Demand for affordable housing continues to drive residential sales: report

affordable housing

Demand for affordable housing has continued to drive residential sales, which is expected to stabilise going forward. Also, pre-leased office space remains the most sought-after asset for the majority of private equity capital into the real estate sector, a new report by Colliers International titled Asia Market snapshot – Q2 2018 has said.

Warehousing and logistics remain a dark horse, with a number of PE-backed platforms looking to set up logistic parks to cater to the huge pent-up demand for grade A facilities in the industry, it said.

Affordable housing remains the main source of demand as the contribution of this segment to overall sales in tier I cities increased, with sales driven by new launches and mid-income and affordable housing, it says.

Recent policy decisions such as the enhancement of the carpet area for middle income group customers under the Prime Minister Awas Yojna (PMAY) scheme and the revision of housing loan limits for priority sector lending are seen to fuel optimism among buyers for affordable housing. The Reserve Bank of India (RBI)’s decision to hike key interest rates by 25 bps may dampen market sentiment, but isn’t expected to significantly impact sales velocity, it said.

A positive leasing market with strong global occupier demand has sustained investors’ interest in the commercial real estate sector. Warehousing and industrial are also expected to pick up following the granting of infrastructure status to the logistics sector, the report said.

“Although the luxury residential sector is still under stress, the mid-income segment volumes have shown signs of revival in the past two quarters. Affordable housing has been driving most of the volumes in the residential sector. On the other hand, commercial real estate absorption has remained strong, showing signs of a robust business environment. With the introduction of GST, there has been increased focus on creating a large logistics network, backed by large ticket private and public investments. The real estate industry across sectors seems poised to end the year on a reasonably decent note as compared to the previous year,” says Suresh Castellino, Executive National Director, Capital Markets and Investment Services at Colliers International India.