Indian Economy: Need to Revive Real Estate Sector to Boost Economy

Indian Economy: Need to Revive Real Estate Sector to Boost Economy


By Bikash C Paul

As Indian economy reels under slowdown, the symptoms of the diseases are becoming more and more obvious with declining sectoral growth. Real estate and construction, one of the most crucial employment generating sectors, has witnessed a significant decline in the last few quarters, signifying quite a deep scar.

People are not buying enough homes anymore, thanks to an overall squeeze in Indian economy. The downline adverse impact of the fewer people buying homes is being manifested in the piling of inventory and decline in new projects, indicating massive dip in investment and employment generation in this labour-incentive sector.

Housing sales in Q3 2019 (July-September period) saw a quarterly decline of 20% across the top 7 cities across India. Sales have gone down to 55,080 units in Q3 2019 from 68,600 units in Q2 2019 (April-June). New launches fell by 34% over the same period – from 69,020 units to 45,230 units. On a y-o-y basis, housing sales fell by 18% while new launches fell by 13% in Q3 2019 over the corresponding quarter in 2018.

In terms of sales, Hyderabad saw the maximum decline of 26% during the quarter with housing absorption falling from 4,430 units in Q2 2019 to 3,280 units in Q3 2019. The dip in sales was quite significant when compared with other top cities in the country. Y-o-y, housing sales in Hyderabad was dropped by a whopping 32%, a study by real estate consultancy firm ANAROCK Research reveals.

Both Mumbai and Bengaluru saw sales decrease by 20% each in Q3 2019 over the previous quarter, at approx. 17,200 units and 10,500 units respectively. Interestingly, on a yearly basis, Bengaluru saw the maximum sales decline of 35%, while Mumbai saw the least decline at 6%.


City-wise sales (In Units) & percentage change Q-o-Q & Y-o-Y

Cities Name  Q3 2019  Q2 2019  % Change (Q2 Vs Q3 2019)  Q3 2018  % Change (Q3 2018 Vs Q3 2019)
NCR 9,830 12,640 -22% 11,360 -13%
MUMBAI 17,180 21,360 -20% 18,180 -6%
Bengaluru 10,500 13,150 -20% 16,240 -35%
Pune 8,550 10,490 -18% 9,290 -8%
Hyderabad 3,280 4,430 -26% 4,850 -32%
Chennai 2,620 2,990 -12% 2,930 -11%
Kolkata 3,120 3,540 -12% 4,290 -27%
Total 55,080 68,600 -20% 67,140 -18%

 As sales dipped, cascading effects followed: Piled up inventory and decline in new housing projects. Anuj Puri, Chairman, ANAROCK Property Consultants said, “The decline in new supply and housing sales in this quarter was expected as both homebuyers and developers remained cautious and risk-averse.”

On the supply front, overall unsold stock or inventory as on Q3 2019 was 6.56 lakh units across the top seven cities. However, two major southern markets–Bangalore and Hyderabad–took lead in selling unsold housing units. Bengaluru witnessed the highest yearly reduction in unsold inventory by 17% – from 76,550 units in Q3 2018 to 63,540 units in Q3 2019. Hyderabad was second with shedding overall yearly unsold stock by 12% in Q3 2019. It now stands at 23,890 units – the lowest among the top 7 cities.


City-wise Supply (In Units) & percentage change Q-o-Q & Y-o-Y

Cities Name  Q3 2019  Q2 2019  % Change (Q2 Vs Q3 2019)  Q3 2018  % Change (Q3 2018 Vs Q3 2019)
NCR 5,790 13,570 -57% 4,200 38%
MMR 14,040 23,050 -39% 19,850 -29%
Bengaluru 9,370 11,010 -15% 7,170 31%
Pune 8,320 10,700 -22% 7,880 6%
Hyderabad 2,050 4,160 -51% 4,150 -51%
Chennai 2,530 3,890 -35% 4,850 -48%
Kolkata 3,130 2,640 19% 4,030 -22%
Total 45,230 69,020 -34% 52,130 -13%

With inventory piling up and sells drying up, no wonder that fresh investments became thinner with the developers shying away of the new projects. New launches in these seven cities came down to around 45,230 units in Q3 2019 against 69,020 units in Q2 2019 and 52,130 units in Q3 2018.

NCR saw maximum quarterly decline of 57% – from 13,570 new units in Q2 2019 to 5,790 units in Q3. In Hyderabad too, new launches dropped significantly by 51% over the previous quarter. Only Kolkata saw quarterly rise in new launches in Q3 2019, increasing by 19%.

For long, the housing sector has considered as one of the major yardsticks to gauge the mood of the country’s economy. The unenthusiastic mood, hence, is reflecting a generally ‘not so good’ economic and employment generation situation. The government has recently come out with a few measures and industry is banking on that. Mr Puri clarifies: “The slew of economy-boosting measures by the government to spur growth across sectors will very likely give the housing sector a leg-up in the ensuing quarters.”

The sooner it happens, the better.

Bikash C Paul is an independent journalist based in India’s national capital: New Delhi.

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