by Anushree Ghosh
Analysing the annual growth of residential real estate in India.
Since half a decade the real estate industry is going through the prolonged phase of slothfulness. The stagnancy has especially cursed the residential real estate sector of India as it remains intact even after 6 years of struggle. In the country’s top 10 metro cities such as Mumbai, Chennai, Hyderabad, Kolkata, Chandigarh, Pune, and so on the absorption of the new home has tripped at CAGR of 8% in last 6 years. Thus, a large number of houses still continue to exist unoccupied. It is estimated that clearing the inventory would take many months.
According to the July report of Kotak Securities Ltd, “Across all metros, launches remained the lowest in Delhi NCR with only 1 million sq. ft. released in July 2018 in peripheral regions of Ghaziabad and Greater Noida. Net unsold residential inventory in NCR stood at 243 million sq.ft. as of July 2018 and is equal to 63 months of sales (based on average sales of trailing 12 months).” Sales of residential properties increased by 25 % in the 1st half of 2018 to 64,080 units, in Hyderabad and Kolkata.”
Among all, the affordable housing segment has been in more demand. The government’s policy for promoting the sale of affordable housing is a great boost for the sector. Cities like Mumbai and Bangaluru observed the major residential launches. Bengaluru contributed 20-22% to the total number of new projects in the last 3 years, while Mumbai was at 31%.
Although the condition improved, with respect to last years’ sales – most of the projects are RERA registered now, the purchase decision is majorly taken by the buyer. Introduction of RERA in the Indian real estate market changed the whole equation. Now, the developers are bound to offer the total cost that must include everything. Therefore it is much easier for the buyer to make a decision due to the increased transparency. Developers tried to attract potential buyers with discount schemes and impromptu possession offers. The added advantage was the ready availability of bank loans at cheaper interest rates.
We believe with the reforms in the real estate sector, transparency is bound to increase many folds; which would be beneficial for the buyers and developers. And with this steady growth rate, new segments like geriatric care houses and co-living spaces could see a rise in demand. The unorganized market is expected to curb the unoccupied places of tier-2 cities like Kota, Indore, Dehradun and Hyderabad where land prices are still considered affordable, and where a large number of people migrate for educational or work. The government needs to further act on it to stabilize the sector and generate employment. More workable options of lease-only models and aggregator could get a push. Operators like Yourspace and Indecampus could attract investors if they exhibit a sound vision to the investors.