Residential Real Estate Sector Unsold Inventory Levels: Economic Survey
As per the Economic Survey 2017-18, although some recent reforms might have affected the residential real estate market in the short term, these reforms helped in bringing down the unsold inventory levels from 888,373 units witnessed in April 2016, to about 807,903 units in October 2017.
Residential launches across top 14 cities in India during H1 2017 fell to the lowest in past five years to about 58,000 units as per the National Real Estate Development Council (NAREDCO). Similarly, new residential sales, fell to five years low of about 101,850 units during this period. While sales during H1 2017 were down by over 38 per cent compared with H1 2016, unit launches were down by over 56 per cent during the same period.
On demand side, the individual housing loan disbursements of Public Sector Banks (PSBs) and Housing Finance Companies (HFCs) have shown an increase of nearly 11 per cent in 2016-17 over 2015-16. Rising NPAs, higher risk provisioning assigned to real estate sector and dwindling profits in the real estate sector, have made banks reluctant to lend to the sector. As a result, share of bank lending for organized funding to real estate sector has dropped significantly from over 68 per cent in 2013, to 17 per cent in 2016.
Housing price index has shown increasing annual trend in 36 cities during April-June 2017 out of 50 major cities, with Vizag recording the highest increase of 15.7 per cent, Delhi recording 8.1 per cent, and NOIDA recording the lowest increase of 0.9 per cent. Among the 13 cities witnessing a fall in index, the highest decline was recorded in Bhiwadi (-10.6 per cent), followed by Coimbatore (-6.6 per cent), and Chandigarh (-5.9 per cent).
Some of the recent reforms and policies related to Real Estate sector include the Pradhan Mantri Awas Yojana (PMAY) with the government sanctioning over 3.1 million houses for the affordable housing segment in urban regions till November 2017. Of this, about 1.6 million houses have been grounded and are at various stages of construction, and about 0.4 million houses have been built under the mission which also helped level unsold inventory.
Credit Linked Subsidy Scheme (CLSS) under PMAY was extended to the Middle Income Group (MIG) segment, which got included in the scheme from 01 January 2017. With the enactment of Real Estate (Regulation & Development) Act, 2016, it is anticipated that accountability would lead to higher growth across the real estate value chain, while compulsory disclosures and registrations would ensure transparency.
Source Link- https://economictimes.indiatimes.com/.