New Launches Take a Backseat as Realty Cos Look to Clear Inventory

Cos feel new projects could put pressure on pricing in a market already saddled with a lot of inventory

Real estate developers have cut back sharply on new project launches, preferring instead to first try and sell pricier unsold inventory and, in the process, also prevent prices from collapsing in a sagging market. 
Analysts tracking the property market say developers across India have realised that launching new projects could put pressure on pricing in a market already saddled with inventory. "If they launch at a lower price today, their existing unsold inventory will get hit," says Vineet Chandak, real estate analyst with IDFC Securities. Property prices rose sharply in the last one year even though sales volumes fell more than 50%, hit by double-digit interest rates, high property prices and an overall economic slowdown. 
Research firm PropEquity estimates that residential project launches in key centers such as Delhi-NCR, Mumbai and Bangalore have dropped by 30-50% in a year. The firm estimates that new residential project launches fell 49% y-o-y in the Delhi NCR region in the January-March quarter, outpacing a 31% drop in the Mumbai Metropolitan Region. The numbers for Bangalore, Chennai, Pune and Hyderabad stood at 45%, 42%, 44% and 77% respectively. "Developers across the country are delaying project launches to maintain pricing and clearing their unsold inventory that was launched at higher prices," says Samir Jasuja, CEO at PropEquity. Developers, many of whom managed to increase prices in the last year to pass on increased costs of steel, cement and labour, also concede that new launches are being delayed. 
"Slow sales are forcing developers to go slow on launches. Unfortunately, because of high costs, developers do not want to drop prices, which will be the cases with some new launches," says Shakti Nath, managing director of Logix Group. Lalit Kumar Jain, president of the Confederation of Real Estate Developers' Association of India (Credai), the apex body for private real estate developers, also blames delays in getting project approvals for the drop in new project launches. Developers are also having to grapple with delays in the construction of projects already underway because of liquidity issues and these are also affecting new launches. 
Experts say developers have managed to hold on to pricing levels so far, but that could change. "Lesser project launches will keep future supply of homes in check and reduce pressure on prices. But if the market situation continues in the same way, it will surely have an impact on pricing," says Anshuman Magazine, chairman and managing director of property advisory firm CBRE South Asia. "Nobody wants prices to come down as recovering those prices quickly is difficult." 
ravi.sharma4@timesgroup.com