A resurgence in residential demand has led to a 5% increase in prices across the top eight cities, while registering a marginal decline in unsold inventory during April-June quarter of 2022. Residential prices, which have surpassed pre-pandemic levels, have been seeing an upward trend led by rising demand amidst rising prices of construction materials. Delhi-NCR saw the highest increase in residential prices at 10% y-o-y, followed by Ahmedabad and Hyderabad with 9% and 8% y-o-y increase respectively, shows a joint report by CREDAI, Colliers and Liases Foras. The top eight cities include Delhi NCR, Mumbai Metropolitan Region (MMR), Kolkata, Pune, Hyderabad, Chennai, Bengaluru and Ahmedabad.
Delhi NCR saw the highest increase in prices across India at 10% with an average carpet price of ₹7,434 per square feet in Q2 2022. As per the report, Golf Course Road saw the highest price rise of 21% y-o-y followed by Noida Expressway. The entire region’s inventory dropped 10% YoY in Q2 2022, as developers focused on offloading older projects. While overall unsold inventory is the lowest in three years, the majority of the unsold inventory is concentrated in Noida Extension and Greater Noida, followed by Ghaziabad.
Unsold inventory dips
The sales momentum that started in the latter part of last year continued in Q2 2022 as well, led by pent-up demand and attractive pricing. Hence, despite rising prices and an increase in new launches in the last few quarters, says the report, unsold inventory saw a dip in the majority of the cities.
Bengaluru, as per the report, witnessed the steepest decline of 21% y-o-y in its inventory overhang, led by higher sales. Only Hyderabad, MMR and Ahmedabad saw an increase in unsold inventory, which was led by significant new launches. Inventory overhang in Bengaluru has been continuously falling since the beginning of 2019, and is currently the lowest in the last three years. Almost the entire unsold inventory is in Bengaluru’s peripheral areas. This is owing to the large number of projects being launched in the peripheral areas of the city, due to promising prospects in these locations.
MMR still accounts for the highest share in unsold inventory at 36%, followed by 14% in Delhi NCR and 13% in Pune. MMR saw a 14% rise in unsold inventory in the last year. The rise in unsold inventory was led by significant new launches in the city. Unsold inventory in central suburb extension accounts for 26%, majority share in the price range of ₹7,500-10,000 per square feet.
Will house demand take a hit?
The central bank continues to increase repo rates to offset the impact of inflation and banks have also started raising their home loan interest rates. With rising house prices amid higher materials and labour costs, Ramesh Nair, CEO, India and managing director, market development, Asia, Colliers, sees a marginal dip in demand, but is confident that the sales will continue to grow across segments from September, as we enter the festive season.
The Reserve Bank of India (RBI) increased the repo rates for the third time in a row in the last two months. After the 50 basis points (1 basis point is 1/100th of 1%) hike in August, Anuj Puri, chairman, ANAROCK Group, believes that it marks the end to the all-time best low interest rate regime and the home loan lending rates will now edge further into the red zone. Puri sees some impact on the residential sales given multiple negative factors at play.
"RBI has increased the repo rate amidst inflationary pressures and banks have already begun increasing the lending rates. However, the upcoming festive season is likely to keep the market sentiment high resulting in higher sales,” says Ramesh Nair.
Pankaj Kapoor, managing director, Liases Foras, believes prices to remain range bound. He says that with discounted EMI schemes, we see early signs of developers absorbing the impact of increasing interest rates. Sales volumes are likely to improve as we see growing new supply with festive offers very soon.