Mid-segment in big league

Geetu Vaid

he battered and beleaguered residential segment seems to have found its price sweet spot in 2018 — a ticket size that the end users are not reluctant to grab. Not only is this price easy on pocket, but  due to the policy push the housing stock in this price range is also high. In the end user- driven market, it is the Rs 20  lakh to Rs 50 lakh price segment that is fetching good returns across the cities. 

According to data released recently by India’s largest marketplace for new homes Square Yards, the share of mid-market houses priced between Rs 20 and Rs 50 lakh has touched an all-time high of 42 per cent in the second half of FY 2018-2019. This category has  grown at a staggering rate of 21 per cent CAGR since first half of FY 2016-2017.

A recent report by Magicbricks. com also ratifies this trend while maintaining that affordable housing is the biggest driver for growth in the real estate sector and that urban India’ housing deficit has reduced by 60 per cent with the implementation of Pradhan Mantri Awas Yojana (PMAY). The report  states that more than 9 lakh houses of up to Rs 50 lakh each had been completed in just over three years and over 30 lakh had been approved. More than 60 lakh houses had been sanctioned under the PMAY (U) till October 15, 2018, out of which 33 lakh are under beneficiary-led construction (BLC).

“Mid-market housing segment is witnessing robust sales for the past two-three years as this is where the bulk of the demand has always been, but it is only recently that the developers have started concentrating on this category and have begun aligning their offerings with the actual needs of the buyers”, says Tanuj Shori, Co-Founder and CEO, Square Yards.

While maintaining that credit linked schemes like CLSS have acted as a catalyst to boost demand, Jayashree Kurup, Head of Content and Advisory- Magicbricks, says, “There was always demand from end users in this segment, but supply was scanty or in very far off locations which were difficult to live in.  Now with a policy push towards completion, handover and also more infra projects getting completed, end users are seeking to buy mostly completed projects”.   

The buyer preference is making more and more developers shift focus towards this segment as is evident from the share of mid-market inventory in the new launches. According to data provided by Anarock around 22,120 new units were launched in the affordable category of less than Rs 40 lakh segment in the second quarter of 2018 across top seven cities. And affordable housing units comprised 46 per cent of the total new supply in the same category. “Today even the best developers are opting to enter the affordable or mid segment category. That tells its own story”, says Jayashree Kurup, Head of Content and Advisory- Magicbricks. This is evident from the fact that many developers have dedicated verticals for affordable housing projects. Thus, while players like Godrej Properties have exclusive affordable projects across cities, Tata Housing has its vertical Value Homes, ATS has HOme Craft, Sushma Buildtech in Tricity has JoyNest brand, Shapoorji Pallonji Group has Joyville, Purvankara is building affordable housing units under ‘Provident’.  And with around 2,37,000 units in the affordable segment  unsold in second quarter of 2018 across top seven cities,  the buyers have plenty of choice at the moment. 

Even in the ongoing projects the stress is on completion of units in this price bracket. According  Anarock figures over 3.5 lakh units had been completed  between September 2017 to August 2018 in the top seven cities and about 76 per cent of these were in the below Rs 80 lakh category. And 95 per cent of these have already been sold and are ready for  occupancy.

The NRI factor

The availability of new as well as ready-to-move-in stock in this category is also attracting NRIs. Square Yards, that has virtual monopoly over many of the NRI markets for real estate has reported  steep demand from NRIs for the mid-market housing projects. Commenting on this trend Shori says, “Contrary to the popular belief that NRI investors chase high-value property,  they are prefering these as they can hedge their risks better by investing in many projects with each ticket size being smaller. They also know that they can have better exit options and higher returns owing to soaring sales in this segment.”

High-Growth trajectory

• The India Brand Equity Foundation reports that New housing launches across top seven cities increased 27 per cent year-on-year in January-March 2018 and most of these new launches were in the affordable housing sector.
• The supply in the affordable housing segment of less than Rs 40 lakh saw an increase of 100% in the second quarter of 2018 as as against the previous quarter. 
• Overall supply in Q2 of 2018 was dominated by the affordable segment with nearly 46 per cent supply in this category.