Inventory levels for South India-based real estate players remained high during the first quarter and prices have witnessed a decline as well during the quarter due to focus on affordable housing, according to a report.
“The overall inventory levels increased from 25.2 million sq ft in Q1FY15 to 28.4 million sq ft in Q1FY16. We note that over Q1-Q3 of FY15, inventory levels trended down. However, the trend reversed in Q4FY15 due to the launch of affordable housing by Sobha (8.3 million sq ft) in Balegere (Bengaluru) and the launch of 7.5 million sq ft in Bengaluru by Prestige. During 1QF16, Puravankara’s inventory increased on a sequential basis with the commencement of new projects (1.8 million sq ft),” SBICAP Securities said in a recent report.
According to the report, overall inventory reached 45 months (28.4 million sq ft) in Q1FY16 due weak sales in Bengaluru markets. The overall inventory days increased due to the pile-up in inventory in Q1FY16 to 28.4 million sq ft vs. 26.8 million sq ft in 4QF15. While Prestige’s inventory increased to 43 months, Sobha’s inventory increased to 30 months despite an absolute fall in inventory for both the companies sequentially.
The total sales volumes for all four companies (Puravankara, Sobha, Prestige and Brigade) remain subdued at 2.4 million sq ft in Q1FY16. In the past two years, sales volumes have been around the 3-4.5 million sq ft per quarter range. Sale prices have increased gradually during the past one year. However, in Q1FY16, we witnessed a relatively sharper sequential decline of 6 per cent due to the increased focus on affordable housing, SBICAP Securities added.
The report goes on to state that overall launches by these companies have declined significantly on a sequential basis due to the lack of demand. Sobha launched just 0.3 million sq ft in Q1FY16, Puravankara has not launched any new projects for the past three quarters while Prestige has not launched any new projects after the launch of the 7.25 million sq ft project in Q4FY15.
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