Builders reducing size of housing units to improve affordability for homebuyers
The ticket size of new residential launches across top eight cities has seen an average decline of 14% year – on – year.real estate Updated: May 06, 2017 21:13 IST
The ticket size of new residential launches across top eight cities has seen an average decline of 14% year – on – year (y-o-y). This was a consequence of many developers recalibrating their market strategies that involved reducing effective cost of their property and restricting the number of new launches in order to reduce their inventory holding, says a new report by Cushman & Wakefield.
In accordance with the market sentiments, the total number of new housing units declined during the year by 11% to approximately 113,000 units. Of this, mid housing segment accounted for 56% of the total unit launches followed by value housing segment at 32%. On a y-o-y basis, value housing segment noted an increase of 22% to more than 36,300 units.
The high-end segment, on the other hand, was impacted the most, wherein launches almost halved to 12,000 units during the year.
In most cities developers have sought to rationalise ticket sizes especially in the high-end and luxury segments, which has been hit the most.
“The government has been resilient in its efforts to create affordable housing and achieve its target of Housing for All by 2022 and is taking steps to build in benefits for developers to participate. Post demonetisation, markets have witnessed a slow uptake of residential properties on account of price and value mismatch. Consequently, developers are also relooking at their strategies to create better value for homebuyers,” says Anshul Jain, managing director, India, Cushman & Wakefield.
“In terms of projects that have already been launched and where units remain unsold, developers are offering discounts and schemes to decrease their inventory and these schemes will continue for a while till the markets finds a balance. Further, the ticket values of new units being launched may see some change this year, as many developers are working on lowering these to increase the affordability of their units by either offering attractive prices or smaller units. This, along with reduced bank loan rates are expected to create some velocity in the sales by the end of the year and going into the next year,” he says.
All segments in Delhi-NCR witnessed a drop in ticket size in 2016 owing to slow sales velocity and subdued market sentiments. The steepest drop was seen in the high-end segment wherein ticket size of newly launched units in 2016 declined by 62% to R2.5 crore. The drop in ticket size came on the back of lower average launch prices, as well as smaller sizes of units launched. During the year, developers launched projects at relatively less-expensive locations in Noida and Greater Noida, as compared to 2015 when launches were seen in more premium locations of Golf Course Road and Golf Course Extension Road. This resulted in the average launch price declining 40% at Rs 9,000 per sq ft during 2016. Overall, the average size of newly launched units too declined by 37% to Rs 2,800 per sq ft, which brought down the average ticket size.
The value housing segment’s ticket size dropped 17% to Rs 36 lakh in 2016. The fall in average ticket size comes primarily due to lower average unit size of 1,200 sq ft.
In Mumbai, the average ticket size of mid segment fell by 14% to Rs 1.12 crore as developers focused more on offering apartments of smaller sizes, as well as launching projects at marginally lower prices. Average size of newly launched units in 2016 in Mumbai reduced by 10% to approximately to 960 sq ft. Further, developers launched mid segment projects in the western suburbs of Malad, Kandivali and Borivali, at lower-than-average prices, in order to push sales. Also, launches at Ulwe, Seawoods, Kharghar in Navi Mumbai during 2016 were at an average 5% lower than other established markets in the vicinity.
The value housing segment saw the ticket size increasing by 26% to Rs 34 lakh as demand in this segment remains strong. This was led by both, an increase in size as well as an increase in average launch price. Category B developers offered 1.5 and 2 BHKs in peripheral locations such as Panvel, Ambernath, Mira Road under the value housing segment category.
However, developers in Mumbai raced ahead to launch projects during the year, with some large projects launches by reputed developers in the city. Therefore, launches in the mid segment more than doubled to 18,700 units, while overall launches increased by 58% to 24,900 units.
Launch of new units in Bengaluru declined by 42% to 17,300 units during 2016, partly due to delays in receiving completion certificates on account BBMP’s drive to clamp down on encroached land and partly due to muted demand in the high-end and luxury segments, as well as anticipation of new rules under RERA, which has forced developers to postpone new launches. Only the value housing segment saw a surge – up 21% as 6,460 units launched during the year.
The value housing segment in Bengaluru witnessed a 23% decline in ticket size of new launches to Rs 39 lakh, mainly due to lower sizes offered by developers, to push sales in the market. The average unit size declined 19% to 1,000 sq ft during 2016, while the average launch price fell 5% to Rs 3,800 per sq ft. Locations of Sarjapur and Bommasandra in south, accounted for 34% of total value housing launches in south and south-east in 2016 as they offered relatively smaller units.