Residential property sales across top 8 cities dip by 23%

The real estate market has been witnessing a drop since July and residential sales across top 8 property markets in India have slipped 23% from a year ago to 109,159 units during July-December.

According to a report by Knight Frank, the metropols has seen a crash in fourth quarter of 2016, including the usually resilient Bangalore. New Launches also fell 46% from a year ago to 68,702 units during the second half of 2016.

National Capital Region (NCR) is the worst-affected market followed by Bengaluru and Mumbai. In this situation, 2016 has replaced 2015 as the worst performing year in terms of sales volume in the recent history; being the lowest since global financial crisis.

Sales volume in the top eight cities declined by 9% in 2016 to 244,680 units, the report said. The October-December quarter ended with 44% on-year drop in sales and 61% decline in launches.

The residential market of the top eight Indian cities including Mumbai, Delhi, Bengaluru, Pune and Chennai had started off on a positive note in 2016 with the first half of 2016 witnessing a 7% on-year jump in sales volume. The second half of 2016 had also began at the same pace with July-September sales volume showing a positive growth on the back of the start of the festive season.

"All these factors coupled with political stability, regulatory environment, enhanced infrastructure, strong investments, approval to the GST bill and amendments to REITs led us to the feeling that the year would end on a high note for the residential property sector. But, the demonetisation move pulled down the last quarter sales across all cities. The fall in Q4 (October-December) was intense, H2 2016 ended below H2 2015. 2016 ends at launches and sales being lowest since global financial crisis," Shishir Baijal, CMD, Knight Frank India, told ET.

He expects uncertainty to continue in the next quarter. "It will be important to see how developers recalibrate their businesses to the changing environment and, whether buyers capitalize the opportunity of various reforms and change their status quo position of 'wait and watch," Baijal said.

According to Knight Frank estimate, the real estate industry has lost revenue of Rs 22,600 crore during the fourth quarter. The government's notional loss on stamp duty levied by state governments has been estimated to be Rs 1,200 crore.

For office property market, the year turned out to be steady and consistent in line with 2015 performance across six major markets including Mumbai, Bengaluru, Delhi and Pune. However, in the second half, office transactions fell 12% from a year ago to 20.4 million sq ft. New supply of office space reduced 46% in the second half of 2016 to 10.1 million sq ft.

In the second half of 2016, average rental values rose to their sharpest level since 2013 at 11% from a year ago. Mumbai led the rise in rentals with a 16% on-year jump; NCR and Bengaluru followed closely at 14% and 12%, respectively, Knight Frank said.