CRISIL: Demand for real estate is likely to stabilise

CRISIL: Demand for real estate is likely to stabilise

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The report finds that the base prices have already seen correction of 7-15% across MMR, NCR, Bengaluru and Pune. The more the developers push for volume sales, the more would prices remain under pressure

According to CRISIL’s Realty Check report, the real estate scenario in four key cities of India- [Mumbai Metropolitan Region (MMR), National Capital Region (NCR), Bengaluru and Pune] indicates that demand for new homes has bottomed out and is likely to stabilise in the coming days. The report estimates that over the next 3 years, demand is set to grow at a slow pace of 3%.

Concerns related to income growth, preference for rental options and low confidence in under-construction projects is likely to keep demand range-bound,” says the report. Bengaluru is likely to fare relatively better than the rest of the cities, the report said.

Over the last 6-7 years, demand has declined at a compound annual growth rate (CAGR) of 7%, both on account of city-level as well as sector-level factors. However, affordability has improved because of reduced capital values and more launches in lower ticket sizes.

The report finds that the base prices have already seen correction of 7-15% across MMR, NCR, Bengaluru and Pune. The more the developers push for volume sales, the more would prices remain under pressure.

It should be noted that in addition to the correction in base price, developers are offering discounts such as inclusion of stamp duty registration, waiver of Goods and Services Tax. Freebies and add-ons are also being offered, leading to overall savings of 10-30% for end-users. The price correction, coupled with focus on lower ticket sizes, will improve affordability and give impetus to demand.

Another interesting finding of the report is that over the last 2-3 years, the overall area of new houses launched has been reducing to make houses affordable as the government’s thrust is also on affordable housing. In the case of MMR, for example, only 20% of new launches in the last 3 years were at a ticket size of more than Rs 1 crore, while houses launched before 2017 show 40% units priced at more than Rs 1 crore. All the four cities mentioned above have a similar trend. In MMR, there is a preference for ticket size of less than Rs 1 crore, while in the case of the rest of the cities, there is a preference for ticket size of less than Rs 75 lakh.