Residential demand unlikely to improve in 12-18 months

MUMBAI: Even as the number of project launches is likely to rise in the affordable housing category in the next few quarters, the demand for residential property is unlikely to revive in the next 12-18 months, says Crisil.

According to the rating agency, the demand is unlikely to revive in the next 12-18 months as the fundamental problem of lack of end-user buyers is unlikely to change any sooner.

Crisil's analysis shows that home sales in the top 10 cities like Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai metropolitan region, NCR and Pune have declined at a compound annual growth rate of eight per cent since 2011.

"The trend appears set to last well into fiscal 2019 or beyond, portending more pain for developers," it said.

Crisil said high property prices have turned end-users into fence-sitters in most micro markets. Also, concerns over job losses and lack of employment opportunities is curtailing income visibility required for a housing loan, which is typically for a long tenure, keeping away buyers.

According to the agency, rentals are being preferred to buying a property and many nuclear families are opting for rental accommodation in suburban locations than purchasing a house in a peripheral micro market.

"There are risks associated with delivery of under-construction projects, especially delays in getting possession from the developers, which deter buyers," it said.

The agency further said participation of the investor community has reduced significantly on account of falling returns on the asset. Crisil Research Senior Director Prasad Koparkar, however, said the next few quarters will see more launches in the affordable housing category, or projects with smaller configurations, leading to a reduction in the overall ticket size.

"That, along with falling interest rates and supportive credit-linked subsidy framework, will benefit end-users because affordability improves. We are also seeing prices hovering at current levels on account of weak demand and moderation in new supplies," he added.