After a prolonged recessionary period following the coronavirus pandemic, demand for residential real estate has resumed. Record low interest rates, better affordability and easing property prices have boosted investor sentiment towards the sector.
The latest analysis of real estate data by Edelweiss Securities Ltd showed that unsold inventory declined 11% year-on-year (YoY) in October. “Kolkata saw the maximum rate of improvement in inventory at 23% yoy, followed by Bengaluru, Pune and Mumbai Metropolitan Region (MMR) (decline by 13-16% each). The unsold inventory in Chennai and NCR declined by 6-10% every year. The Edelweiss report said Hyderabad was the only city where inventory months were stable.
said the unsold inventory split remains broadly stable on a year-over-year basis. MMR accounts for the bulk of the unsold inventory in the country, followed by the National Capital Region, Bengaluru, Hyderabad and Pune. As demand exceeds supply, the rate of absorption also improved with 12-month absorption rising by 11%, with pan India inventory levels declining from 37 months in October 2020 to 26 months. Pune and Hyderabad continue to be the best markets with 14-18 months. of inventory, followed by Chennai, MMR, Bengaluru and Kolkata in 25-28 months. The report said that NCR continues to be the worst-hit real estate market with an inventory of 57 months.
Going forward, apart from the demand-supply dynamics, investors in real estate stocks will closely monitor price movements. As the sector is grappling with steep rise in raw material and labor cost, the market is widely expected that developers will resort to price hike at the earliest. It also remains to be seen whether the increase in prices on demand for residential real estate.
Meanwhile, real estate companies posted decent sales growth in the September quarter, with many developers witnessing a meaningful drop in debt levels and lower borrowing costs.
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