Branded players see upswing but smaller developers are still struggling
Home sales in Kolkata have been a mixed bag over the first nine months of 2019. While branded real estate developers have seen an upswing of sorts and improvement in sentiment, smaller players and standalone projects are yet to gain any sales momentum.
Project launches continue to be on the decline, with the focus being primarily on reducing unsold stock. Affordable housing (below ₹75 lakh) continues to be the main draw.
“Home buyers are gradually tilting towards branded players, who include not just listed developers but also those who have been operating for a decade; newly-formed entities of large conglomerates; or those with sizeable areas under development, either locally or pan-India,” says Soumendu Chatterjee, Director and City Head – Kolkata, ANAROCK Property Consultants.
Big players better off?
Market sources say advertisement and promotional schemes by branded operators have led to some improvement in sentiment for bigger projects. These schemes primarily include those which go beyond regular financing options.
For instance, Emami Realty, a part of the Emami Group, which earlier this year launched an assured rental scheme, has seen a nearly 15-20 per cent increase in sales since the promotion was offered. Under this, a buyer can enrol his name in the assured rental scheme by paying a sum of ₹1 lakh. The offer comes with a flexible payment plan, wherein, the buyer can pay 9 per cent of the total sale value within 15 days, 16 per cent within 45 days, 25 per cent within 60 days and 50 per cent within 90 days.
On purchase of a 4BHK apartment, the prospective buyer will get ₹50,000 per month as rent for 24 months; for a 3BHK, the rent per month will be ₹30,000 and for a 2BHK, the rent will be ₹20,000 per month. The offer is valid for a very limited period and is applicable on non-subvention cases only. Emami Realty will also provide an iPhone XR to each of the first 50 enrolments, the developer’s release added.
According to Rishi Jain, Managing Director, Jain Realty, which has four projects in the city, there is a marked improvement in buyer sentiment with sales moving up by 25-30 per cent. This has been evident over the last 12 months with issues around the West Bengal Housing Industry Regulatory Authority (WBHIRA), the State’s RERA authority, settling down. Initial teething troubles and project registrations under the new law has led to some trouble for developers.
“We have taken steps like pushing service apartment bookings and also innovated on the sales front. Channel partner meetings are being initiated for better sales. See, we can either say the market is bad and do nothing or we can innovate and sell our offerings,” he told BusinessLine.
Incidentally, consultancy firms, too, have come up with different home sales numbers. JLL, among the largest real estate consultancy firms in the country, has maintained that Kolkata witnessed “strong residential sales growth of 19 per cent during the January-September period in 2019”.
The south peripheral submarket (Tollygunge, Narendrapur, Joka) has accounted the majority of the sales followed by east (Rajarhat, New Town) and north Kolkata (Ultadanga, Dum Dum). For northern and eastern peripheral submarkets, factors such as access to IT parks, easy connectivity to the airport and social infrastructure are driving demand,” Samantak Das, Chief Economist and Head of Research & REIS, JLL India, said.
ANAROCK’s research indicates that housing sales in Kolkata have seen a 9 per cent decline in the first three months of 2019 against the same period in 2018. Total sales reported in first three quarters of 2019 were 10,670 units, whereas it was 11,740 units in 2018 during the same period; thereby indicating a decline of over 9 per cent.
Fall in new launches
But, without doubt, there has been a huge decline in new launches. The fall is anywhere between 45-70 per cent over the first nine months; JLL India’s data suggest that Kolkata has seen a 63 per cent fall in launches during the first nine months of 2019 YoY.
ANAROCK says that the first three quarters of 2019 saw a supply addition of nearly 6,770 units, 48 per cent less than in the corresponding period in 2018, when recorded new launches were 13,040 units.
This, alternatively, means that there is a decline in unsold inventory, which stood at 45,570 units till September 2019, indicating a yearly decline of 8 per cent. Unsold inventory in Q3 2018 stood at 49,300 units.
“The city has adopted a restrained approach on the back of existing unsold inventory and weak demand sentiment. Kolkata developers have been selling off already launched projects and focussing on completion of construction, rather than new supply,” says JLL’s Das.
Small players worse off
According to Knight Frank India’s Swapan Dutta, Branch Director, Kolkata, slow economic growth and procedural delays have been major factors resulting in subdued activities between January and June this year.
With launches, sales and even weighted average of residential projects falling, the road to recovery for the Kolkata market looks long.
“Sluggish sales and unsold inventory have been pulling down residential prices constantly for the last two years,” he adds.
In fact, the picture remains grey for smaller developers, especially those taking up standalone projects. Firstly, capital requirements (for developers) have gone up multiple times, while buyer sentiment for standalone projects continues to be dull.
This apart, completion certificates, with GST not charged, continue to be the sole demand driver for projects.
Under-construction homes that attract 5 per cent GST still have low demand. So the onus is now on the developer to ensure completion of the project. This requires deep pockets.
A chicken-and-egg situation
According to Ritwik Das, Managing Director, Bluechip Projects and Chairman of the Bengal National Chamber of Commerce and India, earlier, a developer could start a project if he managed 35-40 per cent of the construction cost. Apartment bookings (in the project) would help tide them through the rest. But now, a developer needs at least 65-70 per cent of the construction cost ready. So, one needs to have deep pockets; and finance options are limited.
“It’s a chicken-and-egg situation for developers and buyers. Buyers don’t want under-construction projects. So, either developers manage finances, complete the project and get the required certificates or they stall and wait till they manage finances. And anyway, bank financing for developers continues to be difficult to obtain,” he said.