Top eight property markets see 5.4% decline in Q1 average prices – ET RealEstate

MUMBAI: The Covid19 pandemic, subsequent lockdowns and its impact on economic growth have resulted in correction on property prices. Top 8 Indian property markets have witnessed an average 5.4 per cent drop in prices from a year ago during April-June, showed data from Liases Foras Real Estate Rating & Research.

On Sequential basis, weighted average prices across tier I cities have reduced by 4 per cent since March end. The National Capital Region (NCR) exhibited a maximum decrease in prices by 9 per cent while Bengaluru, Chennai, Mumbai Metropolitan Region (MMR) and Pune witnessed a drop of 4 per cent each. Interestingly, prices in Hyderabad have increased 6 per cent from a year ago.

“Property prices have started to soften, as 44 per cent projects are offering a discount ranging from 5-20 per cent. With upcoming festive seasons, others will also have to follow suit because inventory overhang has crossed over 100 months due to impact on demand,” said Pankaj Kapoor, managing director, Liases Foras Real Estate Rating & Research.

The average price correction includes builders’ quoted prices, cash discounts, online booking discounts, stamp duty and the goods & services tax waiver, various incentives etc. Over 6,046 projects out of 8,860 projects checked from total 13,428 projects offered such discounts across these markets.

In MMR, sales declined 63 per cent led by 85 per cent and 73 per cent drop in Navi Mumbai and Panvel market, respectively. Unsold Stock increased by 5 per cent each in central suburbs and extended western suburbs followed by 3 per cent in Navi Mumbai and 2 per cent in extended central suburb Extended.

The worst-affected NCR market, sales witnessed a significant drop in all suburbs bearing an overall drop of 67 per cent. Sales declined maximum in Faridabad 85 per cent followed by Gurugram 76 per cent, Bhiwadi 65 per cent, Greater Noida 63 per cent, Ghaziabad 60 per cent and Noida 45 per cent, the data showed.

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Nearly 50% of unsold residential inventory faces high execution risk – ET RealEstate

MUMBAI: Nearly 50% of unsold housing inventory across India is facing the risk of being delayed or is susceptible to price correction. More than the risk price correction; the risk of default in execution poses a bigger challenge for Indian real estate, showed a stress test conducted by Liases Foras Real Estate Rating & Research.

Around 33% of projects in Mumbai Metropolitan Region (MMR) and 59% of National Capital Region (NCR) projects fall in high and very high execution risk categories. On a region level segmentation, MMR has the highest risk of undergoing a price correction where 10% of projects are expected to undergo high correction of more than 20%.

The stress testing has been carried out across 18,225 ongoing real estate projects across 50 cities in India and covers over 85% of developers’ residential segment supply. However, the test has been conducted based on data available for the quarter ended March and pre-Covid period.

“While this assessment is based on pre-Covid data, the situation would worsen further as both construction and demand has taken a big hit,” said Pankaj Kapoor, managing director of Liases Foras Real Estate Rating & Research.

The all India residential real estate market closed at an inventory of 13.45 lakh units, measuring 1.58 billion sq ft with an overhang of 45 months when the nationwide lockdown was enforced towards the end of March.

The supply side of the market was struggling even before the pandemic had set in. Taking a turn for the worse, COVID-19 and the nationwide lockdown has affected the demand side of the market which is the buyer’s sentiment.

Job losses, salary cuts, reduced savings and uncertainty of a normal world, have induced negativity of the buyer towards home purchase. A distressed market puts the already struggling projects–prior to Covid19–into a tighter position making them susceptible to default and thereby leading to chances of delinquency.

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