Demand for housing from end user is expected to remain skewed towards ready-to-move-in properties in affordable and mid-income projects in 2017, said Colliers International India in a report.
In 2016, about 89,000 units were launched across six major cities in India, which is about 34% less than the units launched in 2015. The decline in the number of new launches indicates the waning interest of buyers in the primary market, the report said.
In the aftermath of demonetisation, many banks have reduced the home loan rates to the tune of 8.25 to 9%, which is the lowest in the last 8 years. The government has also announced an interest subsidy to the tune of 3 to 4% for first time affordable housing homebuyers in 2017. As per Colliers, the 2017 union budget holds the key to many more incentives for homebuyers in the form of tax cuts and interest subsidies.
“We expect demand for quality stock in areas with good connectivity and social infrastructure to revive in the near term, especially in mid-segment housing. However, realistic pricing will be the key to an early revival as right now both buyers and sellers are hanging on in the hope of achieving optimum prices. We think prospective buyers should not delay their decision unduly, since they can negotiate realistic prices in both the primary and secondary markets,” said Surabhi Arora, Associate Director Research at Colliers International India.
The year 2016 began with a promising outlook for Mumbai, but as the year progressed, the real estate market in the city was affected by several factors, like the approval of real estate (Regulation and Development) Act (RERA) by the central government, the new Maharashtra Housing Policy and the demonetisation drive.
Developers and buyers alike adopted a wait and watch approach and the number of launches reduced considerably. In 2016, there were about 29,000 new launches in the Mumbai Metropolitan Region (MMR) and its suburbs, a decline of 18.8% over 2015. About 51% of the new launches were in Thane. The remaining share was concentrated at other locations namely Central suburbs (23%) Navi Mumbai (15%), Central Mumbai (9%) and South Mumbai (2%). Colliers forecasts, new unit launches shall be concentrated in Thane and Navi Mumbai in 2017, due to the available land reserve at these locations.
Bengaluru continued its run in the residential market with maximum number of new unit launches in 2016. However, while in 2016, nearly 24,800 new residential units were launched in Bengaluru, it reflects a 35% year on year (y-o-y) decrease over 2015. This slow pace of new launch activity can be attributed to multiple events that unfolded during 2016; like the impending finalisation of RERA Act; delays in obtaining approvals due to Bruhat Bengaluru Mahanagar Palike (BBMP)‘s citywide drive to tackle encroachment of storm water drains that kept developers cautious and the momentary civil unrest over Cauvery water issue between the state of Karnataka and Tamil Nadu which hampered new launches in the second half of 2016, the report said.
Gurgaon witnessed the launch of around 6,700 units in 2016, about one-third of the 2015 numbers. Colliers expects a muted demand, and limited number of new launches in the first half of 2017, as the ongoing slump in the market gets further fortified after the demonetisation move. Contrary to the general perception of a significant price correction, Colliers does not believe that prices will crash. It expects that prices will largely remain stable while a marginal correction up to 5-7% in emerging micromarkets, such as Dwarka Expressway and Golf Course Extension Road cannot be ruled out due to high inventory available in secondary market. The story was very similar for Noida, as in the backdrop of muted sales in the primary market and heightened consumer activism on the issue of delay in completion of projects, developers remained focused on execution of projects in 2016. About 6,500 new units were launched in Noida in 2016, which is almost equal to the 2015 figures, the report added.
Despite being one of the most active residential markets in 2016, the Pune market slowed down towards the end of 2016, with new launches totalling to about 20,400, witnessing a 36% decrease over 2015. According to Colliers, low enquiry levels especially in the high-end and luxury segment echoed prevailing subdued market sentiments, as most launches in 2016 were focused on the budget or mid-end segment. Localities adjacent to commercial hubs of Pune in West (Baner, Hinjewadi), South (Undri, Handewadi), South East (Keshavnagar, Hadapsar) and East (Kharadi) constituted an 80% of new launches.