With the buyers postponing their property investment plans as for now owing to coronavirus pandemic, Indian real estate developers’ pile of inventory has increased. According to a recent report, developers have a locked-in capital amounting to Rs. 370,000 crore in the form of 455, 351 units of unsold inventory.
COVID-19 pandemic has brought the whole world to a screeching halt. With the buyers vanishing from the market, Q1 2020 saw 30 percent year-on-year decline in housing sales. With new launches outpacing sales by a significant margin, unsold inventory has risen from 442,228 units in Q4 2019 to 455,351 units in Q1 2020.
With the signs of coronavirus being ebbed away is not in sight, the coming quarters are expected to witness zero to negligible movement in the housing market. An assessment of years to sell reveals that the expected time to liquidate the stock has increased from 3.2 years in the last quarter of 2019 to 3.3 years in the first quarter of 2020, says a report by JLL titled India Residential Market Update Q1-2020.
With coming quarters to witness further lower sales, the years to sell will evidently increase. No wonder, the developers will be forced to sit on the Rs. 370,000 crore worth of inventory for a long time to come.
The increase in inventory pile up has pushed Mumbai on the top with maximum quantum as well as value of unsold inventory. The city is sitting on 124,059 units of unsold inventory while Delhi NCR has 121,800 unsold units.
Real estate experts feel with negligible sales happening in the backdrop of piles of inventory, the developers will soon be forced to slash down the property prices which along with reduced home loan rates will lead to increase in affordability. Despite the efforts, the state of the real estate market is directly dependent on intensity, spread and duration of COVID-19 pandemic.
“When the COVID-19 scenario stabilises, factors such as better-priced deals, enhanced financial health of banks and greater demand from end users will aid in improving buyer sentiment. Sales are expected to regain some traction towards the end of 2020 supported by the festive season during that period,” Money Control quoted Ramesh Nair, CEO & Country Head, JLL, as saying.