Top 7 Residential Realty Markets driving sales figures
Realty+ takes stock of the top performing cities in India in terms of residential real estate sales and the trends driving these sales figures.
The real estate sector facing a consistent slowdown and dipping sales gets a ray of hope in the recently announced Interim budget that may benefit property sales in coming years. The year 2018 too witnessed some signs of improvement in key residential markets across India. The reformatory changes have eventually given a fillip to buyer confidence. Housing has now become more of an end-use commodity rather than an asset for investment with high returns. Affordable homes sops have boosted both demand and supply as millennial prefer smaller ticket price units (INR <40 lakh). Buyers’ preference has also transformed from under construction projects to ready-to-move-in or nearing completion largely due to the narrowing price gap, GST benefit and no risk of completion.
Residential Real Estate Trends
• Residential sales increased in 2018 compared to last year by 18% across NCR, MMR, Bengaluru, Pune, Hyderabad, Chennai and Kolkata. In Bengaluru and Hyderabad housing sales increased by 7% and 64% respectively during this five year period.
• NCR witnessed nearly 61% drop in housing sales in 2018 compared to 2014, followed by Pune and MMR with 24% and 14% respectively.
• Hyderabad recorded 64% rise in absorption during the period largely because of state bifurcation issue in 2014. After Telangana formation in 2015 there is a resurgence of growth with IT/ITeS sectors rapidly fuelling housing demand. • During 2014-2018, Bengaluru remained the most vibrant and resilient real estate market with 33% increase in sales in 2018, over the preceding year due to ample supply (around 40%) of properties that are ready-to-move-in or nearing completion within a year.
• After a consecutive y-o-y drop in housing sales in NCR since 2014, the realty market here witnessed green shoots of revival in 2018 with housing sales 18% increase from 2017 to 2018. The various infrastructure initiatives like metro extension and KMP expressway etc. have boosted the realty prospects in the region.
Bengaluru showed 81% y-o-y growth in new launches in 2018, with a significant increase in supply from the Prime Central and Secondary submarkets. Metro Rail connectivity became the prime driver for certain markets. Sales witnessed heightened activity as market recovered slowly from the impact of RERA and GST.
While the market reflects positive sentiments in terms of renewed vigour in new launches and slower pick-up in sales, it is important that developers focus more on offloading the existing inventory, keeping new launches under control. This will have a positive domino impact on market dynamics and create favourable buyer sentiment, resulting in sales expansion in the coming year.
• Upcoming Metro Rail connectivity proved to be a major driver for certain residential pockets like Kanakpura Road
• Homes above INR 10 mn. Witnessed increased launches in 2018 compared to 2017
• Developers should focus on selling existing inventory and keep new launches in check. Also read http://realtyplusmag.com/budget-sop-opera-2019-20/
In Chennai residential market, the South Suburban submarket contributed maximum to the new launches in 2018. Most of the launches were witnessed in the low price segment, with 62% of the new supply falling within the INR 5 million category.
The increase in FSI from 1.5 to 2, is expected to increase the supply of residential units in the market as it works as an incentive for developers, with demand likely to remain strong. Going ahead, a continued strong momentum in sales will however depend upon the ability of developers to launch new projects that fit the homebuyers’ budget.
• New launches witnessed a strong 53% y-o-y growth in 2018 compared with 2017
• Developers have increased their focus on lower ticket sizes in Chennai as this segment witnesses huge unmet demand
• Growth in sales was almost similar to the growth in launches, indicating a healthy and balanced residential market.
Delhi NCR witnessed a surge in new launches (114% Y-o-Y), with the first half of 2018 contributing to a larger share than the second half. Enhanced infrastructure activity in certain micro-markets, coupled with Government incentives for the affordable housing segment saw an increase in project launches.
Developers are realigning their product strategies to capitalise on the upbeat market sentiment by rationalising prices and size of the apartments in order to fit the budget of a genuine homebuyer. Delhi NCR has shown early signs of recovery. A continuous and sturdy growth in sales momentum will have a significant bearing in setting a high tone in this market in the coming years.
• Gurugram and Ghaziabad gained significant share in new launches in 2018 which grew 114% y-o-y
• Delhi NCR displayed strong positive growth with over 70% y-o-y increase in sales in 2018
• Noida-Greater Noida contributed maximum (50-55%) to overall sales in 2018.
The Hyderabad market showed significant growth in sales which were recorded at much higher levels as compared to the growth in new launches. Additionally, the residential market got a boost with the RERA website coming alive in the second half of 2018. The residential price index displayed a positive trend. This along with the increasing number of new launches and rising sales (driven by robust hiring and burgeoning commercial office space investments) are a perfect recipe for a healthy residential market. With all these elements becoming a reality, the Hyderabad residential market is likely to shine brightly in Indian Real Estate’s galaxy.
- New launches doubled in 1H 2018 compared with 1H 2017
- Low and mid-price segments formed a majority of launches in 2018
- Influx of working professionals into Hyderabad is leading to enhanced residential demand
The Kolkata Residential market has begun to recover. Over the last two years, supply of housing units catering to low income segment has seen growth in the peripheral areas of the city. Healthy expansion in commercial real estate, new job creation and infrastructure development will act as triggers which will drive overall growth in the long term.
Regulatory ambiguity with the co-existence of HIRA at the state and RERA at the centre still persists. However, the state has already begun implementing select provisions of HIRA such as registration of projects and usage of carpet area. Clarity on the dual regulatory authority, with the state following one set of regulations will aid in boosting consumer and developer confidence resulting in a healthy interplay of demand and supply of residential real estate in the city.
- The second half of 2018 recorded slower growth in launches as developers remained cautious
- Three-fourth of the launches were in the less than INR 5million category
- South Peripheral drove the growth in off take of units
The Mumbai residential market witnessed a steady growth in new project launches and sales during 2018, with the first half of the year outperforming the latter. A marked increase in launches within the ticket size of up to INR 10 million was witnessed in certain suburban markets. This indicated a move towards the much needed alignment of supply with demand. A slow recovery phase in sales was observed as the markets absorbed the impact of GST and RERA. Steady prices kept buyer interest active.
In the aftermath of the implementation of RERA and GST, fence sitters have been postponing their purchase decisions in anticipation of a significant price reduction. This has resulted in a slower recovery in the off take of units in most areas of Mumbai. At the same time, there is a concerted effort by developers to make houses more affordable by rationalizing their sizes. This combined with the on-going rapid infrastructure development, is expected to trigger market sentiment, translating into higher sales in the coming quarters.
- Thane remained at the helm of new launches in 2018,contributing to a quarter of the total launches
- About 56% of the new launches ere within the INR 5-20mn. category in 2018.Developers are slowly aligning supply with demand levels
- The average annual residential prices increased by only 1.4% from 2014-18 indicating increased affordability.
The Pune residential market witnessed a healthy revival with sales outgrowing launches. Riding high on expected growth in commercial office space, demand in the residential segment is expected to remain buoyant. With the positive ramifications of RERA and GST setting in, a leap in sales was witnessed. This coupled with the increasing focus of developers on launching residential units in the low price segment augurs well for the future of the Pune residential market.
- The number of new launches has doubled in North East and South East markets in 2018.
- Residential supply witnessed steady flow on expectations of future IT/ITes growth
- Hinjewadi and Wakad dominated sales by contributing 34% to the total units sold in 2018