Despite modest new launches, annual housing sales increased by 22 percent and the share of affordable and mid-income housing supply remained more than half across the top cities, says a report by JLL India.
The report, titled, "Residential Market Update – H1 2019", said a sizeable 58 percent of the new supply that hit the prime markets in the first half of 2019 was in the affordable and mid-price segment and the supply was mainly concentrated in the peripheral areas of the cities, it said.
With Hyderabad being on top among the seven cities, residential real estate market witnessed an increase of 22 percent in sales at a pan-India level during the period, it said.
Key markets of Mumbai, Bengaluru and Delhi NCR accounted for more than 60 percent of the total sales. Pune, followed by Chennai and Bengaluru, have the maximum share of affordable and mid-price units in new launches, the report said.
New launches across the seven cities dipped by 11 percent except for Mumbai and Bengaluru.
The share of affordable and mid-income housing has seen an increase up to 58 percent at the country level. Pune tops the list with 91 percent of the new supply falling in the affordable and mid-income category, the report said.
During the first half of 2019, Hyderabad recorded the highest growth in sales at 65 percent, followed by Delhi NCR (42 percent) on a year-on-year basis. In Chennai, sales grew by 24 percent over the second half of 2018, however it is yet to match the levels of the first half of 2018, the report said.
Sales are likely to receive a further fillip with progressive policies of the government. During the first quarter this year, the government further lowered GST rates on affordable homes to 1 percent from the earlier 8 percent, without input tax credit (ITC).
The GST on projects under construction, which are not under the affordable housing segment, was reduced to 5 percent from 12 percent. The rate revision augurs well for homebuyers as the process of claiming the ITC under the former system was complex.
“Series of reforms and rising buyers’ interest in the segment have propelled the sector to align itself to the market demand. Interestingly, in most cities, homebuyers continue to focus on ready to move in projects and projects nearing completion. As a result of this shift in buying preference, developers too are focused on completing their ongoing projects,” said Ramesh Nair, CEO & Country Head, JLL India.
“Limited number of launches by developers, in a way, is helping the sector to balance the demand supply scenario in the country. This will act as a cushion and help the sector revive. As a result of the reform measures more specifically RERA and GST, we expect more transparency in the sector which in turn will bring back buyers’ confidence,” says Siva Krishnan, MD - Residential Services, Developer Solutions and Strategic Consulting.
The report added that a substantial decline in launches, combined with a strong growth in sales in the first half of 2019, has brought a parity between year-to-sell (YTS) and average construction period across cities.
“With Delhi NCR and Kolkata being the exception, the average YTS at 3.4 years across the 7 cities compares favourably with the average construction period for a typical residential project across these cities at 3-4 years,” said Samantak Das, Chief Economist and Head of Research and REIS, JLL India.