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India’s housing demand to be 2 mn units in 5 years

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India is going to have a total demand of 2.3 million units of residential property in the next five year, while the estimated supply in the same year is expected to be approximately 1 million units leaving a short fall of over 1.3 million units, a recent report said.
According to Cushman & Wakefield’s (C&W) and Global Real Estate Institute’s (GRI) annual report “Embracing Change – Scripting the future of Indian Real Estate”, India is expected to experience a demand of 3.94 million housing units, growing at a steady pace of 11% Compounded Annual Growth Rate (CAGR). Of this 2.3 million units will be the demand from the top seven cities alone.
The report analysed demand for top seven cities – NCR, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata – in which Cushman & Wakefield Research team estimated demand and supply for the years between 2011 – 15 (both years included).
 
Anurag Mathur, Managing Director, Cushman & Wakefield, India said, “The present economic situation may be viewed as a transitory point for the real estate dynamics in India. Although, the market looks positive in the medium term with considerable demand across sectors, the industry seems to be affected by the rising interest rates, rise in construction costs and inflation. However the long term perspective suggests that the sector will continue to witness demand in all as.”
According to the report, NCR is expected to record the highest demand of over 700,000 units, Mumbai is expected to recorded the highest CAGR of 14% between 2011-15. Bangalore is expected to see a demand of approximately 287,000 units in this period. As a result of significant population migrating into the Tier I cities, these locations are likely to witness highest demand
“Supply on the other side will fall short by a very large margin in this sector. Upon analysis, the short fall in housing in just the top seven cities is estimated to be 130%. Much like demand NCR is also expected to witness the highest supply of residential supply, albeit, much lower than demand, which will be closely followed by Mumbai,” report added.
According to the C&W report, the anticipated demand is likely to exert an upward pressure on property prices especially in markets like NCR, Mumbai and Bangalore where the demand supply gap is high. On the other hand, the tier II cities such as Pune, Hyderabad, etc as a result of the relatively lower demand supply gap between 2011-15 in Tier II cities, are likely to see appreciation of capital values at a slower pace compared to the Tier I cities during this time period.
“The housing demand supply scenario and the resulting gap is likely to reduce in the next five years. However, the upcoming supply needs to be priced judiciously along with appropriate location, infrastructure, connectivity, relevant features and amenities to ensure absorption,” said Akshay Kulkarni, Executive Director, Cushman & Wakefield, India.
Of the total demand in the top 7 cities, the mid-ranged housing segment is expected to drive the maximum demand (45%). Majority of the developers in the top seven cities are concentrating on this segment which would help reduce the supply /demand gap, the report said.
On the other hand, the affordable segment of the property market which is likely to register approximately 3 times more demand than supply might see gap increasing during the next five years (2011-15).
“We understand that majority of the supply will be for mid ranged housing, however, there is a very large latent demand for Lower Income Group (LIG) and Economically Weaker Sections (EWS) housing,” Kurlkarni said.
He further added, “Several states across India are considering allocating a percentage of developed land to LIG and EWS in order to meet the demand arising from this segment. This may help in boost the supply in the affordable segment.”
Source: Cushman & Wakefield Research

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