With the residential market still paralysed by slowdown,
a recent study by Jones Lang LaSalle (JLL) shows the hardest hit have
been housing at two extreme ends of the price spectrum. The budget homes
as well as the luxury housing segment have registered the least absorption
in recent times while most property transactions have been underway
in the mid-segment housing.
According to the report — which includes a survey of
Mumbai, NCR-Delhi, Bangalore, Chennai, Pune, Hyderabad and Kolkata —
the best sales have been registered in the price band of Rs 3,000 to
Rs 7,500 per sq ft, with this segment accounting for the least number
of unsold houses. On the other hand, projects priced at more than Rs
7,500 per sq ft took longer to sell, as these catered to mostly investors
or second home buyers who put their buying decision on hold when the
economy is sluggish.
Likewise, the projects priced at below Rs 3,000 suffered
as these buyers are most price sensitive with their ability to afford
waning in keeping with the overall sluggish economy and increasing interest
rates. The share of unsold houses in both these segments is currently
as high as 68-69 per cent. In comparison, when the realty market was
at its buoyant best in 2008, the luxury segment had the lowest unsold
share of three per cent. “Too high priced or low priced projects struggle
to sell. One of the prime lessons that recession taught real estate
developers was that the product had to be priced appropriately to suit
consumers,” it states.
While Mumbai was the first city to recover from the
2008 recession and witness appreciation in residential prices in the
second half of 2009, by end-2010 the sales velocity dropped due to the
hardening of interest rates. Anuj Puri, chairman and country head for
JLL, said, “2011 was a landmark year with record construction and growth
in the residential space. Absorption rate was strong and upward swing
was in process. With the economic downturn, 2012 became a sort of reality
check and supply has been going up, but absorption has come down.”
According to the report, in Mumbai presently about
80 of residential units are sold out when the project is still in the
under-construction stage and only 20 per cent are left to be sold post
construction. It states that a market where the projects are fully sold
before completion is a developer’s market whereas a buyers’ market is
one in which the project is completed before it is sold. In Mumbai,
realty analysts point out that an increasing number of projects are
being offered at highly discounted rates to investors during pre-sales
and pre-launches, a stage where the building plans haven’t even been
approved.
