Housing Absorption Declines 13% in Q2 2019

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Residential real estate activity remained largely tepid during the second quarter of 2019 in the backdrop of the general elections during the period but the recent Union Budget sops for the affordable sector may give the much-needed push to the segment henceforth. ANAROCK research indicates that housing sales in Q2 2019 fell by 13% q-o-q and stood at 68,600 units across the top 7 cities. New launches saw a 2% quarterly decline and stood at 69,000 units. Four of the top 7 cities - NCR, Bangalore, Chennai and Kolkata - saw increased new launches. Though by a minuscule margin, it was the first time since 2016 that new launch numbers outstripped housing sales in a given quarter. Ideally, it should be vice versa.

Hyderabad, Bangaloreand Pune saw the maximum drop in the housing sales at 18%, 16% and 15% respectively.
MMRand NCR saw 11% and 8% dip respectively.

Budget Sops to Push Supply in Affordable Segment Affordable housing saw a quarterly decline of total new supply - by a significant 20% - from 32,060 units in Q1 2019 to 25,580 units in Q2 2019. Despite high demand for budget homes in the major cities, builders find it challenging to build housing in the incentivized INR 45 lakh budget range. The hope that the government would revise the price definition of affordable housing in the top cities has remained unfulfilled. For a city like MMR, a budget of INR 45 lakh is far too low. ANAROCK Property Consultant says, “Housing sales and new launches usually reduce before and during the general elections period. However, on a yearly basis, housing sales jumped up by 12% in Q2 2019 over Q2 2018, while new launches increased by 36% during the same period. Going forward, with a stable government in power, residential activity is likely to pick momentum in the coming quarters. Though new launches saw a 2% quarterly decline in Q2 2019, and affordable housing supply fell by 20% against the previous quarter, the luxury category (priced INR 2 Cr – INR 5 Cr) saw supply increase by a whopping 60%, led by Hyderabad and NCR.” Also read http://realtyplusmag.com/a-vibrant-night-of-gujarat-real-estates-accomplishments/ The government’s Budget ‘bonanza’ for affordable housing – an additional INR 1.5 lakh income tax deduction on interest paid on home loans availed till March 2020 - will incite builders to increase their supply in this category so as to attract first-time home buyers. Thus, we may see an increase in supply in this category in the coming quarters. Highlights

Housing absorption in top 7 cities at approx. 68,600 units in Q2 2019 against 78,520 units in Q1; for first time since 2016, total unit launches are more than units sold in the quarter
Unsold inventory maintains status quo at 6.65 lakh units
Hyderabad records highest quarterly drop in housing absorption at 18%; NCR sees least decline at 8%
Builders restrict new supply in Hyderabad, Pune & MMR; NCR, Bangalore, Chennai & Kolkata see new launches increase by 69%, 21%, 23% & 164% respectively
Affordable (<INR 45 lakh) housing new supply share still highest at 37%; though no. of new unit launches fell by 20% on quarterly basis
Union budget tax sops for affordable segment to benefit 25,580 new homes across top cities, insufficient in light of relentless demand across metros
New launches in luxury category (priced INR 2 Cr – 5 Cr) increase by 60% in Q2 2019 against previous quarter
On yearly basis, home sales in top 7 cities rises by 12% while new launches by 36%