A Remarkable Comeback

Residential unit launches were up 25% in Q1 2016 over Q1 2015 while affordable segment launches rose six-fold as per the all-India property market research conducted

The first quarter of 2016 witnessed launch of approximately 31,200 units across the top eight cities in India, recording an increase of 27% year–on–year, according to property consultants Cushman & Wakefield. The residential market, which saw a slump in launches in 2015, saw a remarkable comeback in the first quarter, backed by a six-fold rise in launches in the affordable housing segment, which saw an addition of over 10,950 units during Q1 2016 as developers foresee greater demand in this highly price-sensitive segment

Key Segment

The affordable segment accounted for approximately 35% of total launches during Q1 2016. Over the last few quarters, the share of affordable housing has constantly increased as developers and investors are viewing this segment more favorably. Affordable housing segment comprise 22% of total unit launches seen in 2015, up from its share of 17% in 2014.

Price Proposition
 
In the same time, average launch prices have witnessed some decline across major cities, making the new projects cheaper than those launched 12- 24 months ago. Mumbai witnessed a significant drop in launch prices of close to 35% in Q1 2016 as against those launched in Q1 2014.

Mumbai Market The average launch price for affordable units declined 36% in Q1 2016 from Q1 2014 to approx. 4,300 per square feet (psf), as developers look to attract buyers in the low-cost segment in Mumbai. Developers expect rationalization in launch prices in this highly price-sensitive segment to increase the sales velocity in the segment.

Size Strategy
 
Developers have also been adopting a strategy of offering residential units in smaller sizing in order to attract buyers. The average unit size of affordable units was seen at approximately 850 sf, a 11% decline over a period of 2 years between Q1 2014 and Q 2016.

Launch Pattern
 
During the current quarter, launches in Mumbai accounted for 17% of total launches (across 8 cities) at 5,360 units. This represents an increase of 35% in Q1 2016, as compared to Q1 2015. The mid-segment accounted for the majority of launches, with launches in the segment spread across the eastern suburbs, Thane and Navi Mumbai. During the quarter, the affordable segment accounted for only 5% of total launches in the city.

Betting on the segment

“Developers have come to realize the vast potential of that was remaining untapped in the affordable housing segment. They have now come to recognize the potential of the segment and are expecting greater momentum in demand in the affordable segment as customers are seen to be more price-sensitive in the current market. With strong emphasis on affordable housing by the government, tax incentives extended by the government, as well as the cautious approach by end-users in other segments, developers are betting on the affordable segment," said Shveta Jain, Executive Director, Residential Services at Cushman & Wakefield.



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