Pune: India's residential sector is passing through interesting times. JLL India's Real Estate Intelligence Service has identified the top ten trends of the Indian residential sector over the past two or three quarters:
Supply – is showing variable signs of cyclical ups and downs depending on launches. Affordable and lower-priced residential corridors such as Greater Noida and NH-8 (NCR-Delhi), Western Suburbs and Thane (Mumbai), Whitefield and Hosur Road (Bangalore) and Southern Suburbs (Chennai) were the prime drivers of new launches.
Demand – on the slowing curve in NCR-Delhi, but stable in all other cities, primarily on the back of new launches in emerging residential corridors being able to attract buyers. Of note is that while NCR-Delhi contributed over one-third of total new launches, its share of net absorption dropped from above 40% to just over 36% by 1Q14.
Vacancy rate – in terms of available apartment units, has risen across all cities and, barring Pune and Hyderabad, is at new market highs.
Rents – have risen marginally across the residential markets of Mumbai, Bangalore, Chennai and Pune. Rents underwent a correction for high-end properties in NCR-Delhi before stabilising, while Kolkata and Hyderabad have largely witnessed stagnation.
Capital values – have steadily risen across cities. Slowing sales momentum has tempered price growth in the Tier 1 cities. Select residential corridors have shown price increments due to new launches at higher prices and subsequent price increases in surrounding projects. Overall, on a pan-India basis, prices have risen by less than 2% q-o-q for the past three quarters. The Tier II cities of Pune and Kolkata have shown the fastest growth due to lower floor prices, with similar reasons contributing to growth in Chennai.
Type of project launches – primarily in the mid-segment category comprising two and three bedroom-hall-kitchen configurations. Developers also launched studio apartments as low-ticket sized projects to attract buyers. Select luxury projects and serviced apartments were also launched to test the waters, as buyers for such projects are largely unaffected by macroeconomic conditions, with the buyer profile also limiting the consumer base.
Emerging corridors – developers explored newer corridors in cities such as Sohna and NH-24 (NCR-Delhi), Ulwe and Karanjade (Mumbai) and Hennar Road (Bangalore) to offer lower-priced projects to buyers.
Infrastructure – projects planned and underway were positioned as pull factors for residential projects launched in the vicinity of such infrastructure developments. New highways and Metro connectivity raised the attraction quotient for upcoming locations.
Buyer/investor sentiment – remains weak given the high interest rates and rising residential prices. Investors have become cautious and are investing in select projects, and by staying away, they have affected investor-driven, speculative residential markets. Buyers have become fence sitters, waiting for economic headwinds to improve and better credit conditions.
Developer sentiment – is tied to the result of the country's general elections. Developers have been taking a wait and watch stance, holding prices. They have shown more flexibility in offering discounts and are looking towards proactive policy changes. They are also targeting emerging corridors for low-ticket project launches.
Rohan Sharma, Senior Manager – Research & REIS, JLL India
