It is not the country‚Äôs automotive sector alone that is passing through a crisis. The real estate sector too, is struggling to cope with a large unsold inventory that could be worth over Rs 6 lakh crore.
That would appear staggering and there are other market trends visible in the sector as well, with the offtake of luxury apartments slowing down considerably across the major cities, according to a study reported in Financial Express.
The significant aspect of this story is that the property prices have not increased in the past few years, an unusual phenomenon with the real estate business. That may be one of the reasons for the piling inventory as buyers who choose properties for investment purposes might be staying away. The study carried out by Liases Foras indicates that the affordability levels of properties have also not been helpful.
Another research has placed the luxury apartments in three categories, ones in the Rs 2 crore to Rs 5 crore category; Rs 5 crore to Rs 10 crore and the last one, apartments priced above Rs 10 crore. The last category applies to Mumbai where the apartments would be typically 4,000 sq. ft to 7,000 sq. ft in size and depending on the city and the location priced anywhere upwards of Rs 25,000 per square foot. Earlier the builders of such properties would sell them to investing buyers who would then sell through their own resources to high net worth individuals. The present status is that the market for these apartments too is end-user driven and is seeing a slowdown and blocking of inventory.
Giving a breakup of the inventory, it is reported that the first six months of this calendar year saw a fresh supply of 1,39,500 units being added to the inventory. Around 10,000 units out of this constitute the luxury segment falling in the three price ranges described above. Of these a majority, 8120 units, are in the lowest Rs 2 crore to Rs 5 crore range, which is 6% of the total inventory.
The real estate sector may not have any magic solution to this issue and may have to wait it out for cycle to refresh and for the demand to pick up again.