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Economy Sep 20, 2012

Inflation bites, home sales dip in all major cities

Home sales have fallen during the first half of 2012 in all major cities, including National Capital Region (NCR), Mumbai and Bangalore, as buyers postponed purchases in anticipation of cut in interest rates, global property consultant CBRE said in a report.

"After the strong momentum that residential market attained in 2011, residential sales declined during the first half of 2012 in all leading cities, particularly in NCR (National Capital Region), Mumbai and Bangalore," CBRE said in a report.

The slowdown in demand was visible in decline in supply addition in the three leading cities, it said. The first half of 2012 witnessed the addition of more than 19,000 units across 66 projects in NCR, Mumbai and Bangalore. This is a drop of about 40% when compared to more than 26,000 units launched in 83 projects during the second half of 2011.

The first half of 2012 witnessed the addition of more than 19,000 units across 66 projects in NCR, Mumbai and Bangalore.

Commenting on the findings of the report, CBRE South Asia Chairman and Managing Director Anshuman Magazine said: "The decrease in residential sales can be attributed to dampened consumer sentiment due to high interest rates and weak economy."

"Both developers and home buyers alike are reeling under inflationary pressures. Home buyers and investors are in a cautionary mode and are deferring purchases in anticipation of interest rates reduction," he added.

The report said the developers continue to face challenges of high borrowing costs, rising input prices and shrinking profit margins, while investors/buyers had to bear the brunt of high interest rates coupled with delayed product delivery. On pricing trend, the consultant said the growth remained subdued in the first half of 2012.

"After a steep appreciation during the first half of 2011, growth in residential prices moderated by the end of 2011. Growth remained subdued in the first half of 2012; an increase in unsold inventory and supply pressures led to capital appreciation being range bound across leading cities such Mumbai and Bangalore," the report said.

On outlook for housing market, CBRE said easing of mortgage rates is likely to improve buyer sentiment and rejuvenate market demand in the coming few months. "This should help investors and end users to re-focus on the residential sector, thereby easing the supply overhang in most cities. Bulk of the demand is likely to remain in the mid segment and low end category of housing.

"Prices are likely to witness subdued growth in most markets in a short to medium term, till the pressures of unsold inventory are eased out," the consultant said.

PTI


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