Even though the new launches of affordable housing units fell 20% in Q2 2019, its share in new supply (overall) is the highest at 37%.
Despite high demand for affordable houses across major cities like Delhi-NCR, Mumbai and Bengaluru, the launch of new affordable housing units witnessed a steep 20% drop quarter-on-quarter (q-o-q) in the April-June calendar period. During Q2 of 2019 calendar year, the new supply fell to 25,580 units compared to 32,060 units in Q1 2019.
Real estate consultancy Anarock, in its latest report, said, “Even as budget homes have been in high demand in major cities, builders are finding it challenging to build houses in the incentivised Rs 45-lakh budget range. The hope that government would revise the price definition of affordable housing in the top cities has remained unfulfilled. For a city like Mumbai metropolitan region (MMR), a budget of Rs 45 lakh is far too low.”
The residential real estate space remained largely tepid during the second quarter of 2019 on account of general elections and housing sales fell 13% q-o-q to 68,600 units across the top seven cities. Overall, new launches witnessed a 2% quarterly decline to 69,000 units. However, the recent Budget sops for the affordable sector may give the much-needed push to the segment, Anarock said.
Even though the new launches of affordable housing units fell 20% in Q2 2019, its share in new supply (overall) is the highest at 37%. Anuj Puri, chairman of Anarock, explained that sales and new launches usually reduce before and during the general elections. However, on a yearly basis, housing sales jumped 12% in Q2 2019 over Q2 2018, while new launches increased by 36% during the same period.
He said the 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 spur builders to increase their supply in this category so as to attract first-time homebuyers. An increase in supply in this category in the coming quarters is anticipated.
“Paradoxically, however, the prevailing high 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,” Puri added. Analysts agree that the recent Budget sops will provide a push to the affordable housing category, whose share in overall residential real estate is rising with every quarter.
According to Kinght Frank’s latest half-yearly report on real estate in India, the regulatory environment is helping boost market volumes. The spurt in demand for affordable housing pushed up overall residential sales in January-June period, recording steady 4% y-o-y growth in sales to 1.33 lakh units. Similarly, launch of new units rose 21% y-o-y to 1.07 lakh units.
Around 51% of the launches during H1 2019 have occurred in the ticket sizes under Rs 5 million, or around Rs 50 lakh and 78% under Rs 10 million, or Rs 1 crore as developers keenly focus affordable housing and lower ticket size as they are demand appropriate, it added.