amristsar and Panchkula are also affected. "Different segments have behaved differently during this slowdown period. In the upper luxury market transaction, volumes have gone down by 15-20% in the last 8-9 months. Mid-segment continues to do well," asserts Jones Lang LaSalle Meghraj country head Anuj Puri.
But though it's North India that has been most affected, the South hasn't completely been free of its own set of woes. According to Cushman & Wakefield, in Bangalore sales in the current year so far are relatively lower than last year. However, there is a steady demand in the market and hence, developers have continued to launch projects.
Hyderabad, on the other hand, is not witnessing a `major' slowdown. However, demand has marginally reduced here also as compared to the last couple of years. Says a Hyderabad-based broker, "Demand has slowed down by at least 30%, especially in the luxury market." The market slowdown could translate into good news for genuine home buyers. Those who have been waiting to make this precious investment may soon get some good bargains as realty players cut prices to attract buyers.
Till recently, houses were selling like hot cakes, naturally driving up the realty prices. While some builders might still be quoting high prices, the fact is the number of transactions have fallen. In fact, after land prices, residential projects are feeling the heat of the US subprime crisis and poor market sentiments. The most hit is the North India property market with project sales witnessing a steady dip in transaction volumes.
New project launches and even the ones that were announced earlier are not finding enough buyers. Even figures from RBI are a glaring evidence of the slowdown in transaction volumes over the last year. As per RBI data for 2007-08, growth in bank credit in housing has gone up from Rs 2,24,758 crore to Rs 2,51,668 crore, an increase of just 11%. Compare this with bank credit growth in FY07 and FY06 that stood at 24.72% and 38.31%, respectively.
Projects in prime markets such as Delhi/NCR, Chandigarh, Amritsar, Lucknow and Bangalore have been witnessing a 15-20% dip in transaction volumes over the last nine months.
"If I compare it with the situation two years ago, the transaction volumes have for sure gone down. Earlier, there were days when we would sell 10,000 flats in a day. But now owing to the absence of speculators in the market, the sale numbers per day have fallen," says Omaxe CMD Rohtas Goel.
Take the case of Delhi NCR. Market sources and brokers say that there has been a 20-25% dip in sale of residential projects over the last six months. These include even upscale projects such as Emaar MGF's Palm Street Project in Gurgaon, Uppal Group's Plumeria group housing project in Greater Noida, Jaypee Greens in Noida Sector 128, Unitech's project on Taj Express Highway in Noida and BPTP's Parklands project in Faridabad.
Gurgaon and Noida which were abuzz with activity once, are feeling the jitters too. "Gurgaon alone has seen a dip of 25-30% in residential project sales. High residential rates in Noida by developers at around Rs 5,000-6,000 per sq ft are driving buyers away. Plus a situation of oversupply and decrease in demand has further compounded the problem," says a source.
Analysts agree that the slowdown impact is more pronounced in the North as compared to the South. Developers, though hesitant about agreeing with the recession don't deny the fact that sales have been on the decline.
Says Parsvnath Developers COO BP Dhaka, "We have new projects coming up in Dharuhera, Jammu and Lucknow. A 15% slowdown in bookings has been seen. Short-term investors are absent from the market. Plus, genuine home buyers are waiting to see if there is a further dip. Adding to that is the subprime crisis, the psychological impact of which has been felt here. That has also led to a lot of people backing out from buying."
Adds Suncity Projects MD Ajay Agarwal, "Transaction volumes have especially gone down in tier II and III cities. Though we have ongoing projects in Indore, Bareilly and Raipur, if I have to come up with new projects, I will have to think twice."
Analysts agree that the speculators' absence from the market owing to the tough season in the stock market, has led to the slowdown in residential project sales. Cushman & Wakefield India associate director (residential) Shveta Jain feels that a lot of investor demand was driving the market around eight months back against only end-user demand now.
"Now, the market is seeing a lot of demand from long-term investors who are not speculators. Developers are also being more realistic on pricing levels. New projects are taking much longer to be sold, mostly they are offloaded within a year or 18 months now as compared to an earlier time period of only 3-6 months."
So as the euphoria led by speculators has taken a beating, the worst hit are satellite towns such Kundli and Sonepat which had seen lot of action in the last three years. Cities such as Mohali, Chandigarh, Amristsar and Panchkula are also affected. "Different segments have behaved differently during this slowdown period. In the upper luxury market transaction, volumes have gone down by 15-20% in the last 8-9 months. Mid-segment continues to do well," asserts Jones Lang LaSalle Meghraj country head Anuj Puri.
But though it's North India that has been most affected, the South hasn't completely been free of its own set of woes. According to Cushman & Wakefield, in Bangalore sales in the current year so far are relatively lower than last year. However, there is a steady demand in the market and hence, developers have continued to launch projects.
Hyderabad, on the other hand, is not witnessing a `major' slowdown. However, demand has marginally reduced here also as compared to the last couple of years. Says a Hyderabad-based broker, "Demand has slowed down by at least 30%, especially in the luxury market." The market slowdown could translate into good news for genuine home buyers. Those who have been waiting to make this precious investment may soon get some good bargains as realty players cut prices to attract buyers.