Covid Impact Reduces Affordable Housing Share in Top 7 Cities

Covid Impact Reduces Affordable Housing Share in Top 7 Cities
02/07/2021 , by , in News/Views

The coronavirus pandemic that hit the real estate sector hard has been harder on the affordable housing segment, with its share of supply dropping to 20 percent in the top seven cities in the second quarter of 2021, realty consultancy firm Anarock has said.

Of 36,260 units launched in these cities in the June quarter, only 7,230 houses were priced below Rs 40 lakh, accounting for 20 percent of the new launches, Anarock said in a report.

The loss of affordable segment has meant gains for mid and premium segment houses, which are priced at Rs 40-80 lakh and Rs 80 lakh to Rs 1.5 crore, respectively. “The premium segment had the highest launch share of 36 percent (approximately 13,130 units), followed closely by the mid-segment with a 32 percent share (about 11,760 units),” Anarock chairman Anuj Puri said about the second quarter. 

 The slowing of new launches may have something to do with the piling up of unsold houses. Despite the government’s continued push for affordable housing, private players have changed their strategy to adjust to the “new normal” thrown up by the pandemic.

Real estate developers are strategically following trends, especially the fact that homebuyers of affordable homes have been hit the hardest by the outbreak, which has led to job losses and shutting down of businesses and loss of livelihood. The economic uncertainty has forced people to defer purchasing a house.

Abundant supply was launched in the top 7 cities after the government began incentivising this segment after 2014 to meet its ‘Housing for all by 2022’ target. Demand for affordable housing remains high, but unsold stock is piling up across cities.

The seven cities—Chennai, Pune, Bengaluru, Hyderabad, Mumbai, Delhi and Kolkata—are ranked on the basis of population and economic activity. Home-loan eligibility for many affordable housing buyers has been hit by the pandemic due to the loss of jobs and many micro, small and medium enterprises shutting down, resulting in significantly lower sales.

For the developers of affordable housing, profit margins are wafer thin. Amid rising basic input costs—cement, steel, labour, etc—it has become difficult for them to launch budget homes since increasing prices in this highly cost-sensitive segment is not advisable. Also, overall sales volumes have declined in the last year because of the pandemic.

Supply, too, has been falling since the outbreak. In 2018, of about 1.95 lakh units launched in the top seven cities, affordable housing had the highest share at 40 percent, Anarock said. It was followed by 36 percent in the mid-segment and 16 percent in the premium category. Likewise, of the 2.37 lakh units launched in 2019, 40 percent of these were affordable houses, 33 percent mid-segment and 16 percent premium.

In 2020, of the 1.28 lakh units, the share of affordable houses was reduced to 30 percent, with mid-segment showing having the highest share at 40 percent. The premium climbed as well to 21 percent, the real estate firm said. There has been a drastic drop in launches since Q2 2020 when the outbreak starting taking its toll on the Indian economy.

In H1 2021, affordable housing’s share of new launches dropped to 26 percent of 98,380 units launched between January and June. The mid-segment again had the highest share at 39 percent and premium housing accounted for a 25 percent share, Anarock said. Further quarterly trend analysis reveals that in Q1 2021, the affordable housing supply share was at 30 percent and tumbled to 20 percent in Q2 2021, it said.

 

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