New launches of residential units in NCR, particularly Noida and Gurugram, have slumped to negligible levels in the third quarter of 2019, underlying the over-supply dynamics of the market and the fact that real estate developers aren’t out of the woods yet.
According to real estate analytics company PropEquity, there were no new launches in Noida in the third quarter; Gurugram witnessed launches of a mere 80 units in one project.
This compares rather sharply with southern Indian cities that are witnessing robust supply of new projects. In Hyderabad, over 4,700 units were launched in the third quarter, a jump of 134 per cent over the second quarter. Bengaluru saw a 41 per cent growth to 9,509 units while supply in Chennai inched up 10 per cent to 2,749 units. Kolkata, meanwhile, also witnessed a promising jump of approximately 62 per cent to 2,816 units.
New launches declined in Western Indian cities too, but are less drastic compared to NCR. Mumbai and Thane dropped 58 per cent each versus the previous quarter while Pune slumped 46 per cent.
“Real estate sector in India is witnessing an interesting trend where south of India is doing significantly better than the rest of India. The new launches are showing divergently opposite trends in the comparison as rest of India is falling behind due to oversupply and south is doing better due to lesser over supply and demand from the IT sector,” Samir Jasuja, Founder and MD of PropEquity noted in a statement.
The sales data isn’t that encouraging and this is true across all cities. Pune and Thane witnessed maximum absorption of approximately 14,500 and 10,500 units respectively. The demand in Chennai dropped by 23 per cent versus the second quarter. Bengaluru witnessed the least drop at 3 per cent.
Meanwhile, a new research from Colliers International highlighted that investments in commercial real estate are booming. The supply-demand dynamics are opposite to that of residential real estate. The supply of office spaces is steadily increasing, so have the absorption rates. Vacancies are down for the top grade buildings while rents in many markets have risen. Unlike the residential side, the office market is characterised by transparency, and in most cases, on-time delivery.
“We expect investments in the residential segment to remain soft during 2020, as liquidity concerns in non-banking financial companies (NBFCs) remain. Over the last few years, residential developers, including those with weak credit lines, were heavily reliant upon NBFCs to fund their projects. We believe that investors should continue to adopt a conservative approach towards residential assets, barring a few top-tier developers, as the demand in the sector has not fully recovered yet,” Colliers stated.