Residential Realty: Why And How Unsold Inventory Is Dipping Drastically?

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    The Indian real estate sector has definitely started coming out of the shadows of piles of unsold inventory and slump after a state of stagnation for over four years. As per data by ANAROCK Property Consultants, the housing sales in top seven cities has risen by a whopping 71 percent in the first quarter of the current year as compared to two years back.

    The unsold inventory in the top cities of Delhi-NCR, Mumbai Metropolitan Region, Bangalore, Hyderabad, Chennai, Pune and Kolkata has gone down considerably. In the same quarter two years back, the cities were holding on to inventory which would have taken 50 months to sold off. At present, this figure has come down to 30 months.

    While the current figure is still far from the idea figure of 18 months, it is safe to say here at the point that rising inventory trend that was seen emerging post 2014 seems to have been arrested with data indicating further decline.

    Bangalore has emerged as the winner as it its unsold inventory has gone down by 44 percent. Hyderabad comes second with about 21 percent reduction in inventory. While Delhi-NCR’s inventory went down by 18 percent, MMR remain relatively stubborn with only 4 percent reduction in the inventory.

    Decline in inventory is attributed mainly to rise in sales and the relatively lower number of launches which is also helping the market limp back to normalcy. Here are some of the factors that are pushing housing sales numbers.

    • Favorable Prices:

    Prices across the cities have not increased much, thus in affect, attracting many potential home buyers.

    “Average property prices across cities have largely maintained status quo and saw less than 2% rise in the last two years — from Rs 5,480 per sq ft in the first quarter of 2017 to Rs 5,570 per sqft in 2019 first quarter (January-March),” Economic Times quoted Anarock Property Consultants chairman Anuj Puri as saying. “A stable government at the Centre is expected to boost buyer confidence further and increase housing sales velocity in the coming quarters.”

    • GST Rate Cuts:

    The government further reduced GST rates on affordable homes to 1% from 8%, albeit without the facility of input tax credit (ITC), earlier this month. GST on other projects was slashed to 5% from 12%. The development has brought cheer in the residential market as it is has favorable effect on the prices.

    • Home Loan Rates Dip:

    Mortgage rates have dropped after the period under review. Earlier this month, SBI reduced its marginal cost-based lending rate (MCLR) by 5 bps across all tenors. This was the second rate cut by the country’s largest lender in a month. With the recent MCLR cut, the reduction in home loan rates since April 10 stood at 15 basis points.

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