Completions, net absorption & unsold inventory – residential
In 2015, developers will become more earnest about right-sizing and right-pricing their offerings. Smaller, yet better-designed and more efficient homes will define the residential real estate market in 2015, and selective corrections in some of the over-priced cities will help bring about faster sales for stagnated supply of larger configurations. Townships will become more prevalent, and the supply of luxury homes will moderate to align with the slow demand dynamics for these offerings.
* Pricing Trends
A large portion of the total unsold residential inventory is in the under-construction projects, while completed projects have only moderate vacancy. Home buyers looking for ready-possession property will therefore find limited room for negotiations when compared to buyers who can wait for some time to get possession. The attractive schemes that were doled out by developers in under-construction projects during the festive season of 2014 are likely to continue into 2015.
2015 will see home buyers benefiting from reduced borrowing rates, increased developer-focus on affordable homes, largely stable prices, and better job and income prospects.
* Affordable Housing
Affordable housing will clearly be the flavour of the season in 2015. While the ruling government at the Centre and the Central Bank have clearly spelled out their intention to push for affordable housing, it is the State governments which will need to take the implementation initiative. The recently concluded elections have clearly indicated that better governance, planning and good implementation are factors on which performance will be evaluated, and affordable housing is an important yardstick for sure.
While affordability will always be a subjective term that assumes different meanings in different markets of India, every city does have its own affordability threshold and benchmark. Developers active in each of the primary cities are now fully aware that they must address the demand for affordable housing in their cities, and stop focusing excessively on high-end and luxury offerings.
Affordable housing is in itself not a difficult format to deliver; the challenging part for many developers will be to align this format with their existing brand image without impacting it. Quite a few prominent developers already have a budget housing strategy, but they have evolved this strategy over time and ensured that the creation of such projects becomes a natural extension of their brands. For the newer entrants who have so far focused exclusively on higher-end housing, the process will begin only now – and for all but the die-hard firms that will not budge from their ‘creamy layer' orientation, the process is unavoidable.
Coming anywhere close to negating the affordable housing gap altogether would take about two decades of focussed supply – and going by previous market learnings, it is unlikely that developers will retain their current focus on affordable housing once the economy picks up sufficiently to make higher-end housing desirable once again. However, as long as the current momentum and orientation prevails, we will at least see some good headway being made on this front in 2015.
