Forecast 2016: The year of compact and affordable homes

  • Vandana Ramnani
  • Updated: Jan 05, 2016 15:33 IST
Buyers can explore housing options in Ghaziabad, Faridabad, Noida and parts of Gurgaon.

The year 2015 saw the Reserve Bank of India cutting interest rates at least four times and end-users finally taking a decision to buy their first homes, preferably in locations where the projects were nearly complete or ready to move in. Developers also tried hard to meet homebuyers’ expectations by focusing on timely delivery and launching fewer projects.

So, will 2016 be different? One expects developers to be more earnest in right-sizing and right-pricing their offerings. Smaller, yet better-designed and more efficient homes will define the residential market space. The market will also start looking up in about six to 12 months, but it will have to be backed by interest rate cuts, increased demand for commercial spaces and more job creation, which will have a direct impact on demand for residential units.

The year will continue to see only end-users dominating the residential space. Investors will come into the picture as the market picks up in the next six months. The demand is likely to remain robust for value-for-money units in well-developed locations in the NCR. Areas offering units in the Rs 3,000 to Rs 5,000 per sq ft range will attract buyers. Such units will include ready-to-move-in apartments in New Gurgaon, Ghaziabad and Noida Expressway.

Quality and timely delivery will be key for buyers so developers are likely to be more focused on these demands. Monetary easing, meanwhile, is expected to be fully passed on to end-users by 2016. It is hoped that the government will continue to provide incentives to sectors such as construction materials, while aggressively driving urban infrastructure projects, says Anshuman Magazine, chairman and MD, CBRE, South Asia Pvt Ltd.

Stability in property prices across major locations along with interest rate cuts led to increased consumer confidence last year. “We hope that the coming year will bring in a lot of reforms too. The sector has been demanding industry status and this will help bring in change for the whole sector. There is a need to streamline taxes and bring in further tax concession to enable more liquidity in the economy, giving a boost to higher consumption. We are hopeful that the GST will be able to address this concern. Overall, GST appears to be a benefactor for the real estate regime, primarily in light of the expected free flow of credit,” says Brotin Banerjee, MD and CEO, Tata Housing Development Company.

End-2015 brought some positive news as the commercial realty market showed early signs of recovery. The growth trajectory will be maintained. Higher demand for office spaces means more employment generation, which in turn fuels residential demand. As a thumb rule, for every 100 sq ft of office space that is taken up, there is 600 sq ft to 800 sq ft of residential space which is needed. But the biggest challenge will be to reduce the unsold residential inventory and that may take months to a few years.

Sanjay Dutt, managing director, India, Cushman and Wakefield, feels that the next year will witness net absorption of office space of approximately 30-32 million square feet, higher than 2015 levels. This buoyancy in the office sector is expected to trickle down to the residential sector in the medium-to-long term, spurred by lower interest rates, higher consumer confidence and government initiatives.

The passage of the real estate regulatory bill is much needed as it will be the only instrument by way of which buyers will become more confident about the sector and builders, too, will be under pressure to deliver quality units on time.

The second half of the year will see the first shoots of real estate recovery, says Samantak Das, chief economist and national director-research, Knight Frank (India) Pvt Ltd. The second half will be much better than 2015 and 2014 but might fail to meet the benchmark of 2013 in terms of volumes. Rise in property prices will more or less be inflation-adjusted (around 2% to 3%) and builders will focus on volumes rather than margins to clear unsold inventory.

Affordability of projects will become the prime focus and builders will be looking at designing units that meet buyers’ budget. Across cities, developers will be seen actively re-configuring their projects to align with market demand, in the process saving on costs and passing on the benefit to buyers. Also, a majority of the new housing project launches, like last year, will be at lower rates than those of earlier projects launched in the same locations but overall launches will be few and far between, the focus being primarily on consolidation and delivery.

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