National Capital Region Phases A Fall In Units

Reeling under the pressure of unsold inventory and delayed plans, NCR witnessed a dip in land cost for the first time in three years in the first half of 2016, reveals a Knight Frank submission. Likewise, new launches took a backseat as planners shifted focus on offloading existing stock.

Residential land cost in (NCR) National Capital Region witnessed a downward trend during the first half of 2016. According to a report by Knight Frank, land cost in the region dipped by 4% year on year during January-June 2016. Average costs in the area were estimated to be about Rs 4.346 per sq.ft. in this period a year ago.

Given the signification of unhealthy dynamics in the area realty, there may not be a quick recovery of residential prices in NCR, the report adds. Land prices are therefore, likely to remain stagnant in the remaining six months of the year. So, should fence-sitting purchaser finally make a move or wait for further correction?

The Senior Vice President- Sales & Manager, Raheja Developers Ltd Harinder Dhillion says, this is the ideal time for purchasing a residence since cost has significantly reduced. Cost in NCR is likely to be stable in the second half of 2016. As transaction level dipped significantly in the first half of the year, certain planners have reduced cost in order to enhance sales volume. Excellent deals of good land are currently on offer, which are not likely to continue beyond sometime.

NEW LAUNCHES DROP SIGNIFICANTLY
New launches in the NCR have also gone down at a rapid pace. These have dropped by 41% y-o-y. This was due to all major planners focusing on completion of existing plans to enhance, cash flows. The drop in new launches is also an outcome of piling unsold inventory in the area which has remained a key concern for planners.

An Assocham report estimates that there are about 2.5 lakh units in NCR that have not found a purchaser. This is despite the price correction in Noida, Gurgaon and some key regions of Delhi. With over 1.20 lakh units, Noida has a major share of the regions unsold inventory.

A delay in many projects has caused a trust deficit among customers.

Owing a construction in many plans going beyond the promised deadline, purchasers increasingly prefer ready-to-move-in plans or those offering possessions within a year said Rajeev Bairathi, Executive Director Head - Capital Markets Knight Frank India. Bairathi says NCR residential zone performance has been dismal. Piled-up inventories and slow sales velocity has brought stagnancy in the market resulting in planners being unable to increase cost substantially. The market was already in a time correction phase for the last three years, and this is the first time that there is a decline in the quoted prices in NCR.

Greater Noida and Gurgaon continue to witness a healthy number of new launches. These accounted for over 80% of launched units in the NCR.

OTHER METROS WITNESS IMPOVED SALES
Planners in other metros such as Mumbai and Bangalore had a reason to cheer. With new launchers going down and sales volume improving, the residence market in these metros is showing signs of recovery. With a y-o-y drop of 7% in the number of unsold units during H1 2016, the inventory pressure has eased in the last six months.

The real estate zone in India could be at its inflection point, with sales in the top six residential markets showing a positive trend, said Shishir Baijal, Chairman and Managing Director, Knight Frank India. However, the situation in NCR still continues to worry planners and land experts.