The first quarter of 2016 witnessed launch of approximately 31,200 units across the top eight cities in India, recording an increase of 27% year – on – year, according to property consultants Cushman & Wakefield. The residential market, which saw a slump in launches in 2015, saw a remarkable comeback in the first quarter, backed by a six-fold rise in launches in the affordable housing segment which saw an addition of over 10,950 units during Q1 2016 as developers foresee greater demand in this highly price-sensitive segment. The affordable segment accounted for approximately 35% of total launches during Q1 2016. Over the last few quarters, the share of affordable housing has constantly increased as developers and investors are viewing this segment more favorably. Affordable housing segment comprise 22% of total unit launches seen in 2015, up from its share of 17% in 2014.
In the same time, average launch prices have witnessed some decline across major cities, making the new projects cheaper than those launched 12- 24 months ago. Mumbai witnessed a significant drop in launch prices of close to 35% in Q1 2016 as against those launched in Q1 2014. While Pune recorded a decline of approximately 25% in launch prices of new projects in the same period. Pune also saw an increase in the average size of apartments that were launched in Q1 2016 which were noted to be larger by an average of 24% over those launched in Q1 2015 impacting the average ticket size of the new launches within the city.
“Developers have come to realize the vast potential of what was remaining untapped in the affordable housing segment. They have now come to recognize the potential of the segment and are expecting greater momentum in demand in the affordable segment as customers are seen to be more price-sensitive in the current market. With strong emphasis on affordable housing by the government, tax incentives extended by the government, as well as the cautious approach by end-users in other segments, developers are betting on the affordable segment," said Shveta Jain, Managing Director, Residential Services at Cushman & Wakefield.
BENGALURU ACCOUNTS FOR 30% OF TOTAL AFFORDABLE LAUNCHES
In Q1 2016, Bengaluru accounted for almost one-fifth of total residential launch activity with launch of approximately 6,320 units. A number of large-scale project launches in South Bengaluru submarket helped in pushing up launches by 55% in Q1 2016, as compared to Q1 2015. After four quarters of subdued activity in the affordable segment, the segment saw a spurt in launches at approximately 3,200 units, accounting for 58% of total launches during the quarter in Bengaluru. In Bengaluru, the criteria for affordable projects is different from that of other cities as it also includes profile of location, facilities offered etc. Hence, Bengaluru’s launch price trend is not analyzed.
AVERAGE LAUNCH PRICE OF AFFORDABLE UNITS DROPS 36% OVER 2 YEARS IN MUMBAI
The average launch price for affordable units declined 36% in Q1 2016 from Q1 2014 to approx. 4,300 per square feet (psf), as developers look to attract buyers in the low-cost segment in Mumbai. Developers expect rationalization in launch prices in this highly price-sensitive segment to increase the sales velocity in the segment. Developers have also been adopting a strategy of offering residential units in smaller sizing in order to attract buyers. The average unit size of affordable units was seen at approximately 850 sf, a 11% decline over a period of 2 years between Q1 2014 and Q 2016. During the current quarter, launches in Mumbai accounted for 17% of total launches (across 8 cities) at 5,360 units. This represents an increase of 35% in Q1 2016, as compared to Q1 2015. The mid-segment accounted for the majority of launches, with launches in the segment spread across the eastern suburbs, Thane and Navi Mumbai. During the quarter, the affordable segment accounted for only 5% of total launches in the city.
AVERAGE TICKET PRICE DOWN BY 10% IN 2 YEARS AFFORDABLE SEGMENT IN DELHI-NCR
In a bid to increase the attractiveness of low-cost housing, the average ticket price in the affordable segment declined by 10% in Q1 2016, as compared to Q1 2014 in Delhi-NCR. This drop in launch price of affordable units was brought about by a mixed strategy of lowering the average launch prices and by resizing the units. The average launch price witnessed a decline of 2% in Q1 2016 to INR 3,190 psf, combined with an 8% decline in average size of units to 1,030 sf, as compared to Q1 2014. The conscious effort by developers in Delhi-NCR to increase the attractiveness of the affordable segment comes at a time when launch of affordable units has remained comparatively high. Total launches during the quarter was seen to have increased 62% to INR 4,570. Developers in Delhi-NCR have focused on the affordable segment that accounted for 41% of total launches during the quarter, with launch of 1,855 units. This represented a 67% increase from the corresponding quarter last year.
AVERAGE LAUNCH PRICES FOR AFFORDABLE UNITS DECLINED BY 25% IN Q1 2016 VS Q1 2015 IN PUNE
In order to drive sales, the average launch price was noted at INR 3,747 psf in Q1 2016, a 25% decline over Q1 2015 levels. On the other hand, the average size of a unit in the affordable segment was seen to be up by 24% to 3,740 sf. Due to the combined effect of both, the average ticket size (base price) is witnessed to have declined, albeit at a slower rate than the decline in average launch price, at 7% to INR 30.4 lakhs. Residential launches in Pune was noted at 4,521 units in Q1 2016, an increase of 37% as compared to Q1 2015. Interestingly, the city witnessed 3,017 unit launches in the affordable segment, representing more than a 10-fold rise from the corresponding quarter last year.
AVERAGE TICKET SIZE FOR AFFORDABLE UNITS DECLINED BY 11% IN KOLKATA IN Q1 2016
The average launch price in the affordable segment declined 5% to INR 2,420 psf in Q1 2016, as compared to Q1 2014. Developers in Kolkata also made a conscious attempt to offer apartments of smaller size. The average size of residential units declined approximately 7% to 795 sf. These two factors in totality led to the ticket size (base price) in the affordable segment dropping 11% over the two-year period to INR 19.2 lakhs. During the quarter, total launches in Kolkata increased 71% to 3,739. The affordable segment’s share stood at 36% with launch of 1345 units in Kolkata.
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Sitara Achreja, Executive Director, Marketing & Communications, India
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