UNSOLD HOUSES AT ALL-TIME HIGH OF 12.76 LAKHS IN INDIA'S
TOP 30 CITIES
O
ver 12.76 lakh houses are lying unsold in
India's top 30 cities, compounding the
problems of the real estate sector already
grappling with a severe liquidity crunch as non-
banking finance companies (NBFCs) have curtailed
lending to developers following the collapse of
IL&FS last year.
The inventory overhang is as high as 80 months in
Kochi, 59 months in Jaipur, 55 months in Lucknow
and 72 months in Chennai, implying it will take
between five and seven years for developers in
these cities to get rid of the present housing stock.
The total unsold inventory in 30 cities has increased
8 per cent over FY18 when the number was 11.90
lakh. This does not augur well for the sector, whose
primary source of funds have been NBFCs and
customer advances. With tepid sales, which grew
only 5 per cent last fiscal, builders are unable to get
funds for completing under-construction projects,
adding to the unsold stock. And NBFCs have almost
stopped lending to developers as the liquidity has
dried up in the system.
Of the 12.76 lakh units, the top eight cities, including
Mumbai Metropolitan Region, National Capital
Region, Bengaluru, Hyderabad, Chennai and Pune
alone account for 9.66 lakh houses.
On a pan-India basis, it will take 42 months to clear
this inventory. "An inventory of 8-11 months is
typically considered efficient and sustainable. This
implies that sales must improve almost four times for
the current inventory to clear expert said
As per expert jobs have not shifted from tier 1 to tier 2
and tier 3 cities as had been expected. "A lot of
developers went there in anticipation of industries
shifting there. That transition has not happened.
There is not enough traction in employment as these
cities have failed to generate the demand that was
envisaged, Moreover, prices in these cities are not
very cheap either. They are comparable with those
in NCR and peripheries of big cities. Like average
price in Jaipur was Rs 3230 per sq ft in the fourth
fiscal quarter and Rs 3969 per sq ft in Nashik, which
is just 17 per cent less than Rs 4645 per sq ft
prevailing in NCR.
The rate of Rs 5736 per sq ft in Goa and Rs 5340 per
sq ft in Kochi is more than both NCR and Pune (Rs
5230 per sq ft). "The problem is affordability in
smaller cities where price points are not cheaper.
The per unit cost at most locations is Rs 50 to 60
lakh, which is in some cases costlier than tier 1
peripheries
The roots of inventory oversupply lie in the boom of
2011 and 12 when developers went overboard with
supply due to high demand from investors. Between
2007 and 2012, builders kept on purchasing more
land, often backed by private equity. "This led to
appreciation in land prices; consequently, the end
product became costlier, but people's income didn't
rise at the same rate.
PAGE 29 I METROBERRY I JULY 2019