Housing Sales Face Slowdown

As anticipated , the rising mortgage rates and increasing property prices on the back of inflated input costs, have started showing their fall out on residential real estate, with slowdown in sales. 

 According to a latest study by property consultancy, Anarock, the top 7 cities saw housing sales moderate by 15% – from approximately  99,550 units in Q1 2022 to about 84,930 units in Q2 2022. MMR recorded the highest sales of about 25,785 units in Q2 2022, followed by NCR with approximately 15,340 units. 

Developers restricted new supply to nearly 82,150 units in Q2 2022 against 89,150 units in Q1 2022 – an 8% decline in the period. MMR and Pune were the only markets to see new launches increase by 26% and 14% q-o-q, respectively. The remaining top 5 cities saw reduced new launches. 

MMR saw about. 29,730 units added in Q2 2022, while Pune added approximately 16,560 units. NCR saw a massive 56% drop in new supply – from 9,300 units in Q1 2021 to approx. 4,070 units in Q2 2022. 

Anuj Puri, Chairman – ANAROCK Group, says, “Inflationary pressures on input costs compelled developers to increase property prices in the past few months, and RBI unleashed two rate hikes that swelled up home loan interest rates. These two factors combined to hike the overall property acquisition cost for homebuyers, leading to a dip in housing sales. The fact that after two years, there was no new Covid-19 wave to disrupt family travel plans during the school vacation months (April to June) could also have impacted sales.” 

“As for the declining new launches, developers would have held back fresh supply while they sought clarity on the unfolding market sentiments amid increased housing purchase costs,” says Puri. “Given that we saw two back-to-back quarters of robust housing sales and new launches (Q4 2021 and Q1 2022), a dip was to be expected.” 

New Launches Overview 

The top 7 cities recorded 82,150 new units launched in Q2 2022 as compared to 89,150 units in Q1 2022, an 8% decrease over the previous quarter.The key cities contributing to new unit launches in Q2 2022 were MMR (Mumbai Metropolitan Region), Hyderabad, Pune, and Bengaluru, which together accounted for 91% of the new supply addition. Only MMR and Pune saw increased new launches. 

• MMR saw approximately  29,730 units  launched , registering an increase of about 26% from Q1 2022. Over 66% of the new supply was added in the INR 40 lakh to INR 2.5 crore price segment. 
• Pune added close to 16,560 units in Q2 2022, a  14%  qoq increase  over the previous quarter. Over 73% of the new supply was added in the sub-INR 80 lakh price segment. 
• Hyderabad added nearly 15,780 new units in Q2 2022 compared to 21,550 units in Q1 2022 – showing a decrease of 27%. Over 92% of the new supply was added in the INR 40 lakh to INR 2.5 crore price segment 

• Bengaluru saw addition of about 12,510 units in Q2 2022, a marginal quarterly decline of 5%. Nearly 74% of the new supply was in the mid and upper mid-segment (INR 40 Lakh – INR 1.5 crore ) 
• NCR saw a  significant decrease of 56% in new launches during this versus the previous quarter, with nearly 4,070 units launched in Q2 2022 
• Chennai added nearly 1,480 units in Q2 2022, a quarterly decrease of 52% over the previous quarter. Approximately 65 % of the new supply was added in sub-INR 1.5 crore price segment. 
• Kolkata added nearly  2,020 units in Q2 2022, a  massive decline of 48%. over Q1 2022. Nearly 65% of the new supply was added in INR 40 Lakh – INR 1.5 crore price segment. 

Source: ANAROCK Research 

Housing Sales Overview 

Considering that 84,930 units were sold in Q2 2022 , there was a  decrease of 15%  over Q1 2022.  NCR, MMR, Bengaluru, Pune, and Hyderabad accounted for 90% of the sales in the quarter. 

• MMR recorded the highest sales  in Q2 2022 among the top 7 cities. With approximately 25,785 units sold in Q2 2022, the city witnessed a quarterly decline of 11%  
• NCR recorded the second highest sales  of nearly 15,340 units in Q2 2022, a decrease of 19% over the previous quarter 
• Pune saw approximately 12,500 units sold in Q2 2022 -  a decline of 11% over Q1 2022 
• Bengaluru saw nearly 11,505 units sold in Q2 2022 – a  quarterly decrease of 14%. 

• Hyderabad registered the sale of  11,190 units  in Q2  2022, with 15% decline over Q1 2022 
• Kolkata recorded the sale of nearly. 4,800 units in Q2 2022, a decrease of 20% over the previous quarter 
• Chennai saw nearly. 3,810 units sold in Q2 2022 – recording a decline of 24% over Q1 2022. 

Source: ANAROCK Research 

Inventory Status 

Available inventory remained more or less stable at 6.25 lakh units in Q2 2022 (against 6.28 lakh units in Q1 2022) due to low quarterly sales. Annually, however, accumulated inventory declined by 4% across the top 7 cities. 

Price Movements  

Residential property prices across the top 7 cities saw a quarterly increase of 2-3% in Q2 2022. Annually, prices have risen by between 4 and 7%, primarily due to increased input costs and good demand post-Covid-19. 

Analysing the trend, Anuj Puri, Chairman, Anarock says that inflationary pressures on input costs compelled developers to increase property prices in the past few months. And this along with home loan rate hikes, combined to push up the overall property acquisition costfor home buyers, in turn leading to a dip in housing sales.