Housing demand not likely to improve in 12-18 months: Crisil

According to Crisil, high property prices have turned end-users into fence-sitters in most micro markets

The demand for residential property is not likely to revive in the next 12-18 months but more launches in affordable housing segment are expected, said a research report by Crisil released on Tuesday.

"Among cities, demand in the National Capital Region has wilted the most over the past 4-5 years and is unlikely to recover in the medium term. The sheer number of disputes between buyers and developers there is a clear indication of lost confidence of not just the end-users but also of the investor community," said Crisil Research's Director Binaifer Jehani.

The absorption of new homes has been on a slide for over six years now, the report said.

"Our analysis shows home sales in the top 10 cities - Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, MMR, NCR and Pune - have declined at a compound annual growth rate of 8 per cent since 2011. The trend appears set to last well into fiscal 2019 or beyond, portending more pain for developers," it said.

According to it, high property prices have turned end-users into fence-sitters in most micro markets. Increasing concerns over job losses and lack of employment opportunities were also key to the declining trend.

The report also pointed out rentals are being preferred to buying a property and many nuclear families are opting for rental accommodation in suburban locations than purchasing a house in a peripheral micro market.

There are risks associated with delivery of under-construction projects, especially delays in getting possession from the developers, which deter buyers, it said, adding that the resurgence in buyers' confidence will happen only when they see the Real Estate (Regulation and Development) Act (RERA) working in their favour.

The report also highlighted, until recently, developers were focussed on mid-category, luxury or premium housing projects. This has led to huge unsold inventory of units - especially in the mid-segment - which are beyond the reach of the average buyer, and developers have only just shifted focus to affordable segment.A

"The next few quarters will see more launches in the affordable housing category, or projects with smaller configurations, leading to a reduction in the overall ticket size. That, along with falling interest rates and supportive credit-linked subsidy framework, will benefit end-users because affordability improves," said Crisil Research's Senior Director Prasad Koparkar.