Declining Housing Sales – The Devil in the Data
Speculator-driven NCR & MMR saw sales drop by 68% and 27% since
2013-14
by Mr. Anuj Puri, Chairman – ANAROCK Property Consultants
From
observing residential market trends over the past five years, it
clearly emerges that 2013-14 was the last year where things still looked
vibrant for the sector. Housing
sales began plummeting after that, and there is no clear revival in
sight as yet. A quick trends assessment for the past 5 years reveals
that during 2013-2014, an average of 3.3 lakh units were sold annually.
Thereafter, with too many project launches facing
off with decreasing demand, unsold inventory began piling up across the
top 7 cities of India.
Housing sales dropped significantly in the 2015-2016 period. On an average,
only 2.7 lakh units were sold across top 7 cities of India during 2015-16, recording a significant
drop of 17% from the average sales of 2013-14.
When
demonetization hit the nation during the 4th quarter of 2016, the
situation turned from grave to savage. Immediately after the
demonetization impact, the real estate sector
was battered with RERA and GST which severely shook up the sector. In
2017 only around 2 lakh units were sold across the top 7 cities of
India.
Fateful Findings
·
Residential unit sales have
dropped by around 40% from the average of 2013-2014 to 2017.
·
During the same period, larger cities such as
NCR and MMR, which were heavily driven by investor activity, recorded a
massive drop of 68% and 27% respectively in average sales
·
Bangalore and
Chennai, also on investors’ radar, saw
average sales decline by 17% and 45%
respectively
·
Pune, which has also witnessed exponential growth due
to significant interest from investors and NRIs who purchase houses only for financial gains, also witnessed a
decline of 29% in average sales of 2013-14 over 2017
·
In
Kolkata, sales in 2017 saw the smallest decline of 12% as compared to
average sales of 2013-14 (primarily end-user driven cities were not
impacted significantly
during the period under consideration)
·
Hyderabad was the only city which saw any kind of growth
- sales grew by 32% from the average of 2013-2014 to 2017.
Takeaways
A
recurring element in the above findings is investor activity – or, to
call a spade a spade, speculator activity. While both investors and
speculators buy property for profit
- as opposed to end-users, who buy homes to live in -
the two terms are not interchangeable. Speculators primarily
target short-term profits, and usually lack any real knowledge about
real estate as an asset class and the performance of different markets.
Their interests are spread over a wide swath of
investment platforms, including the stock market, bullion and now even
crypto-currencies. They have an unfortunate predilection for applying
the same philosophy to all investment asset classes - namely, to buy low
and sell high with very short investment horizons.
On
the other hand, real estate investor tend to have a much better
understanding of the property market and put in the right amount of
analysis of different markets and the trends
that drive them. They understand how real estate works, make long-term
investment decisions and are not focused on short-term profits (which
has in any case become an unrealistic view to have of real estate in
India) but on steady, sustainable returns. They
may also be invested in other asset classes, but they ensure that they
understand each asset class before plunging in.
Speculation
has played havoc with the Indian real estate market, and the fallout of
speculative activity in previous years is still being felt today. The
new market dynamics
and strengthened regulatory environment have now more or less
eliminated this unwholesome dynamic from Indian real estate. Reduced
buyer confidence due to irrational project delays and diversion of
capital also contributed significantly to the decline in housing
sales in some parts of the country. RERA is now gradually reversing
this unwholesome aspect; however, our cities’ real estate markets will
continue to pay the price of speculative activity for some more time to
come.
Media
Relations
ANAROCK Property Consultants
Pvt. Ltd.
(Formerly
Jones Lang LaSalle Residential Pvt. Ltd.)
Office
No. 901A 9th Floor, ONYX,
Next
to Westin Hotel, Koregaon Park,
Pune
– 411001
M: +91 9657129999
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