Industry watchers say given the average price of these flats of about Rs 90-95 lakh, there are not too many takers at this point. (Reuters)

The total inventory with builders in the Mumbai Metropolitan Region (MMR) could be nudging Rs 2.5 lakh crore with an additional 100,000 apartments remaining unsold over the past year. Industry watchers say given the average price of these flats of about Rs 90-95 lakh, there are not too many takers at this point. Moreover, there’s anticipation prices will come off, they add, following the roll-out of RERA or the Real Estate (Regulation and Development) Act. As such the total number of apartments unsold right now has crossed 2.5 lakh. “At the current pace, it could take nearly five years to clear the unsold stock,” says Pankaj Kapoor, MD, Liases Foras.

Kapoor points out that the poor velocity of sales is the consequence of high property prices partly driven up by an increase in input costs. Indeed, while the homes are not really large — between 500 square feet and 1,000 square feet — the weighted average price per square foot is as much as Rs 13,000, data sourced from Liases Foras show.

However, even as the inventory of ready-to-occupy properties has risen threefold to 15,000 units in the past two years, sales have picked up pace. Sales of ready apartments have almost doubled to more than 10,000 units in 2016-17 over the previous year, a sharper rise than in 2015-16. One reason for this was developers’ urgency to complete and sell properties before the roll-out of RERA.

With RERA now a reality, however, there is the possibility of both sales and launches losing momentum. Ashish Shah, COO, Radius Developers, says developers are recalibrating their models to comply with the new rules and therefore the number of launches could be fewer. “Companies must engage with their stakeholders and financiers to figure out their capital flows,” Shah said adding that they might need credit lines for longer periods.

Already, the acute shortage of cash following demonetisation in early November last year slowed down new launches significantly which have seen a steady quarter–on–quarter (Q-o-Q) decline for the last four quarters. In fact, a Cushman and Wakefield study shows the top eight cities reported a 16% year-on-year fall in launches with approximately 25,800 units launched in the January-March period. Since May, project launches have declined by 8%, the report noted.

Anshul Jain, managing director, India, Cushman and Wakefield, said launches in the residential sector were expected to remain subdued over the next two to three quarters. “Developers need to make intrinsic changes to their business structure, operations and marketing strategies to comply with RERA norms,” Jain explained. Once builders come up to speed with the compliance, sales could pick up say experts who point out buyers would become more confident of getting possession on time.

“Unlike in recent months, we could see buyers opt for under-construction apartments since these are typically priced more attractively,” said a builder. In the past delays in the completion of projects have made buyers wary of buying incomplete apartments and pushed them into buying ready-to-move-in houses. “Apart from the lower risk GST will now be applicable on ready-to-move-in homes and that will stimulate demand” Kapoor explained.