It’s a steady market

Developers in Bengaluru have designed a methodology to balance demand and supply by controlling launches, says Suresh Hari of CREDAI. By RANJANI GOVIND

February 24, 2017 04:22 pm | Updated 04:22 pm IST

Ready apartments

Ready apartments

The Confederation of Real Estate Developers’ Associations of India (CREDAI) last February partnered with international property consultant JLL to come up with an independent study on the ‘Analysis of Unsold Residential Inventory in Bengaluru.’ “There were myriad reports from real estate consultants throughout India that had conflicting details, especially of the Bengaluru market. Instead of seeing end-users in confusion, we as an industry body came up for the first time with a study - partnering with the international property consultant JLL - for an independent study and assessment to categorise the market inventory for easy understanding,” said Suresh Hari, Secretary, CREDAI Bengaluru.

The study comprised 957 projects and 138 non-CREDAI members.

“Bengaluru had 4,492 units under its ‘unsold inventory’ as of December 2015 with healthy residential supply and demand ratio,” the report said. The CREDAI and JLL study “re-defined what ‘unsold inventory’ meant” by categorising them into Launched Projects; Under-Construction Projects (also termed to-be-sold inventory); and Unsold Inventory (constructed).

While CREDAI is yet to release the report of assessment for unsold inventory and projects under construction, this year’s data according to the member-body association is likely to have a 10 per cent variation because of demonetisation.

Suresh Hari of CREDAI spoke to The Hindu-Property Plus on the present inventory and what it means to the Bengaluru market.

Excerpts:

* What is the latest Bengaluru market inventory according to the CREDAI study?

Though CREDAI has not yet calibrated details of the study this year, in all probability the figures will be the same with a marginal difference of 10%, + or -. This is mainly because the launches were delayed due to demonetisation. Sales have picked up considerably after the Union Budget.

There are 2,06,753 apartments and villas launched over the last five years as of December 2015.

The city had 82,357 units (apartments and villas) that were in the process of construction, but not sold technically. They were only amongst the ‘stock available’ but had not reached the sales counters due to various technical reasons. So we cannot categorise them under ‘unsold inventory.”

* How does CREDAI look at its stock? Does it consider it as “unsold inventory” or “ready to move in” that can be sold at higher rates later

CREDAI considers only finished and not sold, as unsold inventory. The projects that are in progress at various stages cannot be considered unsold. There are stocks held back by a few to gain better price after completion or at a later stage. Though it can be considered as unsold, for practical purposes it is not so due to deliberate holding by the individual developer.

Can you comment on Bengaluru's absorption that makes it easier to handle Launched Projects; Under-Construction Projects and Unsold Inventory (constructed) for CREDAI members.

Bengaluru has around 250 members and Karnataka totally has 500 members. The city has a buoyant real estate market that has seen Rs. 2,500 crore home loan disbursement with 45,000 units absorption on an average annually. So, the ‘to-be-sold’ and ‘unsold’ statistics should not make a huge difference to the market. With a mature realty market,over a period of time, the developer community here has an evolved methodology to balance demand and supply by controlling launches. Further, the Bengaluru market sees very slight fluctuations due to overall economic conditions.

Will the reports help developers understand and study the ground reality to plan their projects and have a reasonable pricing?

The reports are always needed to address the market demand and plan ahead. Bengaluru has been in the forefront of such activities always and it enables both supply and demand side to be properly bridged.

What about appreciation? Can one expect a moderate 5-10 per cent year on year, when unsold inventory is huge? Would there be increased pricing?

As regards stock, the indications are that the position is comfortable. Hence the price impact due to this will not be visible. Further, real estate as a investment avenue normally gives a yield of 4-6 % per annum. This percentage will reach 10 to 15% during great demand time and the investment in real estate should be for a longer term. Price increase in the short term can happen during huge demand and supply gap.

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