Sales in the affordable housing segment have taken a beating in 2022 as high-end and mid-segment housing gained share owing to lower-priced units, indicating some impact of deteriorating affordability in the price-sensitive segment.
The share of sales for units below Rs 50 lakh category witnessed a decline from 42% in July-December 2021 to 35% in July-December 2022, according to Knight Frank India’s report for the second half of 2022. The growth in share of sales in the Rs 50 lakh to Rs 1 crore segment also remained moderate with a 200 basis points increase from 35% in the second half of 2021 to 37% in July-December 2022.
In contrast, units above Rs 1 crore witnessed a sharper growth and gained 500 basis points to 28% in July-December 2022 from 23% in the same period last year.
“This momentum is the result of a definitive shift in attitude in favour of home ownership that has ignited the latent demand. The shift is so strong that despite some worsening in affordability on account of rising home loan interest rates, sales momentum has remained buoyant,” said Shishir Baijal, chairman and managing director, Knight Frank India
Premium segments of residential real estate have performed better as compared to the affordable segment, reflecting the stress on lower end segment of homebuyers, like the other consumer segments where the mass categories are feeling the inflation pressure.
Last week, JLL India also highlighted that the share of the affordable segment in annual sales in 2022 has declined as compared to the previous year. The consultant highlighted that almost half of the sales witnessed in 2022 came from apartments in the price bracket of up to Rs 75 lakh. The sales momentum also remained strong in the premium segment as apartments in the Rs 1.5 crore plus price tag had a share of 19% in the overall sales recorded in 2022.
The affordability synergy that was prevailing six months back has been facing some challenges. There has been a rise in residential prices across the top seven cities of India in the range of 4-11% year-on-year along with home loan interest rate that has moved up by around 200 basis points in the last seven to eight months.
The real estate industry is now also demanding that the government increase the price cap of affordable housing in the upcoming Budget to Rs 75-80 lakh from the current Rs 45 lakh. The demand is particularly for metropolitan cities where delivering houses of below Rs 50 lakh is difficult due to high cost of construction and land.
However, the strong uptick in sales in other categories brought the quarters to sell (QTS) level down to 7.2 quarters from 10.2 quarters in H2 2021, according to Knight Frank.
Overall, the calendar year 2022 witnessed good sales momentum with over 3.12 lakh residential units sold across top eight cities of India registering a growth of 34% year on year—a nine year high.
Encouraged by the sales velocity, launches also saw a commensurate rise in 2022. A total of 3.28 lakh units were launched across the eight markets registering a rise of 41% y-o-y. Mumbai remained the largest market by volume both in terms of sales of 85,169 units as well as new launches, followed by National Capital Region (NCR) with 58,460 units sold and Bengaluru, which sold 53,363 units. Apart from Kolkata, that saw a slowdown in sales of residential by 10% y-o-y in 2022, all markets registered growth in both sales as well as new launches.
In terms of 12-month residential price change, Mumbai, NCR, Bengaluru and Pune registered increments of 7% each. Chennai and Hyderabad witnessed a significant increment of 6% while Kolkata and Ahmedabad witnessed an increment of 4%.