New Delhi: The euphoria over affordable housing, which became the mainstay of real estate developers during the economic crisis as they struggled to find buyers, may be over as there are few takers for houses in that segment, according to a report released by PropEquity, a real estate consultant.
“Post the initial euphoria during early 2009, affordable segment has witnessed a gradual decline in absorption levels. However, these levels stand closer to sustainable levels,” the report said, adding that the mid-segment—defined as houses in the price range of Rs30-75 lakh—is a major contributor to the increased sales, surpassing in certain cases the absorption in the affordable segment.
“New launches in the coming months would be in the higher price range. Apart from the affordable housing, there is also a genuine demand for the mid-housing in the market,” said Samir Jasuja, managing director, P E Analytics Pvt. Ltd.
The report takes into account prices, launches and absorption levels in the residential real estate segment over a period stretching from third quarter of 2008 to the first quarter of 2010, covering a total of 13 cities.
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According to Shveta Jain, director, residential services, at international property consultant firm Cushman and Wakefield India, there is significant demand seen in the metros for mid-end housing vis-à-vis affordable housing. “Due to the aspirational values embedded in the working population of metros, it leads them to stretch their budget and seek better housing complexes,” she said.
The report added that cities such as Gurgaon, on the outskirts of New Delhi, and Mumbai witnessed a decline in unsold inventory, indicating a revival after the slump in the market. However, while there has been a regular supply of units in the affordable and mid-housing range between the last quarter of 2009 and first quarter of this year, absorption levels have been low in most cities.
For instance, Mumbai alone got a supply of 1,812 units across the affordable and mid-housing categories during the period between the fourth quarter of 2009 and the first quarter of 2010. But sales declined to 2,474 in the first quarter of this year from 4,396 units in the fourth quarter of the previous year. Gurgaon, too, saw a dip, despite a healthy supply of 4,892 residential units over the last two quarters. Sales declined to 3,635 units in the last quarter compared with 5,642 units in the fourth quarter of 2009.
The only exceptions to this trend were Noida and Greater Noida markets in the National Capital Region centred on New Delhi. The Noida market witnessed the highest supply by the end of the last quarter. The market received 20,693 units in the past two quarters alone, the report said. However, it witnessed a significant increase in the absorption, of 967 units.
Sanjay Dutt, chief executive officer, business, at global property consultant firm Jones Lang LaSalle Meghraj, added that people during the slump lost confidence on the job front and the real estate market. “But after a dormant phase, actual homebuyers are back in the market with more cash and spending capacity,” he said.
On the price movement, the report said the Mumbai Metropolitan Region witnessed an upward trend in the average transacted prices in the affordable segment while prices in the Delhi-National Capital Region market remained stable or witnessed a minor correction resulting in areas such as Noida seeing a higher absorption. On the other hand, cities such as Chennai and Bangalore have recorded minor upward pricing trends despite high levels of unsold inventory.
The reasons for the shift from affordable to mid-housing segment are reduced home loan rates and better incentives in terms of discounts, said the report.
Graphic by Naveen Kumar Saini/Mint