The Pune residential market has been witnessing a downward trend in terms of demand for homes since the beginning of 2013, and this momentum seems to have continued in 2014 as well. While the demand for homes dropped by over 19% in 2013, it is expected to fall by 11% in 2014. The total number of units to be absorbed is expected to fall from 38,800 in 2013 to 34,500 in 2014. However, a fall in absorption is expected to be complemented by a sharper drop in the number of new launches during the year. New launches are estimated to decrease by 21% from 45,370 units in 2013 to 35,840 units in 2014.
Comparing the absolute numbers of absorption and new launches on an annual basis is not sufficient to understand the health of a market or its impact on price. Since demand and supply are influenced by various other independent factors, such as economic growth, market sentiment, interest rate and income growth, among others, an annual rise or fall in demand and supply could be misinterpreted as a sign of a strong or weak market. Hence, with the aim of removing seasonality from the data, we have analysed the long-term moving average (eight quarters) trend in absorption and new launches.
The following chart clearly indicates a falling trend in both absorption and launches since June 2012. Interestingly, the rate of fall in new launches is far greater than the fall in absorption since December 2013. The correction in the market has been led primarily by developers who have refrained from launching new projects during the last six months after witnessing a decelerating trend in sales volumes for over two years in a row. While the analysis of absorption and new launches could provide a fair idea with respect to the traction being witnessed in the market, the impact on price cannot be understood without studying the unsold inventory available in the Pune city.
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