A laborer holds out a helmet at the construction site in Mumbai (Photographer: Dhiraj Singh/Bloomberg)

A Dud Diwali For Developers This Year

Developers hoping for a Diwali revival were left disappointed. Enquiries surged to their highest since demonetisation during the festival season. Sales didn’t.

Fewer apartments were sold in the top eight cities in the quarter ended September, according to property research company PropEquity. Sales declined 13-60 percent in the three months on a year-on-year basis, according to its data. Sales haven’t picked up since January even as initial cash crunch after the note ban began to ease. New launches that contribute the bulk of the demand plunged as well. And there wasn’t much of a pick-up in October either, barring for low-cost homes in some pockets.

“I don’t think the festive season was inspiring at all. It won’t even touch the levels of last year,” Samantak Das, chief economist at property consultant Knight Frank India, told BloombergQuint. “The overall impact is quite adverse.”

The housing market continues to hurt from Prime Minister Narendra Modi’s decision to outlaw old high-value bills and a new housing law. Demonetisation had hit real estate the hardest as buyers had to pay up to 40 percent cash upfront – unaccounted. The Real Estate Regulation Act that followed protects customers against false promises and bars builders from shifting funds from one project to another. A combination of the two triggered a cash crunch, bringing down demand and new launches.

Prospective homebuyers had started making enquiries in the run-up to the festival season, which began earlier than usual this year in September-end.

Footfalls had tripled since demonetisation, said Jaxay Shah, president at Confederation of Real Estate Developers Association of India. That gave developers hope. Yet, the enquiries didn’t translate into sales.

It’s the “fence-sitting” syndrome, said Ashwinder Raj Singh, chief executive officer of Anarock Property Consultants. “(This) basically means that a significant number of people who want to buy a home are not doing so.”

Singh said homebuyers could be expecting deeper price cuts. Apartments are 5-7 percent cheaper across most big cities since April. The prices have already bottomed out, Shah said. “They won’t come down more.”

Worries Over Stuck Projects

The fund squeeze stalled several large projects in Delhi-National Capital Region, India’s largest real estate market. Incomplete townships left thousands of homebuyers stuck.

Owners of apartments in Jaypee Infratech’s project have been given a say in the insolvency proceedings. Unitech Ltd.’s managing director is in custody for failing to hand over possession of flats. Many are yet to get homes in the residential towers build by Amrapali Builders and Supertech Builders.

The market had a lot of negativity about developers defaulting or projects getting stuck, said Pankaj Kapoor, founder and managing director of Liases and Foras. “That still plays on buyers’ minds.”

It is a depression psychology where despite prices getting rationalised, interest rates dropping, you still have a cautious consumer.
Pankaj Kapoor, Founder & MD, Liases Foras

Kapoor had expected the festival sales to be 30-40 higher than last year. “It has been a disappointment,” he said.

The situation won’t change for another six months at least, said Knight Frank’s Das. RERA needs to be in place throughout the country, he said.

Also Read: Will Homebuyers Get Parity With Jaypee Infratech Lenders?

Affordable Housing Push

To cushion the housing market after the cash ban, the government offered interest subsidy of up to Rs 2.6 lakh for affordable home loans. It extended the scheme by another 15 months in September as part of its ‘Housing for All by 2022’ plan. That’s partly reviving the demand for low-cost homes.

There is no clear growth trend as only select projects are doing really well, Niranjan Hiranandani, co-founder and managing director of the Hiranandani Group, told BloombergQuint on November 3. The western and southern regions are doing better with most of the new launches in the affordable homes segment, he said.

Sai Estate Consultants expects the low-cost segment to fare better. “Flats costing between Rs 1 crore and Rs 1.5 crore are not moving,” said Amit Wadhwani, director at the Mumbai-based developer.

The market is very polarised at the moment with affordable segment gaining more traction.
Amit Wadhwani, Director, Sai Estate Consultants 

Developers offer discounts during the festive season to lure buyers. “People tend to pre-book. Later some cancellations happen,” said Ashutosh Limaye, head of research at property consultant JLL India. “My sense is sales picked up but only in the affordable segment.”

Also, ready-to-move-in homes are in demand as defaults and incomplete projects spooked of homebuyers. “This is particularly true for the affordable segment in Mumbai and Gurgaon,” said Samir Jasuja, founder and chief executive officer at PropEquity. “For under-construction and new launches, it might take another six months to a year for the sales to pick up.”

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