By: Anshuman Magazine, CMD, CBRE South Asia
Track2Realty: The residential real estate market across leading cities of the country is unlikely to see any traction before the upcoming festive season, when demand is expected to improve. While buyers have held off purchase decisions in anticipation of lowering interest rates, developers have been waiting for the festive season before launching special schemes and discounts to boost housing sales.
New housing supply confined to affordable segments
New residential projects launched during the first half of the year were largely restricted to the secondary and emerging micro-markets of leading cities. The largest quantum of new launches was observed in the mid-segment and low segment, catering to the rising demand for affordable housing in the country. Most of this housing supply was concentrated in Chennai, the Delhi National Capital Region (NCR), Bangalore and Pune.
Leading cities witnessed dwindling demand from home buyers during the first six months of 2014. Owing to high pricing and lending rates, home buyer preferences remained focused on the secondary and emerging micro-markets of leading cities.
Residential districts across the Delhi NCR, Hyderabad and Kolkata witnessed a slowdown in sales transactions; while the growth of commercial activity and the growing influx of IT professionals pushed housing demand in Bangalore and Chennai. Despite the addition of fresh housing supply in Mumbai during H1 2014, for instance, high property prices and interest rates kept a tight rein on home buyer demand.
Home buyer interest remained largely focused on cost effective suburban markets of Delhi NCR during the first half of 2014. The residential market in Gurgaon saw stability in terms of new housing supply, while Noida remained the preferred housing market for new launches in the affordable and mid-end options. In Bangalore too, new housing project launches were concentrated on affordable and mid-end offerings during H1 2014.
Outlook: H2 2014
Against the backdrop of a stable government at the center, and expectations of faster decision-making and positive reforms, activity in the housing market across leading cities is likely to improve in the forthcoming quarters. Development firms are expected to focus mainly on the completion of under-construction projects.
Additionally, ongoing and planned infrastructure projects are likely to propel the residential investment market forward. To achieve our national vision of providing ‘housing for all by 2022’, investments in the housing segment will need to grow manifold over the next seven to eight years.
In the Delhi NCR, for instance, new policy measures may impact absorption activity in the coming months. The demand for mid-segment housing is expected to be largely concentrated in the emerging micro-markets of Noida Extension, Noida Expressway, Manesar and New Gurgaon. Going forward, these areas are likely to see a spurt in demand for housing in the premium/luxury segment.
Mumbai is likely to witness an increase in new project launches in the mid-end segment during the second half of the year. Suburban locations of the city are likely to remain the main growth areas. Home buyer demand is expected to improve by the forthcoming festive season in Mumbai too, on the back of improved market sentiments and easing of interest rates.
