All the major markets we visited are showing stress with sales stalling whereas unsold inventory buildup at life time high. All major market developers except Delhi NCR are offering discounts to the tune of 5-15% in garb of lot of freebies whereas Delhi NCR is witnessing explicit price cuts. As prices have gone up too high too quickly, we expect this segment to undergo significant price correction for ticket size of Rs10mn+ and time correction expected for ticket size of below Rs10mn. Demand will remain tepid till FY19 due to oversupply prevalent in all the major markets.
Semi Luxury and Luxury segments are hit the most
Lot of
launches in semi luxury and luxury segment in last few years across
India. As these luxury segments are more aspirational than need based,
these have been hit the worst due to sentiments hitting new lows. Most
of the developers agreed that this segment is seeing the maximum
discounts and explicit price cuts in the range of 10-15% and expect the
demand to remain tepid for couple of years.
Benign Inflation will boost the flow to Financial Savings. Job cuts in mid-management layer and falling wage hikes for new entrants should hurt.
Either price or time correction required for income to catch up the high property prices
Property prices have gone up too high too quickly vis –a-vis income levels. Differential in median property prices and median income has expanded. Monthly EMI to income ratio of 40 is the most comfortable ratio. Individuals with 5-10 years of experience and earning between Rs 1-1.5 mn can only afford a property ticket size of Rs 6mn. Time and price correction in property price levels along with lower HF loan rates seems inevitable.
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