New launches trigger demand in realty sector

NEW DELHI: After witnessing an acute slowdown during the third and fourth quarter of 2008, the real estate sector has shown some recovery in the Make home loan repayment easyEMIs and tenureLand as investment Buying house? Quote price first quarter of 2009 ending March 31.

If trends of absorption for the period January-March 2009 are any indication , a report prepared by PropEquity Research suggested there has been a surge in absorption in majority of the cities.

A recent study conducted by PropEquity across Mumbai, Bangalore , Chennai, Hyderabad, and Gurgaon in NCR reveals that absorption has been high among the residential new launches in the first quarter of 2009 in Mumbai, Chennai and Gurgaon.

The study attributes the success rate in absorption to the price correction and reduction in unit sizes introduced by developers in these cities. However, Bangalore and Hyderabad, which witnessed fewer new launches during the period, experienced a low absorption.

The real estate sector experienced one of the worst kinds of slowdown in demand because of rise in the interest rates in the January-March 2008, by almost 2 percentage points, to 12%. At the same time, the prevailing prices of residential apartments in most of the cities made them unaffordable for most buyers. The situation further worsened after global financial markets got affected due to the failure of banks and brokering houses in the US and Europe.

This also affected Indian real estate market very badly and demand plummeted. According to the report , While October-December 2008 saw the nadir with absorption of only 1,113 units in Mumbai, the first quarter of 2009 witnessed the launch of over 14,478 residential apartment units and a corresponding absorption of 5,746 units. As against this, during October-December 2008, 3,096 units were launched, the report said. That means, in the first quarter of 2009, 40% of the launched apartments were sold, which is considered to be a good turnover.

Similarly, in Gurgaon, during January-March 2009, 815 units were sold while 4,490 units were launched. As against this, in October-December 2008 quarter, only 587 units were sold from 3,708 units launched. Therefore, both the absorption and launch figure showed sign of recovery. The first quarter of 2009 showed a significant turnaround in realty activity in Chennai as well. While the number of apartments launched during Make home loan repayment easyEMIs and tenureLand as investment Buying house? Quote price the fourth quarter more than doubled to 3,764 units from 1,567 units in the quarter ending December 2008, the absorption increased by more than three times to 1,450 in the quarter ending March 2009, from 468 in the previous one. In Bangalore, however, the number of apartments launched in the first quarter of 2009 declined to 2,571 units from 4,149 units in the previous quarter. But, the absorption level improved slightly, to 764 units, as against 739 units in the previous quarter.

In Hyderabad, both the number of units launched and absorbed declined to 1,286 and 347 in the first quarter of 2009, from 2,512 and 440 respectively in the last quarter of 2008.

The report says the main reason for increase in absorption of the new launched products is drop in the per sq ft rate and the reduction in the size of the units, which brought their prices within the affordable range of buyers. The report says most of these units were launched at a price almost 40% lower than the average pricing of apartments that were available in the first quarter of 2008. The average unit size of these apartments was also lower by almost 35%. As a result, 74% of the residential apartment absorption that took place in Mumbai in the first quarter of 2009 constituted the new launch products.

According to Samir Jasuja, founder & CEO of PropEquity, “The increase in this high absorption trend can be attributed to price correction and reduction in unit sizes adopted by developers. This encouraging trend is indicative that the markets are poised for a recovery if proactive measures are adopted by the real estate community to offer the right product at the right price to the consumers.”

This trend continued in Gurgaon and Chennai where the new launches have witnessed high absorption after the unit sizes were reduced and average prices corrected by almost 15% to 25%. As anticipated, 61% of the total absorption in Gurgaon and 58% of the total absorption in Chennai in the first quarter of 2009 was constituted by the newly launched residential apartment units.