South India beats north in the real estate game: Here're the details

For the past 15 years, first the booming IT sector and then the burgeoning ecommerce industry in the south helped in generating a steady stream of end-users

Big listed real estate companies drive profits home in a dull market
Karan Choudhury Bengaluru
4 min read Last Updated : Aug 16 2019 | 2:41 AM IST
The contrast between the state of real estate between North India and South India could not have been more stark.

While throwaway land prices, greed and a disregard for laws led to the real estate bust in the north, the southern market, thanks to being more end-user-driven, along with factors such as economic growth, job creation, and security, as well as strong sentiment, has been consistently doing much better. With reliable developers who completed projects in time, goodwill and positive sentiment have been created.

According to industry experts, for the past 15 years, first the booming IT sector and then the burgeoning ecommerce industry in the south helped in generating a steady stream of end-users.
 
The numbers say it all

According to ANAROCK Research, the National Capital Region’s (NCR’s) residential absorption in 2014 was nearly 114,000 units while all three southern markets combined saw housing sales of merely 88,000 units during the same period. 

“However, there was a stark change in this trend henceforth with southern markets increasing their overall housing sales share y-o-y. In 2015, housing sales in the NCR significantly dropped to 77,000 units while sales in the southern markets rose to more than 100,000 units. This trend has continued since then,” said Santhosh Kumar, vice-chairman, ANAROCK Property Consultants.

According to the 2019 data for the first half of the year, 26,380 units were sold in the NCR while Bengaluru alone saw an absorption of nearly 28,730 units, followed by Hyderabad with 9,830 units and Chennai with 7,550 units.


According to Vivek Rathi, director, research, Knight Frank India, while developers in both cities are more conservative than their northern counterparts, Bengaluru and Hyderabad have experienced a different course of development. 

“Bengaluru is market driven by end-users and has a burgeoning professional class looking at acquiring properties. Hyderabad is still catering for a backlog of buyers. In Hyderabad, for many years leading to the bifurcation of the state, development activities were at a near standstill. Both these markets are therefore seeing growth in demand.”

At the individual city level, Bangalore has always seen maximum new supply and absorption over the last several years. Increased commercial activity backed by high demand from the IT/ITeS sectors coupled with restored consumer sentiments has given an upper edge to the ‘Garden City.’ According to ANAROCK, as many as 20,080 new units were launched in Bengaluru. 

Among the leading and prominent residential developers in South India who have launched several projects and seen good sales over the last few years are Sobha Developers, Puravankara, Prestige Estates, Brigade Enterprises, Salarpuria Sattva among others.

What happened in the north?

According to industry experts, crisis that has engulfed once booming real estate market mainly in the satellite cities of the Noida and Greater Noida had a flawed foundation to begin with.

It might take anywhere between 15 years to almost two decades for the 80,000 odd home buyers mainly in projects of beleaguered real estate developers Amrapali Group, Jaypee Infratech, Unitech and 40,000 more in hundreds of smaller projects to finally take the keys to their flats. 

Stalled due to lack of funds, caught in litigation and no one coming close to finding a solution to the problem that has mainly affected the NCR region, many now fear the decade long wait would stretch at least five more years and in some cases even decade.

“The northern market till a few years ago was driven by investors who have burnt their fingers in recent years and have subsequently stayed away. This has adversely affected sales in the earlier part of the decade, albeit some respite has come through end-user demand that stabilized the market over the past 18 months. Also this market has seen some prominent cases of defaults in recent times, which has further cautioned buyers who are now only looking at purchasing in developments from reputed building companies,” added Rathi.

According to ANAROCK, 118,000 units, worth Rs 82,110 crore in the NCR, are completely stalled in NCR. “Of these, nearly 69 per cent, or 83,470 units, have been sold. In contrast, all three southern cities together have merely 8,000 units that are completely stalled and their worth is approximately Rs 7,780 crore. This indicates how unprofessional builders have been in the northern region,” said Kumar.

Topics :Real Estate Real estate pricesAffect of GST on real estate sector

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