The affordable segment has emerged as the main driving force of the real estate sector and may help revive the market in the near future.
The affordable segment of housing – 2BHKs of around 1,000 sq ft in the price range of Rs 3035 lakh may help revive the real estate market in the country, especially in the Delhi NCR region, reports say.
A report by consultancy firm Cushman & Wakefield says that the affordable segment has emerged as the main driving force of the sector and may help revive the real estate market, which has been facing turbulent times for the past few years, due to delay in giving possessions.
The report by Cushman & Wakefield said that the residential market, which saw a slump in launches in 2015, registered a comeback in the January-March quarter of 2016, backed by a 62% rise in launches in the affordable housing segment – 4,600 units against 2,800 units in the same period last year. The affordable segment constitute of around 41% of the total launch in the NCR.
The report said that in a bid to increase the attractiveness of affordable housing, developers have reduced the average ticket price by 10% in the January-March quarter of 2016, compared to the same period in 2014, in the NCR.
This drop in launch price of affordable units was brought about by a mixed strategy of lowering the average launch prices and by resizing the units. The average launch price registered a decline of 2% in the first quarter of 2016, to Rs 3,190 per sq ft, combined with an 8% decline in the average size of the units, to 1,030 sq ft, compared to the first quarter of 2014, the report said.
The conscious effort by developers to increase the attractiveness of the affordable segment comes at a time when launch of affordable units remains comparatively high.
“Over the last few quarters, the share of affordable housing has constantly increased, as developers and investors view this segment more favorably.
“With the NDA government laying strong emphasis on affordable housing and extending tax incentives to this segment, coupled with the cautious approach by end users in other segments, developers are betting big on the affordable segment,“ Shveta Jain, executive director (residential services) of Cushman & Wakefield, said.
The Union Budget has offered an additional tax incentive to buyers of affordable houses, costing less than Rs 50 lakh, on a loan of up to Rs 35 lakh. Under this, buyers will be allowed an additional deduction of Rs 50,000 on account of interest payment on home loan from their taxable income. This is over and above the Rs 2,00,000 deduction allowed on interest payment on the home loan.
Another consultancy firm, JLL India, also said that things are now looking up with the pace of economy gathering steam and through various initiatives announced by the NDA government.
Ashwinder Raj Singh, CEO (residential services) of JLL India, said that 2015-16 saw traction in urban demand and that the current financial year is expected to usher in growth in the rural economy, on the back of a favorable monsoon. Agriculture accounts for 15% of the country’s GDP and, with 2016 being declared a La Nina year, further growth is more or less assured, Singh said.
Hopes of a favorable monsoon this year, coupled with the recent rate cuts by the RBI, are compelling reasons for growth in the realty sector in the near future, says Aman Nagar, director of Paras Buildtech.