Despite a favourable policy framework, end users continue to be fence sitters as they await effective implementation of RERA and new launches in the affordable housing segment.
Absorption of new homes declines in last six years…
The real estate sector in India has been witnessing prolonged sluggishness over the last 6-7 years. Absorption of new homes in top 10 cities (Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai Metropolitan Region (MMR), National Capital Region (NCR) and Pune) has slipped at a compound annual growth rate (CAGR) of 8% in the last six years. The sector has witnessed a decline in area booked and area launched over the last few years. Developers have been majorly focusing on mid-category/luxury/premium housing projects. This has created a wide gap in demand-supply dynamics, resulting in pent-up demand for affordable housing units and a huge unsold inventory of unaffordable units across most micro markets. Respite is unlikely in near future as investors are out of the market and end users continue to wait for the right opportunity.
…Trend unlikely to change for at least 12-18 months
Pressure on residential real estate prices across top 10 cities was clearly visible during H1 2017. While several developers offered upfront per square feet discounts, a few large developers bundled financing schemes and reduced interest schemes to offer ‘all inclusive house prices’. Home buyers, in many cases, were also offered indirect benefits such as reduced floor charges or premium location charges. Taking into account these aspects, the effective price correction was 5-10%.