A recent interaction with a group of residential sales executives made me believe that residential sales are slow in the first half of the year because the first quarter is synonymous with academic exams while the third quarter sales suffer because of the monsoon season and Pitru Paksh, which is considered an inauspicious period for new beginnings. However, sales generally pick up in the fourth quarter because of the various festivals, which are considered auspicious for purchasing a new house. With a visible increase in new launches and marketing activity, the fourth quarter should be contributing a significantly bigger share to the annual absorption of residential units. However, when I actually checked the primary residential absorption numbers for the past few years, they revealed a contrasting story:

Source: JLL (Real Estate Intelligence Service)

A look at the demand for residential real estate during the past five years shows that in contrast to the general perception that a majority of sales happen in the second half of a year, the absorption is largely the same in both halves. A weighted average of the past five years shows that the first quarter attracts the highest number of deals at 27% while the fourth quarter, i.e. the festive season, attracts 25%, which is at par with the average.

While I do not contest the fact that the hypothesis could have been valid in the pre-2010 period, to say that it is valid today is wrong. That is mainly because of the following reasons:

• Average age of home buyers has come down from mid-50s to mid-20s. The younger generation prefers to take an informed decision and focuses on better bargaining opportunities rather than the auspicious days to purchase property.
• The service industry is growing fast and now contributes over 55% of India’s GDP. A larger part of this industry announces salary hikes and bonuses in the second quarter compared to the manufacturing and trading industry, which announces bonuses during Diwali which falls in the fourth quarter.
• Many people belonging to the upper-middle and high-income groups plan their investments during the first quarter, for effective tax management purposes.

In short, the trend has changed and the seasonal impact on housing demand is a thing of the past. So, if the first half has not seen good business, expecting the other half to cover the deficit will be nothing but a false hope. In such a case, are developers overestimating the impact of the festive season?

Login

Label

Name*

Email*

Website

Company

Label

Name*

Email*

Website

0 Comments

Inline Feedbacks

View all comments