COVID-19 set to derail India’s affordable housing segment

New Delhi: The coronavirus crisis and the ongoing lockdown in India will severely affect the country’s affordable housing sector, according to a report by Anarock Property Consultants.

The report noted that around 6.1 lakh affordable housing units were under construction across seven major cities when the 21-day nationwide lockdown was announced (on March 24 midnight), which are now stalled.

“The COVID-19 pandemic is all set to derail the growth momentum of affordable housing in 2020. This will be one of the worst-affected segments. As many as 6.1 lakh affordable units were under construction across top 7 cities when the lockdown was announced. This is over 39 per cent of the total 15.62 lakh under-construction units in the top 7 cities — the highest share of all budget categories,” said the report.

It noted that while the overall unsold housing inventory is likely to shrink by 1-3 per cent in 2020, the unsold affordable stock may actually increase by 1-2 per cent during this period.

This is in sharp contrast to the trend in the past few years when the demand for the affordable housing units has been higher than the higher-end properties.

The slowdown in the segment would be a major setback for the already subdued Indian realty sector, as this very affordable segment has been seen as the silver lining by the market players who have witnessed a number of blows and low demand in the past 5-6 years, largely in the luxury and mid-range properties.

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At the end of the first quarter of 2020, there are more than 2.34 lakh unsold affordable homes in the top seven cities, which accounts for 36 per cent of the total unsold stock across all budget categories.

“The government’s ‘Housing for All’ push coupled with multiple sops to buyers and developers brought an avalanche of affordable housing projects in India,” said Anuj Puri, Chairman, Anarock Property Consultants.

“As much as 40 per cent of the new supply added across the top 7 cities in the past few years was in the affordable segment (units priced below Rs 40 lakh). Resultantly, there is a huge under-construction supply of about 6.1 lakh units in the affordable segment,” he said

Puri noted that as the target audience of affordable housing typically has limited income and unemployment fears currently loom large, it could result in deferred property purchase decisions in 2020 and ultimately derail the segments’ growth momentum.

National Capital Region (NCR) and Mumbai Metropolitan Region (MMR) alone account for nearly 59 per cent or 3.59 lakh units out of these around 6.1 lakh units, launched between 2013 and 2019.

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NCR has the maximum under-construction affordable housing stock with more than 1.87 lakh units, followed by MMR with nearly 1.72 lakh affordable units. The unsold affordable stock in MMR as in March 2020-end is 68,970 units.

In Pune, under-construction affordable housing stock was close to 1.31 lakh units, while unsold affordable homes stood at nearly 46,630 units. Kolkata continues to have the maximum new supply in the affordable housing category, with a current inventory of 55,300 affordable units under construction. The city’s unsold affordable housing stock is 27,040 units as on Q1 2020 end.

Bangalore has merely 16 per cent or 32,300 units under construction in the affordable category, out of a total of 2 lakh units under construction. This is the lowest share among all top seven cities. Unsold affordable housing stock in Bangalore is currently just 14,800 units.

Chennai has 19,500 affordable housing units under construction whereas the unsold affordable inventory is just 9,220 units. Hyderabad has the lowest share of both under-construction and unsold affordable housing stock. Under-construction stock stood at 11,000 units and unsold affordable inventory was just 3,370 units.

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