New realty project launches collapse 50% in Jan-March

Even as the realty industry has talked of revival in market sentiment, the number of project launches witnessed almost 50 per cent decline during the January-March compared to the same period last year, says a report.

The first quarter of 2015 saw the lowest number of project launches over a period of two years, according to a recent report by property consultant Cushman & Wakefield (C&W). Nearly 24,700 units were launched during the period as against 55,500, registering a 50 per cent decline compared to January-March quarter of 2014 mainly due to lower returns on sales.

“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 and ensure timely exit for themselves as well as their investors,” C&W Executive Director (transaction services, residential) Shveta Jain said. She said the cost of creating new projects has been on a steady increase as input costs including those towards statutory approvals from state government, cost of land, among others, have been rising. Apart from this, since many cities are planning to roll out new development plan, developers are refraining from launching new projects until the new regulations come into effect, Jain said.

Among new unit launches during the period, only the high-end segment registered a year-on-year growth of 26 per cent to 7,700 units, while all other segments have seen considerable decline, affordable housing segment units reduced significantly by over 80 per cent.

Developers are inclined towards the high-end segment where profit margins are typically higher, as builders look to offset increasing land and development costs. New launches in the affordable segment dropped by nearly 80 per cent to 1,700 units compared to 8,600 during the corresponding period last year. In the mid-income segment, 15,200 units were launched compared to 40,600 while 100 units were launched in the luxury space against 200 during January-March of 2014. 

“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,” Jain said. “Therefore, there is concentrated effort towards keeping debt exposure low by lowering the number of launches, except in high demand location where sale activities are high and fast paced,” she added.Hyderabad saw a massive surge in high-end segment launches that rose to 3,300 units, while Bengaluru witnessed a year-on -year decline of 76 per cent in unit launches with nearly 4,100 units launched during the first quarter of 2015. 

There has also been a reduction in the average number of units launched per project which has declined from 287 units in the first quarter of 2014 to 233 units per project. The average number of units per project was highest (669) in Hyderabad, followed by 567 in Mumbai. In other three cities, namely, Delhi-NCR, Kolkata and Pune, comparatively smaller projects with lesser number of units were launched during the period. “The number of units launched per project further decreased in this quarter, as developers launched smaller projects entailing comparatively lower investments and hoped to garner faster sales,” she added.