<p>Bengaluru’s residential market sales, primarily flats and apartments, has crashed by 76 per cent this year in the January to March quarter. <br /><br />From around 7,000 apartments launched last year, this year the launches clocked 4,100 between January and March, a study by Cushman and Wakefield (C&W) has revealed. Developers are more keen on finishing and selling existing projects than on launching new ones that enhance unsold stock and supply.<br /><br />The study states: “Due to cautious investing attitude of the buyers, the absorption rate in the city declined leading to a lot of unsold inventory and thereby a restrained supply. Nearly 41% of the total units that sold was from the south-east submarket, primarily along Sarjapur Road and Hosur Road and an additional 25% in the North submarket, in Yelahanka and around Kogilu. <br /><br />Key factors<br /><br />Increasing IT-ITeS developments and enhanced connectivity to other parts of the City have been key factors driving the launch activity in the above-mentioned submarkets.”<br />The decline is not restricted to Bengaluru alone, but is nation-residential launch was 24,700 units this year, while it was over 48,000 last year. wide. Sales fell 50 per cent this year in eight mega cities compared to last year. The total <br /><br />According to the study, the decline in new launches have come on the back of less-than-expected sales in the residential sector, due to which developers are holding back on new launches and instead focusing on completing their existing projects. In addition, with a few key cities planning to roll out new development plan, developers are refraining from launching new projects until the new regulations come into effect. <br /><br />The January-March period saw the lowest number of residential project launches over a period of two years. Shveta Jain, Executive Director, Transaction Services, Residential, C&W said, “Cost of creating new projects has been on a steady rise as input costs including cost towards statutory approvals etc. from state government, cost of land, land development have been rising. Conversion of interest to sale is low. Developers are looking to deliver their projects and ensure timely exit for themselves as well as their investors.”<br /><br />Cheaper debt<br /><br />Shveta further added, “Many developers are taking time to restructure their debts and financial liabilities by ensuring that expensive debts are replaced with cheaper debt and attract private equity capital wherever there is a possibility. <br /><br />“The primary concern for many developers is that they have either over-leveraged their current projects while, they are unable to utilise their land bank or future development capabilities to raise more capital. Therefore, there is concentrated effort towards keeping debt exposure low by lowering the number of launches. Selective inventory sales to private equity at 20-25% discount is also being witnessed.”</p>.<p><br />Only the high-end segment registered a year-on-year growth of 26%. While all other segments have seen considerable decline, affordable housing segment units reduced significantly by over 80%. Developers are inclined towards the high-end segment where profit margins are typically higher, as builders look to offset increasing land and development costs. </p>
<p>Bengaluru’s residential market sales, primarily flats and apartments, has crashed by 76 per cent this year in the January to March quarter. <br /><br />From around 7,000 apartments launched last year, this year the launches clocked 4,100 between January and March, a study by Cushman and Wakefield (C&W) has revealed. Developers are more keen on finishing and selling existing projects than on launching new ones that enhance unsold stock and supply.<br /><br />The study states: “Due to cautious investing attitude of the buyers, the absorption rate in the city declined leading to a lot of unsold inventory and thereby a restrained supply. Nearly 41% of the total units that sold was from the south-east submarket, primarily along Sarjapur Road and Hosur Road and an additional 25% in the North submarket, in Yelahanka and around Kogilu. <br /><br />Key factors<br /><br />Increasing IT-ITeS developments and enhanced connectivity to other parts of the City have been key factors driving the launch activity in the above-mentioned submarkets.”<br />The decline is not restricted to Bengaluru alone, but is nation-residential launch was 24,700 units this year, while it was over 48,000 last year. wide. Sales fell 50 per cent this year in eight mega cities compared to last year. The total <br /><br />According to the study, the decline in new launches have come on the back of less-than-expected sales in the residential sector, due to which developers are holding back on new launches and instead focusing on completing their existing projects. In addition, with a few key cities planning to roll out new development plan, developers are refraining from launching new projects until the new regulations come into effect. <br /><br />The January-March period saw the lowest number of residential project launches over a period of two years. Shveta Jain, Executive Director, Transaction Services, Residential, C&W said, “Cost of creating new projects has been on a steady rise as input costs including cost towards statutory approvals etc. from state government, cost of land, land development have been rising. Conversion of interest to sale is low. Developers are looking to deliver their projects and ensure timely exit for themselves as well as their investors.”<br /><br />Cheaper debt<br /><br />Shveta further added, “Many developers are taking time to restructure their debts and financial liabilities by ensuring that expensive debts are replaced with cheaper debt and attract private equity capital wherever there is a possibility. <br /><br />“The primary concern for many developers is that they have either over-leveraged their current projects while, they are unable to utilise their land bank or future development capabilities to raise more capital. Therefore, there is concentrated effort towards keeping debt exposure low by lowering the number of launches. Selective inventory sales to private equity at 20-25% discount is also being witnessed.”</p>.<p><br />Only the high-end segment registered a year-on-year growth of 26%. While all other segments have seen considerable decline, affordable housing segment units reduced significantly by over 80%. Developers are inclined towards the high-end segment where profit margins are typically higher, as builders look to offset increasing land and development costs. </p>
