According to the Gera Pune Residential Realty Report, for the period of Jun to Dec 2023, the rise in salaries and disposable income have more than compensated for the increase in interest rates.
The average prices of homes for sale reached a new high of Rs 5,938 per sq ft, at about 17% higher than the previous peak of Rs 5,096 in Dec 2015. Between Dec 2022 and Dec 2023, home prices rose by 8.74%, where the average rates were at Rs 5,461 per sq ft in Dec 2022, and went up to Rs 5,938 per sq ft in Dec 2023.
Fresh supply launched in the last six months remains at an elevated level, increasing by 9% to 50,343 units over the six months ended Dec 2023 – in the six months ending Jun 2023, they were at 46,007 units. However, for the full year, new launches have gone down by 6%, i.e. to 96,350 units in 2023 from 1,02,572 units in 2022. The UDCPR continues to be awaited for the PMRDA regions. Once the UDCPR is made applicable to the PMRDA areas, the overall development potential will go up between 2 and 2.5 times. This will potentially, substantially increase supply.
The overall inventory available for sale is healthy at 73,379 homes i.e., 23.63% of the total inventory under development, at 310,567 homes. The current unsold inventory is about 9.31 months of the current annual sales volumes. There is an increase from in inventory overhang, at 8.37 months in Dec 2022, substantially lower than that in 2018, when the overhang was 11.43 months. The gross inventory of approx. 3.1 lakh homes has been reasonably stable since Dec 2015.
The replacement ratio (which measures the ratio of new inventory added to the inventory sold during a period) is at 1.06, indicating that supply added to the market was 6% more than the sales during the year. The market is generally considered buoyant, however, the first signs of difficulty are seen when the replacement ratio starts to rise. The present number at 6% is not a major concern, however, if substantial new inventory is added, and sales numbers do not rise, the market could face headwinds in due course.
Apart from the value segment (i.e. units priced between Rs 4,792 per sq ft to Rs 5,988 per sq ft), which has seen an increase of 12% over 2022, there is a reduction in all the other segments – led by the luxury segment (i.e. units priced at Rs 8,982 per sq ft & above), where new launches have dropped by 34% from 8,764 units in 2022, to 5,753 units in 2023.
However, launches in the luxury segment are still higher compared to all the 7 years prior to 2022. The story for Premium Plus homes (i.e units priced between Rs 7,187 per sq ft to 8,982 per sq ft) which have seen a drop of 3.4% is also similar to Luxury homes. In all the 7 years prior to 2022, the new launches have been lower compared to 2023. The demand for Luxury and Premium Plus still continues to be healthy.
