Total demand for urban housing is estimated at 4.2 million units during the period 2016-2020 across the top eight cities, as per report released by Cushman & Wakefield and GRI entitled “Revitalising Indian Real Estate: A new era of growth & investment . Correspondingly, existing under-construction and planned supply of 1.0 million housing units by private developers is expected to be delivered across top eight cities during the said period. Delhi-NCR (NCT, Ghaziabad, Faridabad, Gurgaon and Noida) continues to garner the highest proportion of demand (24%) at around 1.0 million units by the end of 2020.
It is further estimated that, the LIG (below INR 15 Lakhs) is the most under-serviced segment. While the LIG is likely to generate demand of about 1.98 million units by 2020, supply by private developers of barely 25,000 units. Similarly, though the MIG (INR 15-70 Lakhs) 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 number of 1,457,000 units.
Anshul Jain, Managing Director, India, Cushman & Wakefield says, “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 encouragements 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, the recent move to demonetize 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.”
Anshul further added, “To be able to utilize 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.”
The urban housing demand is the highest in Delhi-NCR across all the 3 segments amongst the top 8 cities, forming nearly 24-26% 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 60-70% 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.
Amongst 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% during 2016-2020. However, MIG and HIG is expected to constitute more than 90% of the upcoming supply.
Delhi-NCR is expected to have the highest demand in all the three segments in the period 2016-2020. In the LIG and MIG segments, the city accounts for 24% of the total demand across the 8 cities. In the HIG segment, demand in Delhi-NCR accounts for 26% of total demand across cities.
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.
Amongst all the eight cities developers are likely to launch the highest number of units for the 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 amongst the lowest in Mumbai.
While nearly 80% of the demand is driven by LIG and MIG over the next 4-5 years, majority of the upcoming supply is directed towards MIG.