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Housing sales in Noida hit 8-year low

July 21, 2015 | By

The Noida property market witnessed new sales of only about 3,800 homes during the April-June period, the lowest in the last eight years, due to dip in demand from investors, according to a report by Bank of America-Merill Lynch.
“The housing market in Noida continues to remain difficult — with absorption rate lower than 2009 levels, new supply/launches having halved compared to the period (calendar year) 2008-13, and higher pressure on pricing,” BofA-ML, an American brokerage firm, said in a research report.

The second quarter of calendar year 2015 witnessed “new sales of about 3,800 units, which is lowest in the last eight years”, it added.

“Absorption rate at 3.7 per cent is lowest in last eight years as investors who held the housing market in the past seemed to have deserted the market, given poor visibility on timely delivery, price appreciation, and exits,” said the report.

Unsold inventory

It also expressed concern over the unsold inventories in the Noida property market.

“Although we believe unsold inventory has peaked at about 1,00,000 units, the same equates to 16 quarters at current sales velocity; again the highest in last 8 years… a 4-year inventory is worrisome…,” the report said.

It attributed the “slow growth in employment generation and perceived poor State governance” as the key reasons for “poor absorption and high unsold inventory in Noida”.

On the Gurgaon market, the report mentioned that during the last six quarters, launches have been twice as much in even quarters as compared to odd quarters.

“We don’t see this as a new trend but shall keep a keen eye on the same,” it said.

Demand in Gurgaon

The report said that demand in Gurgaon was primarily limited to ready-to-move-in supply and new launches (stretched payment terms). “About 40 per cent of the total sales in Q2CY15 was contributed by new launches alone,” it said.

Gurgaon’s unsold inventory has seen an exponential rise over the last 2.5 years, indicating significant slowdown in sales.

“We foresee the weakness to stay through calendar year 2015, before possible recovery in calendar year 2016,” the report said.

To improve sales and cash flow, the brokerage said that there is a need for a notable rise in new launches, with freebies and discount schemes, as well as a reduction in investor inventory in the secondary market.

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