Ur­ban hous­ing de­mand in In­dia ex­pected to grow by 15 mil­lion units by end-2019

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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.

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