`Realty Prices in NCR may Fall on High Inventory' : The Economic Times

New Delhi



A slump in home sales has pushed builders' inventory to `unsustainable levels' in the National Capital Region (NCR) of Delhi, creating conditions for a real price correction that developers have so far avoided, experts say .

Builders in the NCR had 175,000 unsold apartments in the three months to June, according to data from property consultancy JLL India. Most of these apartments though are under construction. Meanwhile, Mumbai had about 80,000 unsold apartments at the end of June while in Bengaluru, builders held 84,000 unsold apartments While sales have been on a slide in most of the big cities, the problem in the NCR is peculiar.

A mix of high prices and large sizes has pushed most of the on-sale apartments beyond the reach of average homebuyers.What has further compounded the problem is the fact that many of these apartments are located in far away areas that do not have much to boast in terms of infrastructure.

“Unless prices come down, sales are likely to remain low in the NCR,“ said Rubi Arya, executive vicechairman and director at private equity firm Mile stone Capital Advisors. The NCR, she said, is now selling fewer homes in terms of volume than even a smaller market like Bengaluru.

This has stretched the balance sheets of builders across the NCR, hampering their ability to reduce debt or launch new projects.

Ashutosh Limaye, national director, research, at JLL India, said builders will come under further pressure because of this unsold inventory. “In the secondary market, investors who had picked up properties earlier are becoming restless as they don't see much appreciation in prices.They want to exit.When this supply comes in to the market at a discount, it will create further pressure on developers, especially for small and mid-sized builders,“ said Limaye. “Now, the possibility of further softening of prices here would be high among small and mid-sized builders.“

Limaye said sales have improved in Mumbai by about 20-25% in the first half of 2015 and this, along with a drop in new supply, has curtailed the inventory level in the city though it is still significant.