Why are builders launching new projects in a slump market.
Unsold inventory in top 8 cities rises 18% yoy, sales drop 4%: Liases Foras. An article I came across in Economic Times.
It continued stating Home sales in the top eight cities of India dropped 4% in the quarter to June over the year-ago quarter while unsold inventory rose a massive 18% during the quarter, according to data from property research firm Liases Foras.
On a year-on-year basis, home sales fell 14% in the National Capital Region (NCR), while they were up 9% in Mumbai.
Hyderabad emerged as the top performer with 36% year-on-year jump in home sales, followed by Pune which also saw a 9% rise in sales similar.
Read more at:
Another Article on the same site stated the quarter saw a total of 24,700 apartments being launched, the lowest in the last two years. The January to March quarter of the current year has seen a 50% decline in new residential project launches across the country compared to the same quarter last year, according to property advisory firm Cushman & Wakefield.
“The decline in new launches have come on the back of less-than-expected sales in the residential sector, due to which developers are holding back on new launches and instead focusing on completing their existing projects,” said a new report from Cushman & Wakefield.
Another article in the ETreality site continued painting the same picture
Will the real estate bubble burst due to falling sales & rising inventories?
Now this is where I am confused, if the inventories are increasing and remaining unsold, then why are the builders launching new projects, we did have 24700 new launches in the last quarter.
I recently got an email stating Prestige is offering, The Songs of South project in pre-launch. Prestige by my personal experience is a very professional company. So why would even they do this mistake in an already saturated market.
A bit of a research on the industry that relies solely on this industry, i.e. cement companies. My take is, if the cement companies order books are in the green then what slump are we talking about.
In India, the housing sector is the biggest demand driver of cement, accounting for about 67 per cent of the total consumption. The other major consumers of cement include infrastructure at 13 per cent, commercial construction at 11 per cent and industrial construction at nine per cent.
The following is what the IBEF (India Brand Equity Foundation) site to find out more and as per them
Another press release on the same site stated Secretary, Department of Industrial Policy and Promotion(DIPP), Shri Amitabh Kant has said that cement industry has to grow 20-25 per cent annually over the next three decades to meet the requirement of a rapidly growing Indian economy. Delivering the inaugural address at the 53rd Annual Session of Cement Manufacturers’ Association (CMA), Shri Kant said that for a sustained high growth rates for the Indian economy, manufacturing has to grow by 13-14 per cent and cement has to be a major driver of India’s growth sector.
But let’s analyse some of the facts;
Then what is this slump we are talking about?
There is no slump. Only the transaction life cycle has become longer. The investor is holding the decision on buying due to the following reasons
Should one be investing or still wait on the side-lines and observe?
My take is if you have the power to sustain and deep enough pockets to hold on to the property then definitely today is the best time to invest, capitalise on the sentiment and we can get a few discounts.
If you are a short term investor again a good time to invest, but use the tools like the subvention schemes, etc. that the builder offers. To reduce exposure. Commercial property might make more sense to you.
But the key here is not to panic when you put the property for sale. Understand the market scenario, get evaluation done of the property. As I always say don’t assume, get to the facts coz facts are never wrong.