As home sales outpace launches, prices stay firm, inventory falls

After running neck and neck through most of 2023, residential sales have outpaced launches in December and January ensuring that home prices stay firm with an upward bias and reducing inventory to 16-17 months to sell.

Commentaries and announcements by top developers show that 30-40 per cent of units in projects are getting sold within weeks of launch. Projects by top, listed developers with good delivery track records get snapped up in no time and according to property consultant Anarock Research, of the 4.7 lakh units sold in 2023 around 40 per cent were from newly launched units.

In calendar 2023 launches by top players in major cities were of the order of 920.6 million sq ft while sales were 900 msf, according to data collated by Kotak Institutional Equities and PropEquity. Launches were up 31 per cent on year and sales 34 per cent on year.

In December and January, the trend significantly reversed. In December launches were 66 msf and sales 110 msf, while in January launches were at 59 msf and sales just over 97 msf. In the nine months of FY24, sales were marginally ahead of launches.

Strong demand

“Demand for homes in the top seven cities remains unabated and looks very upbeat going forward as well,” said Anuj Puri, Chairman, Anarock Group. He added that large and listed developers were seeing significant sales.

According to Kotak, the nine large, listed players in the country have launches close to 28 msf in the current quarter, having already launched 67 msf in the first nine months of FY24. Of this Mumbai-based Godrej Properties has the most project launches in terms of area at 8.6 msf followed by Bengaluru-based Prestige Estates Projects at 7.4 msf. Prestige, in fact, has surpassed all other developers by launching close to 31 msf in FY24 so far. At least 70 msf of launches are planned for FY25, according to preliminary forecasts, but the eventual number is likely to be higher because most players are targeting 20-30 per cent rise in their planned launches.

Analysts said that developers had slowed down their launches and were pacing it in order not to get ahead of sales and have an oversupply situation.

Inventory and pricing

With launches lagging sales, inventory is at an all-time low of 1.38 billion sq ft, with less than 18 months to sell, according to Kotak.

Rising prices of homes have been a hot topic of conversation in the last couple of years and data shows that on an all-India basis prices rose 11 per cent on year in 2023. In December prices had shot up 17 per cent on year and 9 per cent sequentially to ₹8,045 per sq ft.

In January prices softened sequentially in the National Capital Region though elsewhere there were up 1-4 per cent.

Puri said though average prices were likely to appreciate 8-10 per cent in 2024, demand would continue undeterred.

He attributed the robust demand to the resilient Indian economy, stable inflation and therefore stable interest rates, and affordability.

“The momentum in Indian residential market is high because new supply is now dominated by Grade A developers who are completing the projects on time. Timely project completion is giving a major boost to overall consumer sentiments.”

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