FY16 Was A Mixed Bag For Real Estate, But Downsides May Be Limited: DataLabs Report
The financial year 2015-16 was a mixed bag for the real estate sector, but what capped the disappointments and showed light at the end of the tunnel were some ground-breaking reforms and an upturn towards the end of the year, shows PropTiger DataLabs' India Realty Report FY 2016.
The analysis, tracking the residential real estate market in nine major cities of the country — Ahmedabad, Bengaluru, Chennai, Gurgaon (including Bhiwadi, Dharuhera and Sohna), Hyderabad, Kolkata, Mumbai (including Navi Mumbai and Thane), Noida (including Greater Noida and Yamuna Expressway), and Pune — shows how the initiatives taken during FY16 to revive the real estate sector may bear fruit in the current financial year.
Here's a look at the key findings of the report:
- Sales: Home sales across cities saw a downtrend, with Noida registering the greatest fall of 51 per cent year-on-year (YoY). The overall decline across the country stood at 33 per cent YoY. However, the rate of sales decline was arrested in the second half of FY16, and contained at less than one per cent YoY, the lowest since the first half of FY14. This seems to indicate that the downside risks might be limited in future.
- Bright spots: Their comparatively affordable real estate and a light inventory pile is an indication that property markets of Hyderabad and Ahmedabad could see major growth in FY17.
- Launches: Projects launches hit a new low in FY16, as inventory pile across cities saw a heavy swell. (During the year, Mumbai, Bengaluru and Noida accounted for the bulk of inventory.) According to the report, the residential market saw 46 per cent YoY drop in new launches. Owing to this, the report says, developers might focus on selling off their stock first by offering attractive discounts. The number of new launches is expected to remain low in FY17.
- Downsizing to make housing affordable: Passive consumers are a major reason for a slowdown in real estate. To plug this, the government and developers have been making efforts to bring the common man back to the market. Developers, in fact, downsized housing units to make them affordable and increase sales. This is also a reason why the 1-BHK housing segment is likely to gain traction across cities, says the report.
- RERA and other reforms: With the Real Estate (Regulation and Development) Act, 2016, set to get implemented, buyers' confidence in the real estate market will get a leg-up. The Union Budget 2016-17 also offered a slew of measures that will help revive the sector.
- Return of the serious home buyer: Despite the fact that they had been keeping away for a while, the serious end-user returned to the market in FY16 and was the primary driver of demand during the year. According to the report, this segment is expected to continue to drive demand in the short term. However, to tap this segment better and for registering better sales, developers will have to focus on their promotional strategies.