BENGALURU: Bengaluru will be the only major city to see a growth in new residential sales in 2014. Five other major metros are expected to see a decline, with NCR and Mumbai being the worst hit thanks to poor sentiment and high property prices.
International property consultancy Knight Frank estimates that by the end of December, the real estate markets of NCR, Mumbai, Pune, Chennai, Hyderabad and Bengaluru, will collectively see an over 10% decline in sales over last year. The six markets together account for about 70% of residential sales in India.
The consultancy firm had in June estimated a 4% decline in sales at 2.75 lakh units across these markets, but sharper than expected declines in NCR and Mumbai have upset those calculations.
Samantak Das, chief economist and director of research and advisory services at Knight Frank India, says that amid the gloom, “there is a slight twist in the tale”. Bengaluru is the only city that will end the year with a growth – of 3-5%. It’s expected to report sales of about 60,000 residential units at the end of December as against 57,300 units in 2013. This is in line with Knight Frank’s June estimate.
But Mumbai, which was projected to grow by 8% to 80,000 units in June, is now expected to decline by at about 10%. And NCR, projected to decline by 17% to 60,000 units, is now expected to drop by more than 20%.
In the September quarter, NCR reported sales of about 11,000 residential units, a decline of 35% from the same quarter last year. Mumbai sales declined by 15% to 15,000 units.
Property consultancy CBRE in its December research report notes: “The residential market continues to suffer from fading demand due to cautious buyer sentiment, elevated prices and high interest rates.”
Surabhi Arora, associate director for research at property consultancy Colliers International, says that despite positive macro-economic sentiments after the Lok Sabha elections, the industry is yet to see improved consumer sentiment translate to a sustained boost in sales.
“In Mumbai, we can see a huge price resistance. When I talk to developers, they say enquiries have increased, but the conversion of enquiries into actual sales is not happening,” says Das. The picture is similar in NCR. In contrast, the Bengaluru market is being kept afloat by what Das calls an “affordable price threshold”.
“What we have been observing over the years in Bengaluru is that buyers are comfortable if prices are in the range of Rs 4,000-6,500 per sqft, in the mid-to-premium housing market. But if it is above Rs 6,500 per sqft, you start to see friction,” says Das.