Affordable housing faces bump

In 7 major cities, new launches come down to 58,381 units till October 2015 from 1,31,448 units in 2013

The number of launches in the affordable category declined 55.5 per cent to 58,381 units between January and October 2015 from 131,448 units in 2013 across seven major locations including Delhi-National Capital Region (NCR), Mumbai metropolitan region, Pune, and Bengaluru. This shows the overall slowdown in the real estate sector has impacted the affordable housing segment, with units priced at Rs 10-30 lakh.

The sharpest decline in new launches in the affordable space came in Hyderabad at 83.8 per cent with unit numbers dropping to 696 during January-October 2015 from 4,312 units in 2013. In Mumbai metropolitan region, new launches came down by 71.3 per cent with 12,660 units during January-October 2015 from 44,168 units in 2013; in Bengaluru, it dropped 65.2 per cent with 4,152 units in January-October 2015 from 11,950 units in 2013, according to data by real estate research firm PropEquity.

Similarly, on absorption in the affordable segment, there has been a decline of 14 per cent across all major cities. From 92,024 units absorbed in 2013, it came down to 79,153 units in the first 10 months of 2015. Only in NCR and Kolkata was the absorption positive for the same time period.

According to experts, the market started to pick up towards the end of last year, but the results will be visible in the next couple of quarters. Since the past few years, there has been a slow uptake in sales with a huge inventory.

Developers have been focusing on clearing existing inventory with few launches; besides, fund crunch became a major issue. The margins of developers have shrunk from 30 per cent to 15-20 per cent over a period of time, forcing many to do away with affordable products because of rising input costs.

A consultant says this is one of main reasons for declining launches in the affordable category. “In areas such as Gurgaon and some locations of Uttar Pradesh, where the state governments are giving incentives to launch projects in this category, developers are going ahead.”

Due to increasing costs, many companies including Tata Housing and Value and Budget Housing Corporation have been resorting to new technologies such as pre-fabricated units to keep costs under check.

REAL WOES