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Spurt in demand for affordable housing pushes up overall residential sales

July 2019
Knight Frank India launched the 11thedition of its flagship half-yearly report – India Real Estate. The report presents a comprehensive analysis of the residential market performance across eight cities for the period January-June 2019 (H1 2019). Residential unit launches in H1 2019 increased by 21 per cent YoY to 0.11 mn units while sales grew by a steady 4 per cent YoY to 0.13 mn units. The residential market witnessed growth in supply as well as sales for the third consecutive half year period, both hitting their highest level since demonetisation during H2 2016.

Residential market highlights for top eight cities:
  • Regulatory environment boosts market volumes; H1 2019 saw launch new units rise by 21 per cent YoY to 107,143 units while sales grew by a steady 4 per cent YoY to 133,317 units. 
  • 51 per cent of launches during H1 2019 have occurred in the ticket sizes under Rs 5 mn (Rs 50 lakh) and 78 per cent under Rs 10 mn (Rs 1 crore) as developers’ keenly focus on affordable housing and lower ticket size as they are demand appropriate.
  • NCR and Kolkata saw a drop in unit launches in H1 2019 while supply volumes in Ahmedabad vaulted by a massive 157 per cent for the same period. Hyderabad and Bengaluru grew by 47 per cent and 34 per cent, respectively.
  • The all India sales improved by 4 per cent in H1 2019 making this the third consecutive quarter to record sales improvements. The trends conclusively show a general arrest of a declining trend that can well be the inflection point leading to growth of sales in the market.  
  • The Mumbai residential market recorded the largest sales volume among all the cities, the most YoY growth was experienced by NCR at 10 per cent during H1 2019.
  • The Kolkata residential market experienced poor traction both in volumes of launches and sales that declined by 90 per cent and 30 per cent respectively. This is primarily due to the procedural delays caused by theWest Bengal Housing Industry Regulatory Authority and the pronounced dependence of developers on the distressed NBFC sector. 
  • Weighted average prices have stagnated across cities with Mumbai, Pune and Chennai seeing prices fall by a further 3 per cent, 4 per cent and 3 per cent YoY, respectively. Hyderabad continues to see exceptional price growth at 9 per cent YoY due to the high proportion of ready inventory and little supply coming online during 2018. 
  • During the last four years, the growth in residential prices in most of the top eight cities of India has been below retail inflation growth and the gap has progressively increased since H1 2016. This has helped keep the end-user interested and arrested the downward sales momentum as compared to launches. Hyderabad has been the only market to buck the trend and recorded residential price growth over the retail inflation level.
  • Unsold inventory across top eight markets recorded a decline of 9 per cent YoY in H1 2019. While Hyderabad saw a decline of 67 per cent in unsold inventory, Mumbai was the only market to record an increase with inventory overhang increasing by 14 per cent.

Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “The concerted efforts by the government and the incentives given have resulted in substantial demand in affordable housing which has resulted in an overall boost to residential sales. This also seems to be in line with the government vision for “Housing for All.”

India residential market snapshot

City

Launch

Units Sold

Unsold Inventory

H1 2018

H1 2019

% change (y-o-y)

H1 2018

H1 2019

% change (y-o-y)

H1 2019

% change (YoY) H1 2019

Mumbai

35,974

     43,822

22

     32,412

     33,731

4

  1,36,525

14

NCR

9,123

       7,846

-14

     18,047

     19,852

10

  1,30,001

-18

Bengaluru

15,556

     20,894

34

     25,802

     28,225

9

     85,387

-14

Pune

14,100

     21,396

52

     16,451

     17,364

6

     31,650

15

Chennai

6,523

       7,762

19

       8,585

       8,979

5

     17,810

-21

Hyderabad

3,706

       5,430

47

       8,313

       8,334

0

       4,265

-67

Kolkata

6,393

          627

-90

       6,591

       4,588

-30

     34,575

-11

Ahmedabad

1,323

       3,398

157

       8,087

       8,212

2%

     10,049

-50

All India

91,739

  1,11,175

21

  1,24,288

  1,29,285

4

  4,50,263

-9

Source: Knight Frank Research