Good news could be in the offing for all those looking forward to buy themselves a new house in Bengaluru. Developers are starting to lose their right towards pricing power in the city, according to a recent report by Bank of America (BofA) Merrill Lynch.
“Around 16,000 units were launched in a single quarter in the second quarter of calendar year 2015 (Q2CY15). As unsold inventory rose above 80,000 units or above 10 quarters, we caution towards early signs of weakness. Also, negligible rise in housing price over the last two quarters indicates loss of pricing power among developers,” BofA Merrill Lynch said.
“We continue to believe in the robustness of the Bengaluru housing market, led by its affordability, attracting end-users and investors. However, with housing demand averaging at about 7,000 units per quarter, consistent rise in housing supply can potentially allow nervousness to creep in among end-users/investors followed by developers,” BofA Merrill Lynch added.
According to BofA Merrill Lynch, the absorption rate in the city has been below 10 per cent since the last five quarters as supply (new launches) has been consistently ahead of demand, and affordability has been approaching all-time low levels (CY09).
As far as Mumbai is concerned, BofA Merrill Lynch believes that the affordability has improved but the inventory is still unaffordable.“Year-on-year affordability improved further in Mumbai city, primarily led by a slowdown in housing price growth,” BofA Merrill Lynch said.
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