Urban housing demand in India expected to grow by 15 million units by end-2019
Demand for urban housing in India is expected to grow by nearly 15 million units by 2019 with the top eight cities contributing 3.4 million units to the number. For Delhi NCR, which is among the top eight, this will mean 872,000 units spread across NCT, Gurgaon, Noida, Ghaziabad and Faridabad, a report titled India Real Estate – Resurgence on the Anvil has revealed.
Demand in the major cities will be driven by the middle income group (MIG) accounting for a 41% or 1.4 million units in absolute terms by the end of 2019, according to the report, which was released by real estate consultants Cushman and Wakefield in association with Global Real Estate Institute (GRI). The low income group (LIG) category will also contribute 1.3 million units in the top eight cities during the same period.
Demand is expected to outstrip supply by roughly 2.5 times, a quarter of this demand likely to be contributed by Delhi NCR.
Commenting on the report, Sanjay Dutt, managing director, India, Cushman and Wakefield, said, “While the forecasts are in favour of demand, rather than supply, in the coming years, the ground reality today is that there is a perceptible supply overhang – residential stock not translating into sales. In order to push sales, developers have offered attractive schemes which, when translated to the final price paid by the end user, translates to a discount. Despite these attractive schemes offered by the developers, the supply overhang continues to bother the sector.”
Dutt also added that office space was showing clear signs of revival, something which was likely to have a trickle-down effect on the residential segment. The recovery for residential will largely be visible in terms of an uptick in the sale of units across cities. “While we expect the situation to remain ‘status quo’ during 2016, the impact of these developments will gradually set in towards end of 2017 or early 2018. Before we see an upward movement in prices, the sales uptick will improve,” he said.
Despite the fact that a large part of this demand is expected to come from the LIG category, affordable housing has not been successful in India owing largely to several challenges such as high cost of land, lack of infrastructure where land available is cheap and low return on investments which makes undertaking such projects unattractive for the developers.
During 2015-19, Delhi NCR, Mumbai and Bengaluru will be the top three contributors, together accounting for 60% of the total incremental demand. The top two cities with the highest gap in demand and supply are Hyderabad and Chennai. with a gap of 83% and 76%, respectively. Delhi NCR was likely to witness a relatively lower gap in the MIG segment as compared to the other cities while Mumbai for all purposes would continue to witness a surplus in the HIG segment, the report added.