India’s Silicon Valley has witnessed 24,305 residential units in new launches over a 6 month period this year. This contributed 40.2 million sq ft of developed area, out of which 75 percent were apartment and 12 per cent plotted improvement.
The row homes segment, though less in the overall market size saw the largest increase in sales velocity with a raise of 23 percent and only 9.4 months stock. A clear indication of the growing demand for this type of real estate.
According to LJ Hooker’s mid-year report, the average price of housing developments in Bangalore grown by only 1.2 percent for the period to Rs 5,030 per sq ft from Rs 5,936 per sq ft. The apartment segment had an increase in average cost of 2 .7 per cent during the 1st half of this year with 3.2 per cent in the earlier period, giving a year-on-year improve of 6 percent.
During the last 6 months, the max stock enhancements took place in the budget house category with 15,341 units followed by mid-range classification with 11,337 units. The largest unsold stock was in the premium segment (Rs 1-3 crore) with 34 percent of the total stock unsold and an oversupply of 218 per cent for the period. Residence stocks made up 77 percent of the value of unsold stock and 19 percent was from villas and row houses segment.
Budget homes and mid-range houses had the most powerful average sales velocity and low months inventory proving the market sensitivity to ticket price. The sales velocity for villas/row homes has decreased in all the regions except in the North-West.
On the supply side, the eastern quadrants participated the largest level of supply and unsold inventory. The south east contributed 102 million sq ft of supply and 40 million sq ft of unsold stock. The central region has noticed the highest revenue velocity of 4.1 per cent (multiple the averages). This reflects the customer’s desire for known safe areas when the market softens.
During the last 6 months, there was a net addition of 41,324 units to the stock and the incremental sales were 30, 598 units, giving an oversupply stage at 35 percent.
In a significant improvement, the size of the normal flat has continued to fall at 1, 636 sq ft, a drop of nearly 8 percent in the last 18 months. Industry sources feel that cutting down the size is the only option left for constructors to decrease the ticket size while trying to maintain their margins.
The 2nd half of this year require builders to keep the prices at market levels and have provides to engage the buyers, based on LJ Hooker sources. Given the level of unsold stock and the pressure to disk drive cash flow, the market is likely to witness aggressive competition.
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