Stagnating property prices, missing buyers and low sales have hit the real estate sector in the northern region the most. This can be gauged from the fact that Mohali, the poster city of Punjab government, is placed last in the key Tier II property destinations in the countries according to a new report by property research firm PropEquity .
With an inventory overhang of 50 months Mohali is the worst performer on the sales front. According to the report north India is the worst performer amongst all regions, performing below par on all the evaluated parameters.
The bottom four cities in the complete ranking Agra, Lucknow, Bhiwadi and Mohali are all from the northern region. “Much like Tier I cities, northern Tier II cities are also marred by project delays, expensive properties and a demand and supply mismatch,” said Samir Jasuja, managing director and founder, PropEquity.
The top 10 rankings consist of six cities of South India, two from West India, and one each from Central and North India. Only one city from Northern India, Jaipur, came in the top 10 with sixth rank. Dehradun (23 months) is the only city from the North with inventory overhang of less than 24 months.
According to market observers unrealistic prices are among the main reason for the market performing so badly in the region. In spite of poor sales and huge inventory overhang the northern region emerged as the second most expensive destination among Tier II cities, with the weighted average price being Rs3,000 per square feet, the report mentions.
“Investors are shying away from this market due to price stagnation and disappearing returns on investments. End-users are waiting for the prices to further correct”, added Jasuja.
South markets outperform the North with Kochi emerging as the top Tier II city in India due to substantial rate of real estate construction and new launches matched by significant sales. With Vishakapatnam at number 3, Trivandrum at 5,Mangalore at 7,Goa at 9 and Coimbatore at #10 Southern region has emerged as a strong destination.
Kochi along with Indore, achieved the highest sales in the year of project launches, among all the Tier II cities.
Kochi, proposed to be one of the smart cities is fast becoming home to emerging software companies.
The report has thrown some startling revelations in some ways, as no city could come on top on more than 2 advanced parameters, and in fact most cities, doing extremely well on some parameters, fared poorly on others. A case in point is Dehradun, which is top on 2 parameters, while last in other four, and hence, has fallen in overall ranking. As a result, cities which fared slightly above moderate on most parameters, excelled in the overall rankings. Cases in point are Kochi and Nashik.
“Southern cities have proven to be resilient, and their conservative nature in even better times actually has helped them sustain traction in the troubled times that the industry is going through”, said Jasuja.
Interestingly the 19 TIER II cities (consolidated) have a total market size in terms of annual primary sales of INR 326 Billion annually, which is lesser than the market sizes of Bengaluru (at Rs 361 billion) and Mumbai ( at Rs 341 billion) respectively.
Overall, the new residential supply in the top 19 Tier II cities has fallen by an overwhelming 64 per cent in the last two years, as against a fall of 40% in top 14 Tier I cities, in the same period.
Residential absorption in the 19 TIER II cities has fallen by 17 per cent in the last two years, as against a fall of 32 per cent in the top 14 TIER I cities, in the same period. The TIER II markets are clearly end user driven than investor driven.
The launch prices of tier II cites increased at an annual rate of 9 per cent over a period of 2 years compared to 10 per cent for Tier I cities.
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