Sliding home sales, slowing new launches

May 23, 2023

April saw a significant fall in sales and supply of houses from the previous month as demand slowed with the relentless hike in interest rates by the Reserve Bank of India since May 2022 and price hikes by developers.

Despite the upbeat sales projections by real estate players for the current year and the future, April data across the top seven cities show that demand for houses was down 13 per cent sequentially, though it was up 4 per cent on the year. Launches have dipped both sequentially and annually and supply fell 26 per cent on month and 9 per cent on year.

The Mumbai Metropolitan Region, which accounts for half of the real estate market in India in terms of value, saw sales in April fall by a fourth sequentially, while it was down 16 per cent on year. A quick overview of the sales in Mumbai from April 2022 to April 2023 showed that in six of the months, there was a dip in sales sequentially. During the festival-packed months of November and December sales rose 6 per cent and 4 per cent, respectively, largely driven by new launches and the festival discounts offered by builders.

Sales in Delhi fell 22 per cent, while Chennai and Pune saw an 18-20 per cent dip in sales.

In terms of new launches Kolkata and Chennai saw the most declines, followed by Bengaluru. While demand does drive the launch trajectory, higher regulatory activism has slowed the pace of launches in many areas. State real estate regulatory authorities have started cracking down on developers, and getting approvals has become more protracted, delaying launches. Oberoi Realty, for instance, a large Mumbai-based developer, had no launches in the March quarter.

After hiking rates 250 basis points on the trot, the RBI put a halt to the rate hike cycle. While this is expected to bring in relief in the form of stable interest rates, the fact is the rates are holding at a high level and banks and housing finance companies are not reducing them. Home purchase financing has become unaffordable for the lower and mid-income segments.

The other factor that has affected home affordability is the rise in prices to the tune of 11-39 per cent, except in Chennai where there was a decrease of 11 per cent.

With launches slowing, unsold inventory has dipped to 18 months (to sale) from 24 months a year ago, though sequentially it has remained stable.

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