Demand for Residential Property nose dives. Here are the reasons
Even after a rise in the project launches of affordable housing, the demand for residential property has been declining.
According to a global analytics company, the demand is unlikely to revive in the next 12-18 months as the fundamental problem of lack of end-user buyers is unlikely to change any sooner. The analysis also shows that residential sales in the top 10 cities i.e. Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai metropolitan region, NCR and Pune, have declined at a compound annual growth rate of 8 per cent since 2011.
REASONS FOR THE DECLINE :
A significant chunk of supply in many micro markets remains unaffordable even when capital values have been under pressure over past few quarters. Studies show several reasons that have contributed to this trend.
- High property prices have turned end-users into fence-sitters.
- Job losses and lack of employment opportunities are reducing income visibility required for a housing loan, which is typically for a long tenure, keeping away buyers.
- Nuclear families are preferring rental accommodation than purchasing a house. Rentals are preferred because high prices of property includes hefty down payments and monthly instalments.
- Delays in delivering the projects by the developers deter buyers, in case of under-construction projects.
The fundamental problem of lack of end-user buyers, is unlikely to change any sooner. Analysts claim that the trendsseem to last well into fiscal 2019 or beyond, portending more pain for developers. They also said that the participation of the investor community has reduced significantly, on account of falling returns on the asset.However, experts believe that the next few quarters will see more launches in the affordable housing category, or projects with smaller configurations, leading to a reduction in the overall ticket size. That, along with falling interest rates and a supportive credit-linked subsidy framework, will benefit end-users by enhancing affordability.However, resurgence in buyers’ confidence will happen only when they’ll see the Real Estate Regulatory Act (RERA) working in their favor.