How are real estate developers dealing with unsold inventory?

The developers are leasing the unsold inventory to corporates in order to improve the sales

The real estate sector has seen many ups and downs since the call for demonetization, it has also seen various reforms in the form of the RERA, which has led to the huge inventory pile up alongwith slow sales and a drop in property prices. The property prices are expected to remain the same in the coming months. In such cases, the real estate developers have started leasing their sold and unsold inventory in their ready to move in projects, to ensure that the area becomes livable and it also helps them sell the unsold units faster. The developers have seen a shift in the investor behavior over the past few months. It has been noticed that the rental model is gaining traction, which enhances the saleability of the residential units because the investors are ready to buy already leased properties since it will fetch higher returns. 

Since the market is slow, the developers want to avoid creating ghost towns, hence the preferred option is to lease out the units. The supply is more than the demand and the developers easily get a rental yield of 4% to 6% in addition to the unsold units being sold out faster. For those investors who are not interested in residing in the project, the leased out properties work as an ideal investment option. The developers usually lease out the apartments to companies who are always on a look out for studio apartments for their staff. The developers maintain the property and also ensure that the property matches the requirements of the individuals.

This concept is a great way of enhancing the saleability of the projects. The product offers immediate returns and allows quick selling of unsold housing stock. There is a lull in the market in terms of new launches. It has been recorded that the top 8 cities witnessed a lower residential launch as compared to the previous year. A closer look indicates that launches have seen a steady quarter on quarter decline for the last one year corresponding to the announcement of RERA followed by the announcement of demonetization in November 2016. Launches across the residential sector has declined by 8% in the last one year. Also, the unsold stock across the eight cities in the Country has gone up by a large extent, Mumbai has seen a fall in the real estateprices and many cities have had an impact on the real estate sector.

In order to generate earnings on their projects and to liven up the area, developers are renting out properties. Leasing is a much better option than to keep the project idle. As more and more people move into the project, there is a faster traction and the housing stock sells faster. The aim behind the same is to see the traction improving rather than the generation of revenue.