New Delhi: Aboom in so-called affordable housing seems to be turning into a bust before it really took off, as data released by a realty research firm show that sales of houses priced between Rs5 lakh and Rs30 lakh have dropped in the past three-four months, leading to an inventory pile-up and a possible price correction in the near future.
Developers launched a slew of affordable housing projects after the realty market crashed last year. It now seems that they may have miscalculated the demand for affordable housing, just as they did for premium housing.
According to findings of a report by PropEquity Research, the decline in sales of affordable homes started from the July-September quarter.
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“The decline in rate of absorption coincides with a hike in home prices by developers, which we think has impacted sales,” said Sameer Jasuja, chief executive of PropEquity.
The study surveyed 13 cities for a year starting July last year. As many as 106,008 apartments in the Rs5-30 lakh range were launched across India during the period, of which 48,826 have been sold, showing a 46% absorption rate.
Pune had the highest launches with a supply of 13,971 residences in the period, followed by Gurgaon in Haryana with 11,388 and Mumbai, with 11,098.
Pune also had the highest absorption at 7,043 units, followed by Gurgaon at 4,426.
Developers in Mumbai and Gurgaon have increased prices by 10-15% in the last three months as home sales picked up.
Adding a caveat, Shruti Gupta, country head of property consultant Hamptons International (India) Pvt. Ltd, said that demand still outweighs supply in affordable housing.
But demand has come down in the past six months because developers have raised prices, she said. Property developers, however, disagreed with the report’s findings.
“In Mumbai, developers have increased prices but there are no affordable homes in Mumbai. Homes there are all at Rs50 lakh and above, while in Gurgaon, the price increase of homes in the primary market (new launches) has been marginal, between 3-5%, mostly to take care of cost inflation. I don’t think the price increase has impacted volumes,” said R. Nagaraju, general manager, corporate strategy and planning, Unitech Ltd.
“Absorption levels are healthy. We are selling 1.5-2 million sq. ft a month,” he said.
Graphics by Yogesh Kumar / Mint