Housing Sales to Remain Strong Despite Modest Launches in First Half

Annual sales increase by 22%; share of affordable and mid-income housing remains over 50% across top cities

July 08, 2019
  • Key markets of Mumbai, Bengaluru and Delhi NCR accounted for more than 60% of the total sales
  • New launches across the seven cities dipped by 11% except Mumbai and Bengaluru.
  • A sizeable 58% of new supply that hit the prime markets in H1 2019 was in the affordable and mid-price segment; supply mainly concentrated in the peripheral areas of the cities
  • Pune followed by Chennai and Bengaluru have the maximum share of affordable and mid-price units in new launches.

Sales are expected to remain strong despite modest new launches in the country witnessed during the first half of the year (H1 2019), according to the latest JLL report, Residential Market Update – H1 2019. With Hyderabad being on top among the seven cities, residential real estate market witnessed an increase of 22% in sales at a pan-India level during the period, it said. Interestingly, the share of affordable and mid-income housing (ticket size of up to INR 10 million in Mumbai and INR 7.5 million across other cities), has seen an increase up to 58% at the country level, the report added. Pune tops the list, with 91% of the new supply falling in the affordable and mid-income category.

The report added, with gradual revival in homebuyers’ confidence and improved affordability, markets witnessed a resurgence in sales in 2018. The resurgence continued in H1 2019.

Sales on a strong footing

 

H1 2016

H2 2016

H1 2017

H2 2017

H1 2018

H2 2018

H1 2019

Mumbai

13,408

12,565

12,309

12,074

13,659

13,199

17,037

Bengaluru

16,540

15,919

13,078

11,902

13,382

15,758

14,978

Delhi NCR

21,610

12,697

8,272

6,168

10,383

14,342

14,789

Pune

9,431

9,429

9,777

7,844

9,988

11,506

10,824

Hyderabad

5,513

3,363

1,768

1,724

5,476

7,726

9,036

Chennai

9,227

8,036

5,255

3,885

8,237

6,186

7,660

Kolkata

4,442

5,655

778

1,524

2,955

3,721

3,923

Overall

80,171

67,664

51,237

45,121

64,080

72,438

78,247

Source: JLL REIS

During H1 2019, Hyderabad recorded the highest growth in sales at 65%, followed by Delhi NCR (42%) on a y-o-y basis. In Chennai, sales grew by 24% over H2 2018, however it is yet to match the levels of H1 2018.

Sales are likely to receive a further fillip with progressive policies of the government. During the first quarter this year, the government further lowered GST rates on affordable homes to 1% from the earlier 8%, without input tax credit (ITC). The GST on projects under construction, which are not under the affordable housing segment, was reduced to 5% from 12%. The rate revision augurs well for homebuyers as the process of claiming the ITC under the former system was complex. 

“Series of reforms and rising buyers’ interest in the segment have propelled the sector to align itself to the market demand. Interestingly, in most cities, homebuyers continue to focus on ready to move in projects and projects nearing completion. As a result of this shift in buying preference, developers too are focused on completing their ongoing projects,” said Ramesh Nair, CEO & Country Head, JLL India.

With developers focusing on delivery of already launched projects, new launches of residential units decreased by 11% on a y-o-y basis across the top seven cities, the report added. With the exception of Mumbai and Bengaluru, where launches grew y-o-y, all other cities saw a dip during H1 2019. Mumbai, Delhi NCR and Bengaluru continued to dominate launches and formed three-fourth of the overall launches during this period.

“Limited number of launches by developers, in a way, is helping the sector to balance the demand supply scenario in the country. This will act as a cushion and help the sector revive. As a result of the reform measures more specifically RERA and GST, we expect more transparency in the sector which in turn will bring back buyers’ confidence. ” said Siva Krishnan, MD - Residential Services, Developer Solutions and Strategic Consulting.

Launches on a slower track

 

H1 2016

H2 2016

H1 2017

H2 2017

H1 2018

H2 2018

H1 2019

Mumbai

11,088

12,400

12,590

20,252

18,196

21,774

28,723

Bengaluru

18,474

9,638

9,287

11,370

16,495

20,791

18,273

Delhi NCR

6,065

5,703

4,920

3,327

11,960

5,700

8,073

Pune

12,855

12,551

9,974

7,978

10,390

10,294

6,776

Hyderabad

10,905

3,702

4,484

6,123

8,920

6,735

4,363

Chennai

8,751

6,157

2,370

6,702

8,596

5,328

4,189

Kolkata

8,473

1,571

2,446

2,452

7,736

6,537

2,652

Overall

76,611

51,722

46,071

58,204

82,293

77,159

73,049

Source: JLL REIS

The report added that a substantial decline in launches combined with a strong growth in sales in H1 2019 has brought a parity between year-to-sell (YTS) and average construction period across cities. “With Delhi NCR and Kolkata being the exception, the average YTS at 3.4 years across the 7 cities compares favourably with the average construction period for a typical residential project across these cities at 3-4 years,” said Samantak Das, Chief Economist and Head of Research & REIS, JLL India.


About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 91,000 as of March 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.