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Doubts rise over housing demand revival

Developers upbeat on festive demand as Crisil believes revival unlikely in a year

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Real estate developers may be upbeat on the revival of sales beginning with the festive season, but Crisil Research in its latest report has stated that revival of housing demand is unlikely for another 12-18 months.

Among the reasons given are affordable rentals, high property prices, low investor community participation, increase in job losses, risks associated with under-construction projects and developers losing focus away from affordable housing segment. Despite a favourable policy framework currently available, end-users continue to be fence-sitters as they await effective implementation of the new real estate act, Rera and new launches in the affordable housing segment.

“To be sure, absorption of new homes has been on a slide for over six years now. Our analysis shows home sales in the top 10 cities – Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai Metropolitan Region, National Capital Region and Pune – have declined at a compound annual growth rate of 8% since 2011. The trend appears set to last well into fiscal 2019 or beyond, portending more pain for developers,” said Crisil Research in the report.

According to the report, respite is unlikely in near future as investors are out of the market and end-users continue to wait for the right opportunity. In fact, it is the affordable housing segment for which demand is in focus and not premium residences that the developer industry had been focusing on for years now. Therefore, the prices will hover at the current levels on account of weak demand and moderation in new supplies.

“I disagree with their report. Post-Rera and GST implementation, buyers are coming forward. There’s festive mood in the market, thus demand is picking up starting this month. If things go the way sales are picking up, we may even reach our peak in another six months,” said Mayur R Shah, managing director of Marathon Group, and president, Credai - MCHI.

Shah, however, agreed that the thrust should be affordable housing and not premium or luxury residences as there’s a market for lower priced homes, in order to reach the peak in sales and revenue.

Agreeing with him is Surendra Hiranandani, chairman and managing director of House of Hiranandani. "The implementation of Rera has seen a deceleration in new launches, but the demand for well-thoughtout products continue to be robust in the market. Owing to the ongoing transformation, developers have been offering attractive rates and payment plans to draw potential buyers. So, for consumers, this seems to be an ideal time to secure great deals, especially on ready to move-in projects. The demand is also expected to pick up because of the reduced availability of under construction homes owing to pending Rera registrations.”

Hiranandani added large volumes of sales of under construction homes in the affordable segment have begun, while the demand is higher for ready to move in properties in the mid and luxury segment.

SINKING IN THE GROUND

  • Crisil’s analysis shows home sales in the top 10 cities have declined at 8% CAGR since 2011
     
  • Post-Rera and GST implementation, buyers are coming forward. There’s festive mood in the market. Demand is picking up starting this month
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