Though there have been mixed views from different research reports on the real estate segment in India, the overall scenario seems that the sector is yet to pick up steam in India. A report by Anarock Property Consultants says that the housing absorption has declined by around 13 per cent in Q2 of 2019 and stood at 68,600 units across the top 7 cities. At the same time, the unsold inventory maintained its status quo at 6.65 lakh units. According to the Anarock report, Hyderabad, Bangalore and Pune saw the maximum drop in the housing sales at 18 per cent, 16 per cent and 15 per cent respectively. MMR (Mumbai Metropolitan Region) and NCR saw a dip of 11 per cent and 8 per cent, respectively.
However, there are indications that housing sales will pick up now since there is a stable government. “Housing sales and new launches usually reduce before and during the general elections period. However, on a yearly basis, housing sales jumped up by 12 per cent in Q2 2019 over Q2 2018, while new launches increased by 36 per cent during the same period. Going forward, with a stable government in power, residential activity is likely to pick momentum in the coming quarters. Though new launches saw a 2 per cent quarterly decline in Q2 2019, and affordable housing supply fell by 20 per cent against the previous quarter, the luxury category (priced Rs 2 crore to Rs 5 crore) saw supply increase by 60 per cent, led by Hyderabad and NCR,” observed Anuj Puri, chairman, Anarock Property Consultants.
Interestingly, the Anarock report found that the affordable housing saw a quarterly decline of total new supply by a significant 20 per cent from 32,060 units in Q1 2019 to 25,580 units in Q2 2019. The report says that despite high demand for budget homes in the major cities, builders find it challenging to build housing in the incentivised Rs 45 lakh budget range. The hope that the government would revise the price definition of affordable housing in the top cities has remained unfulfilled.
For a city like Mumbai, a budget of Rs 45 lakh is far too low. It is also expected that the government’s budget 'bonanza' for affordable housing—an additional Rs 1.5 lakh income tax deduction on interest paid on home loans availed till March 2020—will incite builders to increase their supply in this category so as to attract first-time home buyers. Thus there may be an increase in supply in this category in the coming quarters. The major challenge in this category is that the property prices within the municipal limits of the major cities prevent builders from launching affordable housing projects there, while lack of basic infrastructure facilities in the peripheral areas where housing within Rs 45 lakh could be developed discourage buyers to buy these affordable homes.
On the other hand, Knight Frank India in its half-yearly report on India Real Estate said residential unit launches in H1 2019 increased by 21 per cent year-on-year (YoY) to 0.11 million units while sales grew 4 per cent YoY to 0.13 million units. The report says residential market witnessed growth in supply as well as sales for the third consecutive half year period, both hitting their high since demonetisation during H2 2016. The report also says that the H1 2019 saw the launch of new units increased by 21 per cent YoY to 107,143 units while sales grew by a steady 4 per cent YoY to 133,317 units. The report also says that 51 per cent of launches during H1 2019 had occurred in the ticket sizes under Rs 50 lakhs and 78 per cent under Rs 1 crore as developers’ keenly focus on affordable housing and lower ticket sizes to be demand appropriate.
The Knight Frank report also observed that the average prices had stagnated across cities with Mumbai, Pune and Chennai seeing prices fall of 3 per cent, 4 per cent and 3 per cent YoY, respectively. During the last four years, the growth in residential prices in most of the top eight cities of India had been below retail inflation growth and the gap has progressively increased since H1 2016. This report also observed that unsold inventory across top eight markets recorded a decline of 9 per cent YoY in H1 2019.
