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Kolkata builders focus on home sales, cut back on launches
The Hindu Business Line  |  June 14, 2019

Abhishek Law

According to industry sources, new launches have declined 25 per cent between Q4 of 2018 and Q1 of 2019

 

New home launches in Kolkata have seen a substantial decline over the last one year primarily on account of low buyer sentiments and increasing regulatory environment.

 

According to industry sources, new launches have declined 25 per cent between Q4 of 2018 and Q1 of 2019. The story gets worse when the launches of the first quarter (January-March) this year are compared with that of of 2018, the decline is a whopping 85 per cent.

 

A recent report by real estate consultancy firm, Anarock Property Consultants points out that Kolkata’s new launches recorded the massive with “merely 1,000 units being launched in Q1 2019”.

 

“There are multiple factors at play here. For one people remain jittery about their jobs and are delaying home purchases. This apart, there is some concern about the signals that indicate an economic slowdown which may have forced builders to go slow,” says Swapan Dutta, Branch Director Corporate &ndash Senior Management at real estate consultancy firm, Knight Frank (India) Pvt Ltd.

 

Regulatory environment

 

Builders, BusinessLine spoke to, point out to the economic and regulatory environment affecting them.

 

The NBFC crisis saw a liquidity crunch in the market, while developers found it difficult to raise finances. Before that, demonetisation, roll out of GST and imposition of RERA all came in quick succession.

 

For instance, there was initially a 12 per cent GST on under-construction homes that saw buyers either delay purchase decisions (waiting for completion of construction of a project), or, opt for ready-to-move-in homes which do not attract any GST.

 

Now the GST on under-construction residential properties stands at 5 per cent. But, there is no input tax credit. While the move is expected to bolster demand, some industry sources say the absence of input tax credit will hit developers’ margins. As such, they may go slow on new launches.

 

“The industry has taken too many hits too quickly. So recovery would be a bit slow. Plus there is less scope of a price hike also,” said a developer on conditions of anonymity.

 

Increasing home sales

 

Another developer maintained that the current political volatility in the state has also affected both developers’ and buyer (home) sentiments. As such, developers too want to have a wait and watch policy. Developers point out that while new launches have been slow, home sales have finally managed to come out of the woods after nearly a year.

 

According to Prashant Thakur, Director & Head &ndash Research, Anarock Property Consultants, the Indian residential real estate segment saw green shoots of revival in the first quarter of 2019.

 

Housing sales in Kolkata saw yearly rise of 18 per cent (Q1 2019) to 4,020 units up from the 3,420 in the year-ago period. Meanwhile, unsold inventory also declined by 9 per cent, Anarock’s report suggested. Less supply (or launches) and higher home sales mean developers are concentrating on completing their previously launched projects.

 

“This reduction (in new supply) will serve Kolkata’s market well, as builders will focus squarely on project completion,” Thakur said