A S Sivaramakrishnan, Head – Residential Services for CBRE South Asia, shares his views.
India’s housing market has been faced with subdued home buyer sentiments for the past couple of years.
The good news is that the government has taken initiatives to boost investor interest by focusing on rejuvenating infrastructure and supporting large-scale development of affordable housing across the country. The recent ‘Housing for All’ initiative, along with its ‘100 Smart Cities’ mission and revival of large urban infrastructure projects will help the sector. The Ministry of Housing and Urban Poverty Alleviation, or MoHUPA, has identified 305 towns and cities for the “Housing for All” scheme quite recently. Identifying these urban centers will go a long way in meeting India’s housing requirements in the long-term.
Additionally, the Reserve Bank of India, or RBI, has also implemented monetary easing thrice this year, by reducing base rates by 75 basis points. However, a complete transmission of easing measures is yet to come into effect, and consequently, benefits for the broader economy have remained limited so far. The RBI is hopeful of a likely pick-up in home loan demand from the third quarter, with banks likely to benefit from the paring of rates to secure new lending.
Market trends in H1 2015
Although housing sales and new project launches saw a marginal dip in the first half of the year, the rate of decline slowed down substantially when compared to the same period in 2014.
Home buyer demand for housing properties dropped marginally across India’s leading cities during the first six months of the year, as compared to the second half of 2014. This decline was largely a result of cautious buyer sentiments, high mortgage rates and significant unsold inventory in the primary as well as secondary markets.
Although the RBI did implement monetary easing during the first half of 2015, the actual impact on mortgage rates was far less. On the positive side, the steep rate of the housing demand drop noted in the first half of 2014 seemed to have abated during H1 2015, with the rate of decline becoming much lower.
The southern markets of Chennai and Bangalore saw positive home demand from buyers, accounting for more than 45% of the total housing sales noted across leading cities in the first half of the year. These sales were primarily concentrated in the high-end/mid-end segments of the two cities. The Delhi National Capital Region, or NCR, however, saw a steep decline in residential sales, which adversely affected property prices in the region. The residential markets of Mumbai and Hyderabad also noted a slight drop in home buyer interest during the period.
Pricing trends in the residential real estate market remained diverse, varying across segments and neighborhoods of leading cities during the first six months of the year. Home prices remained largely stable in the premium and high-end/mid-end segments of Mumbai, Chennai and Kolkata; while Bangalore saw a price rise due to a marginal increase in housing demand. Western Hyderabad too saw a slight price rise due to low availability and high demand for premium property. Pune also noted prices rise in certain locations because of healthy home buyer demand.
Meanwhile, Gurgaon’s Sohna Road (NCR) saw home prices decline slightly due to a supply overhang, while remaining stable across other locations of Gurgaon and Noida. Golf Course Road and Greater Noida Expressway also saw a marginal decline in pricing in the premium housing segment during the period
Outlook: India’s housing market
Going forward, a rise in demand from home buyers will most likely be driven by the mid-end and affordable housing segments, which will be concentrated mostly across secondary / peripheral locations of leading cities. Owing to a sustained slowdown in sales volume, developers will most likely defer large scale project launches in prime markets, and focus mainly on completing their under-construction projects. The completion of on-going projects in select locations might also increase transactions in the secondary market (resale of housing units), which is likely to have an impact on price rises in the primary market.
An interesting development in recent times has been developers moving away from traditional marketing tools and adopting innovative techniques to attract buyer interest and revive sales. Developers are trying out all possible marketing strategies right from 'viral marketing—use of social networking services', and 'experiential marketing—engaging consumer in product testing ' to 'personalized marketing—one-to-one marketing' and staging organized housing events. Real estate developers are expected to continue to devise sales techniques as per the pulse of the market, keeping in mind local market trends.
