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The real estate sector contributed merely around 6.3 percent to India’s GDP in FY 2013 as against 10.6 percent in 2011. Despite this grim reality, the industry is showing some positive signs for the future. There is, more or less, stability in property prices all across the country and, above all, new trends emerged over the year that are redefining the real estate sector as a whole.
Commonfloor.com identified 13 trends in the overall Indian real estate industry in 2013 that are set to have a clear impact on the sector in 2014. City-specific trends coupled with the general trends pan-India came to the forefront from the study.
Often referred as the ‘millennium city,’ Gurgaon has always attracted most MNCs, present in India, to set up their headquarters. Since its initial stages, the city witnessed the most extravagant and luxurious class of high-rise developments. Higher per sq. ft. prices have led to higher ticket prices. So much so that the smaller ticket sizes do not appear on the radar. It is hard to imagine someone looking for a Rs 50 lakh dwelling even in new catchments in Gurgaon. Amongst other cities in NCR region, the highest weighted average price per sq. ft. here is around Rs 6,400 per sq. ft. And this hype was largely created by the investors. Cashing on this hype, builders launched projects in high numbers in the city. In fact, the city was the leader in the NCR belt as far as new launches was concerned.
But lately, this investor-driven market has witnessed a concrete shift in the trend. Commonfloor research highlights that the new launches in 2013 reduced to almost half as compared to 2012 while the absorption rates also reduced three times in the same year. Amidst this gloom, the NCR-region witnessed not more than 10 % reduction in new launches in 2013. This clearly indicates that Gurgaon is no longer the show-stopper that it used to be. The city’s contribution to overall supply in NCR is reduced from 36 percent in 2012 to mere 12 percent in 2013. One key reason behind this shift is that prices don’t justify the lower liveability quantile. During boom time, Gurgaon boasted of the best living conditions in a perceptible future. However, the bets on development of social infrastructure did not materialise as anticipated. It is still a challenge to live in Gurgaon without a motorised vehicle.
This suburban area has recently emerged as the new real estate destination in the NCR region. Our research shows that Greater Noida has contributed highest in the cumulative supply in NCR, more than 44 percent. In fact, it is termed as a market for low-ticket investors because of the low prices per sq. ft. Weighted average price in Greater Noida was less than Rs 4400 per sq. ft. in Q3-2013.
“In the past 6-8 months, Greater Noida has seen buyers moving towards it in hordes as it became the most preferred destination for property buying. The key reasons for this shift include the excellent Expressway-connectivity, the structured greenery, proximity to Delhi, affordable rate of housing, no water problems and well-planned urban development,” states Vivek Sawhney, Director-Sales, Investors Clinic.
This shift of focus from Gurgaon market to Greater Noida clearly highlights a new trend – the market is now tilting more towards smaller ticket prices and lower per sq. ft. prices. The smart investor and home buyer have both decided to minimize their risks!
Suburbs in NCR region evolved mainly due to the demand spill-over from Delhi. However, land allocation in the city was reconstituted during the last quarter. According to Delhi Development Authority, about 66,000 hectare of new land will shortly be made available for development across urban extension zones namely I, J, L and P. These zones can accommodate more than 7 lakh units with the density as low as 50 persons per hectare. This New land availability in core Delhi will create interesting patterns in the real estate markets of neighbouring cities like Gurgaon, Noida and Faridabad.
The financial hub of India has inadvertently paved the way for other cities as far as regulating the real estate is concerned – be it transfer of development rights (TDR), fungible floor space index (FSI), redevelopment laws, carpet area concept etc. Interestingly, the conditions prevailing in Mumbai real estate market coupled with the pricing trends are more often replicated in other markets.
Currently, the Mumbai market is more matured and the city is attracting the crème de la crème which is well travelled and has a flair for unique and exclusive lifestyle. Developers are quick to understand this growing trend and are offering this ‘exclusivity’ to the discerning customer. An apartment complex designed by Armani in a ticket price of Rs 7.5 crore or ‘Raheja Vivera’ with an exclusive location at the price rate of Rs 22 crore or the sky-bungalows – Omkar 1973 Worli – priced between Rs 15 crores to Rs 100 crores are perfect examples of how Mumbai Main Island craves for luxury and exclusivity. This clearly reflects that the locational prices can be easily justified to customers if they get exclusive designs and facilities.
Gone are the days when Thane was considered one of the most dynamic real estate markets in the MMR. This sub-city is centrally located to Bhiwandi, Kalyan-Dombivali, Navi Mumbai, harbour-line suburbs and even Mira Bhayandar. However, it has been noticed in 2013 that Thane has lost its past glory. The suburb enjoyed attention only till 2011-12. Our research shows a year-on-year decline of 84 percent in new launch units. The absorption rate has also taken a hit, with almost 90 percent decline. The weighted average price here is around Rs 5,500 per sq. ft.
For quite some time now North Bangalore has been the focal point of all real estate activity in the city. Manyata Tech Park and the new Bangalore International Airport drifted the real estate prices up in this region. But lately, the focus has shifted back to conventional markets. West Bangalore, for instance, has witnessed the launch of several high-end apartments. Earlier, the demand in this region was limited to independent bungalows.
Moreover, emergence of IT sector at the peripheral locations has also skewed the bid rent curve – this shows the value of real estate in comparison to its proximity to CBD. Research by Commonfloor clearly points that focus has once again shifted back to regular peripheral markets like Whitefield, Sarjapur Road and Electronic City. High demand in North Bangalore, over the years, significantly increased the weighted average prices. As a result, prices have already gone overboard as compared to other peripheral micromarkets in the city.
Lately, it is noticed that the demand for average size of units in Bangalore is shrinking. The city is home to a large number of HNIs. Ample land availability and high-paying capacity led Bangalore to have the largest average apartment size in the country. Commonfloor’s chronological data suggests that in 2012 an average apartment size was 1643 sq. ft., which was around 43% higher than the national average. However, in Q3-2013 there was a marginal reduction of around 10% in apartment sizes in the city.
The same research also highlighted that the average size of the projects was also getting smaller due to high risks involved. At least 26% projects launched in Q3-2013 have less than 50 units and 56 % projects have less than 100 units. This clearly highlights the calculative approach of builders towards new launches.
Traditionally, Chennai’s high-end real estate market was confined to low-rise development. And, certainly, the apartments were not looked at as an option for the elite and super-luxury class. However, the trend has now been redefined. Adhering to the growing demand of the globe-trotting customers, builders are launching exclusive ultra-luxury apartments. Priced anywhere between Rs 15 crores and Rs 22 crore, these apartments offer world-class amenities such as private jacuzzi, personal elevator and even a panic room. The trend has received a favourable response from the affluent class in the city.
Moreover, the city boasts of having one of the best beaches in India that faces ‘sunrise.’ Unlike Mumbai, this feature has not been fully utilized here by premium sea-facing apartments. Recently, changed boundaries of coastal regulation zone have opened up large chunk of buildable land along East Coast Road connecting Chennai with Pondicherry.
People living in metros have a tendency of buying second homes for various purposes – be it family expansion, investment or a weekend home. Generally, these homes are of different typology from the first house depending on the purpose. This trend is wearing out due to grim market conditions, tight liquidity and soaring prices. Most of the buyers are concentrating on getting a best deal on their first home and second home is no longer a priority.
Speaking to Commonfloor.com, Pankaj Kapoor, MD, Liases Foras says, “Gone are the days when second homes were the fashion of the market. The craze of the people investing in multiple properties is slowly fading away as returns are not very good.”
A healthy market has an acceptable level of inventory over-hang which is generally 4-10 months. Due to slow economic growth and cash crunch, buyers have been shying away from transactions at the moment. Various reasons are responsible for the inventory pile-up in most metros. During boom time, high speculation led the real estate market towards ample supply. Moreover, the analysis of consumer sentiment by Commonfloor suggests that consumers are waiting for prices to correct. Some end-users expect developers to offer discounts while few want additional charges to be waivered off.
Real estate investment has immensely attracted investors in the last decade mainly because of the high returns it offered. Several projects began with a group of investors buying the units during pre-launch stage. However, the returns for these have lowered in the past few quarters. Adding fuel to the fire, the high inflation rates are giving thinner returns than expected. Thereby, several investors are contemplating an exit strategy. The transaction of under-construction properties also saw a downward trend due to lack of interest by investors. On the other hand, the Indian Real estate market is plagued by construction delays like never before. As a result, the end-users are getting cautious and preferring to buy ready-to-move in or near to completion properties.
Just to throw a number, India has a housing shortage of around 18 million units in urban cities. On the other hand, there is a very high vacancy rate. The reason is that the supply side was not able to identify the exact demand. The general tendency of making higher profits from large units and high-end units is not possible in a slow market. The guru mantra now is to decrease the unit size in order to increase the sales velocity. And the developers have considered it by launching new projects in affordable localities with lower ticket price.
Confirming this Irshad Ahmed of Bangalore-based Irshads Property Matters says, “Affordability will be the keyword for future growth of real estate sector all across the country. Strongest sales will be witnessed in projects that offer affordability be it in terms of location or price.”
Unlike earlier, today’s customer is spoilt for choices. There is ample supply in the market along with a wide spectrum of choices. Hence, the market conditions are extremely favourable for buyers. But, too many options at times leads to confusion. Our research highlights that buyers are now spending double the time than before in order to research and read about the properties and various localities.
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