MMR real estate market witnessed a marginal increase (4%) in pricing over last year, based on our visit to developers in the exhibition. More than 50% projects in our survey had a delivery schedule in FY17 and FY18 while 30% should be available for delivery in less than a year (Exhibit 1). Handover has been delayed by 6 months on an average over last one year.
Developers are using discounting in the form of subvention schemes, stamp duty/floor rise/maintenance bill waiver and freebies (furniture, gold coins, and holiday trips) to improve sales velocity. However, bulk of these discounts offset the marginal price increase taken by the developers. We continued to observe higher discounts available on execution of deal (10-15%) which remains a preferred way of giving discounts than cut in declared property rate.
We observed higher participation by housing finance companies (HFCs) which were offering home loans starting from 9.3%. However the latest RBI rate cut was not yet incorporated in the rates offered. In addition HFCs were funding upto 100% of contract value if market value exceeded contracted value. Approval process timelines varied from 5 to 15 days. First half of FY17 has seen improved funding from banks to developers (10% YoY in Aug’16) as NBFCs continued to gain market share in the sector (1QFY17 growth at 25-30% YoY
With sales exceeding launches over last 6 quarters, market is in a self-correcting phase. This process could be accelerated by improving affordability- higher disposable income or price correction. However with high under construction inventory, we expect capital value improvement to take 12-24 months. Improving transparency (Real Estate Regulator) will improve the customer confidence thus aiding in recovery.
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