Demand for housing likely to go up to 42 lakh units for 8 cities in 5 years | real-estate | Hindustan Times
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Demand for housing likely to go up to 42 lakh units for 8 cities in 5 years

Delhi-NCR (NCT, Ghaziabad, Faridabad, Gurgaon and Noida) continues to garner the highest proportion of demand (24%) at around 10 lakh units by the end of 2020

real estate Updated: Nov 30, 2016 16:48 IST
Delhi-NCR (NCT, Ghaziabad, Faridabad, Gurgaon and Noida) continues to garner the highest proportion of demand (24%) at around 10 lakh units by the end of 2020.
Delhi-NCR (NCT, Ghaziabad, Faridabad, Gurgaon and Noida) continues to garner the highest proportion of demand (24%) at around 10 lakh units by the end of 2020. (Burhaan Kinu)

The total demand for urban housing is estimated at 42 lakh units during 2016 to 2020 across top eight Indian cities, says a report by Cushman & Wakefield and GRI entitled Revitalising Indian Real Estate: A new era of growth and investment. Existing under-construction and planned supply of 10 lakh housing units by private developers is also expected to be delivered across top eight cities during the period. Delhi-NCR (NCT, Ghaziabad, Faridabad, Gurgaon and Noida) continues to garner the highest proportion of demand (24%) at around 10 lakh units by the end of 2020.

Lower income group or LIG (below Rs 15 lakh) is the most under-serviced segment. While the demand generated here is likely to be about 19.8 lakh units by 2020, supply by private developers will be limited to barely 25,000 units. Similarly, though the middle income group or MIG ( Rs 15-70 lakh) accounts for 63% of the total housing supply across eight cities between 2016 and 2020 at 647,000 units, the demand is estimated to be a much higher 1,457,000 units.

“At the ground level, despite demand grossly outstripping supply, there is a considerable proportion of unsold inventory in the MIG and HIG categories, which are not absorbed as these properties are unable to demonstrate value for their buyers. Such units fall out of preference either on account of higher-than-expected prices or due to locations. Lack of funds and high land and development costs are the primary reasons for developers not opting for smaller sized units closer to city centres as profitability drastically reduces. Despite encouragement from the government through taxation and funding relief, under the Housing for All 2022 vision, top cities of India have not seen a significant shift in supply for reduced sized apartments within the MIG or LIG. Further, with the recent move to demonetise large currencies in order to crack down on black money, the demand for HIG and luxury housing could temper further. This is expected to propel developers to recalibrate their plans to suit the high demand segments of affordable housing.” says Anshul Jain, managing director, India, Cushman & Wakefield.

“To be able to utilise the opportunity of the shortfall in supply to demand, private developers will need to change their approach and bring in better strategies, systems, technology and funding options. Some international development companies are actively scouting the various local markets to identify the right opportunities for themselves; Indian developers will need to gear up to meet their onslaught and remain relevant and profitable,” he says.

The urban housing demand is the highest in Delhi-NCR across all the three segments among the top eight cities, forming nearly 24% to 26% of the demand in each of the categories. Mumbai and Bengaluru will follow Delhi-NCR and are expected to generate housing demand of about 711,000 and 686,000 units, respectively, over the next five years. While majority of the demand emanates from MIG within Mumbai, LIG accounts for the maximum proportion in Bengaluru. In most of the cities, except Mumbai, developers are currently focusing on MIG with 60% to 70% of the upcoming supply concentrated in this segment.

Ahmedabad is expected to account for around 6% of the cumulative demand between 2016 and 2020 with nearly 92% of the demand concentrated in LIG and MIG.

Among all the top cities, Bengaluru is likely to witness the highest supply catering to the MIG between 2016 and 2020. However, the city is not likely to see any supply catering to the LIG between the five-year period.

In terms of demand, LIG and MIG will account for nearly 80%of supply during 2016-2020. However, MIG and HIG are expected to constitute more than 90% of the upcoming supply.

Hyderabad is likely to witness only 7% of the total supply – lower than Chennai and Kolkata. Interestingly, the supply catering to MIG and HIG is expected to be similar levels in Hyderabad, with developers not likely to concentrate on the LIG segment in Hyderabad.

Among all the eight cities, developers are likely to launch the highest number of units for LIG in Kolkata. The expected supply in LIG in Kolkata accounts for 35% of total supply for the LIG.

Mumbai is expected to follow Delhi-NCR in terms of total housing demand. However, majority of the supply is likely to cater to the HIG, followed by the MIG and the LIG, with supply of housing units catered towards LIG likely to be among the lowest in Mumbai.