Affordable Housing Share Takes A Big Hit

Affordable Housing Share Takes A Big Hit



Sharing the research data of his company, Anuj Puri, Chairman, ANAROCK Property Consultants, reveals that in 2020, of the total 1.28 lakh units launched in the top seven cities, the affordable segment’s share reduced to 30 per cent. The mid-segment had the highest share in 2020 at 40 per cent while the premium category saw its share increase to 21 per cent

The pandemic has significantly altered previously dominant trends in the Indian residential market. Notably, it has dented the overall new affordable housing supply share across the top seven cities. The latest research data from our company indicates that out of the total new launches of approximately 36,260 units across the top seven cities in Q2 2021, the affordable segment priced below Rs 40 lakhs contributed a mere 20 per cent share i.e. approximately 7,230 units. The premium segment priced between Rs 80 lakh to Rs 1.5 crore had the highest launch share of 36 per cent with approximately 13,130 units, followed closely by the mid-segment with 32 per cent share of approximately 11,760 units.

The main southern cities of Hyderabad, Bengaluru and Chennai together accounted for at least 72 per cent of the total new premium supply in the second quarter. Prominent realty hotspots NCR and MMR had the highest share of affordable housing supply at 52 per cent of a total of 7,230 units launched in this category. The new launch trends in both the pre and post pandemic periods across the top seven cities indicate that the new affordable supply share has been reducing post the pandemic. In 2018, out of approximately 1.95 lakh units launched in the top seven cities, affordable housing had the highest share at 40 per cent.

This was followed by 36 per cent in the Rs 40-80 lakh budget category and 16 per cent in the premium segment. Likewise, of the total 2.37 lakh units launched in 2019, the affordable segment accounted for a 40 per cent share, followed by the mid-segment with 33 per cent share and the premium category with 16 per cent share. However, in 2020, of the total 1.28 lakh units launched in the top seven cities, the affordable segment’s share reduced to 30 per cent. The mid-segment had the highest share in 2020 at 40 per cent while the premium category saw its share increase to 21 per cent. The dramatic drop in affordable housing’s new launch share was profound from Q2 2020 onwards – the period since the pandemic.

In H1 2021, affordable housing’s share of new launches dropped further to approximately 26 per cent of 98,380 units launched between January and June. The mid-segment had the highest share at 39 per cent while the premium housing segment had 25 per cent share. Further quarterly trend analysis reveals that in Q1 2021, the affordable housing supply share was at 30 per cent while in Q2 2021 it dropped to just 20 per cent. Notwithstanding the incumbent government’s continued focus on affordable housing, private players have changed their strategy on the back of the new pandemic realities.

Impact on Affordable Housing

Various factors could be responsible for the drop in affordable housing’s supply share drop:

 Abundant new affordable supply was launched in the top seven cities after the government began incentivizing this segment post-2014 to back the ‘Housing for All by 2022’ scheme. Demand for affordable housing remains high, but there is now a pile up of unsold stock across cities. As per our data, of a total of 6.54 lakh unsold units in the top seven cities as of Q2 2021 end, the affordable segment has the highest share at 33 per cent.
The target audience of the affordable segment – many employed with MSMEs – has been severely impacted by the pandemic in contrast to premium and luxury category buyers. Many affordable housing buyers have had to defer purchase decisions.
Affordable housing developers’ profit margins are wafer thin. Amid rising inflationary trends of basic input costs such as cement, steel, labour, etc., it has become difficult for them to launch budget homes since increasing prices in this highly cost-sensitive segment is inadvisable at this time. Also, overall sales volumes have declined in the last one year because of the pandemic.
Home loan eligibility for many affordable housing buyers has been impacted by the pandemic due to loss of jobs and many MSMEs being shut down – resulting in significantly lower sales in this category.

 

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