Indian Real Estate Inventories Close to Record High: Chennai is 17 Months..

Inventories in the residential real estate market are close to an all-time high in all the major cities in India.

Builders in Mumbai are sitting on an inventory of 48 months. Chennai  is 17 months

Delhi is sitting on an inventory of 23 &  Bangalore on 25 months. This is above the comfortable level of 14 to 15 months. Analysts said these are close to the levels of 2007, when the residential real estate market's inventories were at an all-time high.

Jones Lang Lasalle (JLL), in its latest report, RBI Bans 80:20 Schemes: Correction On The Cards?, says due to these high inventory levels in seven major cities, a price correction is likely. “Inventory levels in the leading seven cities in India are much higher than the comfortable industry levels seen 8-10 months ago, which is between 14 and 15 months’ of unsold supply.

As a result, the ability of the market to cling to current prices is under severe stress,” said Mr. Ashutosh Limaye, Head, Research and Real estate intelligence service, Jones Lang LaSalle India (JLL India).

Mr. Mudassir Zaidi, Regional Head, North, Knight Frank, said, “5 to 7 quarters of inventory are comfortable. Anything above is worrying. Already, these markets are stressed as the supply has already come, whereas demand is not-so-stable.”

 Another one real estate broker, said  “I think buyers would start having some confidence after next Diwali, once polls are over & there are some decisions on the economy”

The report, based on the inventory levels of the second quarter, said though price cuts were inevitable, there would be a resistance to cut due to the plots of land cost. However, there could be a correction in the mid-income segment in the range 12% to 18%, depending on specific projects and builders’ holding capacity and financial strength.

“A correction in prices beyond this would affect developers’ profitability to a non-acceptable extent,” said the report.

Plots of Land prices as a percentage of project cost are 60% in the cities and 40 % to 60% in the suburbs. Mr. Niranjan Hiranandani, Managing Director, Hiranandani Group said the 80:20 or 75:25 schemes would impact the market more in the north, as it was an investor-driven one.

“These schemes are meant more for the investors who pay 20% initially and want to earn profits when the projects are completed.”

There are 50-100 projects in Mumbai–Thane under these, said experts. In other cities, the number is double. “The real-time rise in property prices (adjusted for inflation) in Tier-I cities since first quarter, 2012 has not exceeded 4%-5%, a fact that could dissuade developers from reducing property prices significantly,” said the report.

Inventory Level All Over India..

Name of

the City        Inventory Level        

Mumbai           48 months

Bangalore      25 months.

Delhi                23 months

Thane             23 months

NCR - Delhi   21 months

Chennai         17 months

Hyderabad    17 months

Kokata            17 months

Pune               14 months

Comfortable level -  14 to 15 months

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