New residential project launches drop 12% in 2013

Dec 12, 2013, 06.05PM IST

MUMBAI: International property consultants Cushman & Wakefield on Thursday reported a drop of 12% in new residential project launches in 2013 as over last year. The total estimated unit launches were recorded at 172,500 units across major eight cities of India with Bengaluru recording the largest number of units launched recording a rise 15%.

Chennai on the other hand saw the sharpest decline in launches of new residential units which represented a drop of 39% over last year. Mumbai (6%) and Kolkata (3%) also saw a rise in the total units launched in 2013 over last year. However, NCR (-33%), Pune (-20%) and Ahmedabad (-5%) recorded a decline. Mumbai and Delhi together constituted over 65% of the total launches.

Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield said: In the current economic scenario both buyers and developers are taking a cautious approach not only towards residential real estate but across all asset classes of real estate. However, given that most aspects of development such as construction cost, development cost, cost of land, time taken for approval and cost of debt all have been on an upward tangent developers have not been able to lower cost . Thus many developers took to innovative marketing and pricing strategies to ensure better responses such as in the 20:80 scheme was recently discontinued following RBI's recent announcement."

The high end category residential units saw a rise of over 50% in 2013 even while the largest quantum of launches in residential units was in the mid end category, there was decline of 13% in the total launches of residential units in the mid end category over previous year. There was a sharp drop in the launches of luxury units which declined to only 1100 units with largest number of units being launched in Bengaluru.

"Most micro markets in India have seen a rise in rental values ranging from 2% - 50% mostly in the secondary or in established new projects that are seeing next phases of development. This was on account of existent demand from end users who are looking for better security for their investments thereby choosing to either buy in already completed or from new developments that have seen good track record," said the report. But despite an overall slowdown in the economic scenario due to high inflation and reduced sentiments, purchasers with financial security have viewed this year as a good time to enter the market as prices had been stable for a significant period between 2012 - 13, it added.

In Mumbai, the capital values have remained stable during the fourth quarter compared to the last year however with capital values steadily increasing rental yields in the city have declined. Capital value appreciation in the high-end segment have been the highest in prime locations of South (9%), South Central Mumbai (10%) and Western Suburbs Prime (17%). Infrastructure projects like the monorail and the eastern freeway which is already operational has provided impetus to locations such as Wadala and Chembur. In Mumbai, overall launches have remained healthy during the year and have increased by 6% to 30,800 units compared to 2012 Contribution of 1BHK configuration was also high in suburban and peripheral locations with unit size in the range of 600- 720 sf.