Inventory of unsold flats causing pain for builders

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As per current rate of sales the unsold inventory of around 8 lakhs units worth Rs.4 lakh crores will take nearly 4 years to sell.  Builders are reducing the size of units, but price reduction, no way…

The value of unsold apartments across the top seven cities of the country at the end of June has been estimated at a whopping Rs 4 lakh crore, with few signs the inventory will be cleared anytime in the next four years. At 7.5 lakh, the number of flats in the mid-priced range is virtually the same as it was at the end of March, this year, which means sales have come to a standstill.
In addition, there are 50,000 luxury apartments, priced at an estimated Rs 1 lakh crore, lying unsold in Mumbai alone. “Developers are now reducing the sizes of the apartments to make them more affordable,” Sandeep Runwal, director, Runwal Group, told FE.
Indeed, industry experts opine it could take as long as five years before builders are able to offload such a large number of units. Despite the large number of flats going abegging, however, some 37,000 flats in the mid-priced segment were launched in the three months to June, roughly half the number opened up for buyers in the March quarter, data from reliable source shows. Mudassir Zaidi, national director, Knight Frank, says builders have realised there is little point in launching new properties since that would only pressure prices further. “The pace of recovery in housing sales is far slower than earlier anticipated and the high inventory is not coming down in a hurry,”
Zaidi observed.

The number of quarters required to exhaust the current unsold inventory in Guragon, has risen to two years from three quarters in 2012, estimates Bank of America Merrill Lynch. The brokerage believes the absorption rate in Noida today at 3.7% is the lowest in the last eight years. This is because investors who held the housing market seemed to have deserted it given poor visibility on timely delivery, price appreciation and exits.

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