According to Kotak Institutional Equities report, sales across major cities fell by 4.6% y-o-y, at 34 million sq ft in January 2019.
Real estate launches on a pan-India basis saw a sharp decline of 60% year-on-year to 12.7 million square feet in January 2019 from 32.2 million square feet in January 2018 as the developers face incremental pressure under a constrained liquidity environment.
According to Kotak Institutional Equities report, sales across major cities fell by 4.6% y-o-y, at 34 million sq ft in January 2019. The sale momentum remained steady with an average of 35 million sq ft in the calendar year 2018, even as the launches were down, mainly in National Capital Region (NCR) and tier-2 cities. Sales in tier-2 cities dropped to 1.9 million sq ft against the average monthly launches of 5.4 million sq ft during CY2018. The steady sales and declining launches have helped in reducing the inventory.
The all-India inventory decreased 11% y-o-y, from 1,393 million sq ft to 1,240 million sq ft. Prices remained flat across India at Rs 5,267 per sq ft , an increase of 4.7% y-o-y in the month under review.
Sales activity in NCR remained steady in January 2019 with sales of 4.6 million sq ft, up by 7.6% y-o-y with a major contribution of 1.8 million sq ft from Gurugram and 1.5 million sq ft in Greater Noida. The average sales clocked at 4.3 million sq ft in CY 2018. The launches declined by 85% y-o-y with only 0.8 million sq ft of new inventory in Ghaziabad.
Net unsold residential inventory in NCR stood at 223 million sq ft as of January 2019 and is equivalent to 51 months of sales (based on an average of trailing 12 months). Realisations declined 6% y-o-y in NCR, at Rs 4,930 per sq ft due to a higher proportion of affordable housing projects.
Launches in Mumbai Metropolitan Region (MMR) also reduced by 37% y-o-y, at 2.8 million sq ft in January 2019. Sales remained flat at 6.2 million sq ft, up by 1% y-o-y and were in line with an average of 6.5 million sq ft in CY 2018. The unsold inventory remained highest in MMR among all regions at 273 million sq ft, even after decreasing by 10% y-o-y from 304 million sq ft in January 2018. The inventory is expected to be absorbed in 42 months (based on prevailing past 12-month sales).
Sales in Bengaluru in January 2019 increased by 5% y-o-y, at 4.9 million sq ft against the launches of 3.8 million sq ft during the same period. But the launch activity was lower than the average launches of 4.4 million sq ft in CY2018. Unsold inventory at 156 million sq ft continues to be the lowest across regions in India. Realisations in January 2019 increased 4% y-o-y to Rs 4,950 per sq ft.
As the homebuyers are postponing sales to see the effect of revised Good and Service Tax (GST) rates, which will be implemented from April 1, 2019, the sales number will remain moderate in February and March this year. Lack of clarity on applicable GST rate on under-construction properties and transition to new rates will hinder the sales and collection numbers for developers towards the end of this fiscal year.