Affordable housing will remain the dominant segment in the coming years with a total of 10 million PMAY (U) units to be delivered by 2020 itself. However, what about luxury housing?
In its pursuit to provide Housing for All by 2022, the government has launched several buyer-friendly schemes to push homeownership among Indians. Measures such as awarding industry status to affordable housing, bringing down GST rates and increasing tax deduction limits for interest payments on home loans for affordable housing have made property purchases in this segment more lucrative.
Latest PropTiger data, for instance, shows that nearly 88,000 housing units, priced below Rs 50 lakh, were sold in India’s nine key property markets in the first six months of this year. However, “it is interesting to note that the share of luxury homes is also significant in the overall sales numbers. Nearly 44,000 homes sold between January-June 2019 were priced between Rs 50 lakh and Rs 1 crore and almost 26,000 units sold during this period were priced at over Rs 1 crore,” says Dhruv Agarwala, Group CEO, Housing.com / PropTiger.com / Makaan.com.
This data supports the fact that the growth of affordable housing would continue to be strong in India with its large population. But at the same time, rising income levels among the country’s working-class and entrepreneurs would also support demand in the luxury segment. On the one hand, the depreciation in property value in real terms has made luxury properties more affordable to Indian HNIs, while on the other hand a weak rupee has made it more lucrative for NRIs.
“That is precisely why several big developers have launched new luxury housing projects this year to cater to the rising demand. These include Kalpataru Group, Wadhwa Residency, Baashyaam Constructions, M3M India, Aparna Constructions, Juneja Heights, among others. In fact, this unique situation of rising sales in the affordable segment and healthy demand in the luxury segment is typical for a developing economy,” says Agarwala.
According to a recent CREDAI-CBRE report, affordable housing will remain the dominant segment in the coming years with a total of 10 million PMAY (U) units to be delivered by 2020 itself.
Pradeep Aggarwal, Co-Founder & Chairman, Signature Global, and Chairman, ASSOCHAM National Council on Real Estate, Housing and Urban Development, says, “The government is focusing more on affordable housing as the mission is to deliver ‘Housing for All by 2022’. Steps being taken by the Central as well as various state governments point to the fact that the target will be achieved by the end of the term of this new government. Focus is already on affordable housing and that is the reason there are so many schemes floated to help fill the demand gap.”
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For example, Haryana currently has two policies related to affordable housing — Haryana Affordable Housing Policy and Deen Dayal Jan Awas Yojana. More such schemes by the government are expected and if not new schemes, there might be improvements in these schemes to make sure that the affordable houses are delivered to the target buyers. “In fact, the first quarter of FY19 has seen a rise of more than 55 per cent in housing sales. It is an indication that the buyer trust is coming back and hence a positive impact has started trickling in which will go a long way in transforming the real estate sector,” adds Aggarwal.
Vikas Garg, Deputy MD, MRG World, says, “Multiple sops by the government have led to an increase in sales and supply in the first quarter itself. The NCR region is on top in the number of units added in the affordable housing segment, accounting for 30% of the total supply in major cities. While the entire region is doing good, Noida and Greater Noida are among the front runners and can be counted among the few pockets in NCR that are the favorite of buyers.”
Luxury housing, as it is widely known, took the hardest hit after the demonetization of the high-value currency notes in 2016. As a result, property developers restricted new supply in the luxury segment across the top seven cities. ANAROCK Property Consultants’ recent research, however, indicates that while the affordable and mid-segment housing continued to dominate the overall supply in the first half of 2019, luxury and ultra-luxury housing segments also saw a resurgence. In fact, new luxury housing supply has tripled over the last two years since DeMo.
Dhiraj Jain, Director, Mahagun Group, says, “Having remained in a wait and watch mode for long, buyers are back in the market again and are hunting for good luxury properties. Then there are NRI buyers who buy luxury property mainly because of good ROI or the high standard of lifestyle that a piece of luxury property provides in case they decide to live in here. Notably, as per the latest trend, most of the NRIs are buying property for their personal use. This, however, does not rule out the lure of good capital appreciation as it always plays on the minds of buyers and luxury does provide good appreciation. Another reason for their interest is the fact that the prices of luxury property are at an all-time low currently and developers are providing good deals to the potential buyers.”
Developers say that demonetisation led to a major change in the entire economy, particularly in the real estate market. Earlier, the market was investor-driven, but post demonetisation it has become end user-friendly. Thus, all developers are basically offering products as per the demand.
“While the mid-segment housing still offers a bit of investment opportunity, luxury housing is being purchased by end-users only. With high disposable incomes, Delhi along with Mumbai has always been the biggest market for luxury housing. There are ample indications that the demand for luxury housing is reviving. Needless to say, this presents a great opportunity for developers like us, and we are eagerly looking at the segment with great deal of optimism and surely NCR is set to become the next luxury market destination,” says Yukti Nagpal, Director, Gulshan Homz.