Key factors that stood out in the year 2015

The Indian real estate sector is essentially a tale of two asset classes the office sector that rebounded in the past year and the residential real estate sector that continued to remain sluggish in the year gone by. The residential space is witnessing weak sentiments with inventory levels remaining high in key markets. The end-user demand continues to remain a sticky point in the residential space, as the sector grappled with a perceptible inventory overhang in 2015.

Some of the key factors that stood out in the year gone by have been:

- The lower-than-expected sales in the sector have led to developers constraining new supply this year, thus focusing instead on completing their existing projects.

- The January-September 2015 period saw a 36 percent decline in unit launches as a result of subdued demand.

- On the retail front, exit of retailers in select malls in Thane and Bhandup-Mulund submarkets resulted in a 4.3 percentage point increase in vacancy levels to 18.6 percent in the Q3 of 2015.

- Roughly, 54,000 units were launched in the mid-segment between the period of January and September 2015.

- Developers have aligned their projects to the market needs by right-sizing and right-pricing units to make them more affordable. They are focusing on increasing affordability for end-users by cutting down unit sizes or reducing the average selling prices, which would result in lower ticket size of apartments. For example, in Mumbai, Mulund, Thane, Goregaon and Malad (accounting for nearly 40 percent of total launches during 2013 to September 2015) have witnessed a decline in the average ticket size with Goregaon and Malad being the frontrunners (double-digit decline).

- It is important to note that private equity players still seem to be committed to the residential sector, with the asset class attracting a major chunk of total PE investment volume between the January and September 2015 period. Total PE investment volume in the residential sector increased three-fold during the nine month period to INR 141.4 bn (USD 2.2 bn).

- The 1 bedroom-Hall Kitchen (BHK) units dominated the mid-segment launches with a 49 percent contribution followed by 2 BHK units at 43 percent.

Developers are focusing on increasing affordability for the end-users by reducing unit sizes that would, in turn, lower the ticket size of apartments.

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