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Real estate developers showing interest in affordable housing units; A 27% jump witnessed in new units launched

Oct 11, 2017 01:46 PM

The Government’s decision to incentivise affordable housing through industry status has resulted in the sector recording a surge of 27 percent in new units launched year-on-year. This is across top eight cities in the country. Numerous developers are coming forward to develop affordable housing projects. In 2017, more than 26,000 units have been launched up to now. Out of the total affordable units newly launched, 40 percent were in Mumbai, followed by Kolkata and Pune. About 10,500 units have been launched in Mumbai.

According to a Cushman & Wakefield report, there has been a significant drop in new launches of luxury and high-end units. The former has seen an 84 percent drop and the latter, a 66 percent drop. As the demand for affordable housing units is massive and mostly unmet, more and more developers and consumers are taking interest in these houses. Developers now have more funding options, “such as ECB, FDI and debt financing from national financial institutions at highly competitive rates,” thanks to the Central Government.

However, Anshul Jain, Managing Director of India Cushman & Wakefield, believes that affordable housing projects in Tier-1 cities area challenge because of land cost and availability of such land in established locations. The strong trend that affordable housing is showing is here to stay though. This is more so because of Indian government’s focus on “Housing for All.” To keep the momentum going, a number of added incentives on land acquisition costs are needed. The largest component of project cost is the land cost.

Despite a 27 percent surge in new launches of affordable units, the overall residential launches have recorded a 33 percent decline. From January-September 2017, this figure stood at approximately 60,000 units. There could be continued scepticism from developers with respect to new launches. Even end-user sentiments will remain cautious. This will lead to developers focusing greatly on their unsold inventory. They will come up with attractive offers, gifts, freebies, payment options and discounts, and make full use of the festive season.
According to ET Realty, Mumbai has witnessed the highest number of launches until September, more than 19,400 new residential units. Of these, about 10,000 have been affordable housing units. This is a 300 percent rise over same time in 2016. Mumbai is followed by Pune at 8,400 units and Bengaluru at 8,200 units. This is a year-on-year decline of 41 and 48 percent, in terms of total number of residential units launched.

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