Indian real estate developers can heave a sigh of relief: The latest quarterly update on the market shows that unsold inventory has fallen to their lowest level in several years.
While this is not simply a reflection of increasing sales — developers started going slow on new launches in 2016 — it does indicate that the market is turning healthier.
According to Anarock Property Consultants’ latest report, January-March 2019 saw unsold inventories in the top 7 cities of India fall to 30 months. In the immediately preceding quarter, the figure was 33 months, while the same quarter of 2018, the figure was 42 months (see chart above). Two years ago, it was at 50 months.
Besides a tighter supply — due to lower activity by developers — Anarock credited the turnaround to higher offtake by customers.
“Indian homebuyers are gradually returning to the market and taking advantage of favourable property prices and cuts in GST and home loan rates earlier this year,” it said.
It should be kept in mind that a sharp fall in inventory levels does not necessarily mean that actual inventory has fallen. It can also be caused by a higher rate of sales.
Housing sales in the top seven cities were at 78,520 units in Q1 2019, compared with 46,000 in the same quarter two years ago.
As such, even though inventory levels (in terms of sales months) fell by 40% in the last two years, in absolute terms, they have fallen only 16% to at 6.65 lakh units in Q1 2019.
The absolute number is still considerably high compared to 4.96 lakh recorded in 2013.
“However, the extremely worrisome trend of rising inventory since 2014 onwards has effectively been arrested, with data clearly suggesting a q-o-q unsold stock decline in the 7 main cities from Q1 2017 onward. In the coming quarters, a stable government at the Centre will boost buyer confidence further and increase housing sales velocity,” Anarock said.
In terms of raw numbers, Bangalore performed the best, falling from 1.19 lakh unsold units in Q1 2017 to 66,820 units in Q1 2019. Hyderabad followed with a 21% decline in the same period.
Delhi-NCR saw unsold stock decrease by a significant 18% during the two year period, while Mumbai region cleared a mere 4% of its unsold inventory in the same period.
Back to sales months, Bangalore and Hyderabad led from the front with inventory of just 15 months.
Pune was at third at 28 months, followed by Chennai with 30 months and Mumbai region and Kolkata with 35 months each.
Delhi was at 45 months, but this was also significant improvement over the 90 months reported two years ago.
The agency said that property prices have largely maintained stable in the last two years in India’s top cities.
There was an increase of less than 2% rise in the last two years – from INR 5,480 per sq. ft. in Q1 2017 to INR 5,570 per sq. ft. in Q1 2019.
Given that there was inflation of around 10% over the same period, in real terms, consumers have benefited by about 8%.
Anarock said over 60% of prospective property buyers plan to take the plunge in 2019.