MUMBAI: The K-factor, visible in many sectors of the economy, is at play in the housing space as well. Housing sales were at six-year high in the September quarter, however, the sale of affordable housing units declined 10%, as buyers in the segment continued to be troubled by the high interest rates.
Sale of units priced lesser than Rs 50 lakh across the top 8 cities fell from 26,831 units in Q3CY22 to 24,143 units in Q3CY23. The share of this segment in overall sales shrank to 29% in from 36% in same period last year, as per data by Knight Frank India.
At the same time, the overall housing sales grew 12 % in September quarter at 82,612 units across 8 major cities, the consultant said.
“The consumers in the affordable housing segment are the most exposed to any mortgage related pressure coming from increased home loan interest rate and increased down payment requirement,” said Vivek Rathi – national director research, Knight Frank India.
Since May 2022, the Reserve Bank of India has increased the repo rate by 250 basis points. The consequent increase in the home loan rates has shrunk affordability by 15% across all consumer categories, however, the impact is felt the most in the lower income category, Rathi added.
Interestingly, the higher segment that is between Rs 50 lakh to Rs 1 crore , has seen a growth of 14 % in sales . The share of this segment remained constant at 36%. This is because they have lower reliance on mortgages and also a relatively higher ability to tap into other assets to support the increased financing requirement, he explained.
Units priced above Rs 1 crore and Rs 2 crore saw 39% and 75% jump in y-o-y sales, respectively. Their shares in overall sales also rose to 35% (28%) and 13% (8%) on a yearly basis.
Anuj Puri, chairman at Anarock Property Consultants said that the dwindling demand has also been due to high rise in the equated monthly instalments by almost 20% in the past two years. The floating interest rates for home loans up to Rs 30 lakh have jumped up from 6.7% in mid-2021 to nearly 9.15% today. Home loan borrowers who were paying an EMI of around Rs 22,700 in July 2021 are now paying about Rs 27,300 today – an increase of about Rs 4,600 per month, he said.
This 20% increase in the EMI has resulted in a jump of about Rs 11 lakh in the overall interest component – from about Rs 24.5 lakh interest payable in 2021 to about Rs 35.5 lakh today.
Developers agree that affordable housing has fewer takers now. “In the last quarter, we have seen a decline in demand for affordable housing due to rising land prices and input costs, thereby putting pressure on the affordability quotient ,” said Sriram Mahadevan, managing director, Joyville Shapoorji Housing.
He added that post-pandemic, demand from mid-and premium house buyers has largely risen due to rapid urbanisation, favourable economic conditions, the influence of millennials, and Gen Z emerging as key drivers.
Due to the slowdown, even developers are undertaking fewer projects. The total new supply share in the affordable category across the top 7 cities has declined from 23% in H1 2022 to 18% in H1 2023, according to TruBoard Partners. Pune and NCR saw fall in new launches by 34% and 40% while MMR saw a rise by 78%.
“About 25-30% of the launches over the next one year are likely to be in the affordable segment. However, given the high sensitivity to price and interest rates (EMIs) in this segment, demand as well as supply is unlikely to pick up in a big way. Developers are likely to focus on launches of mid-sized and premium segments,” said Sangram Baviskar, managing director -real estate at TruBoard Partners.
Source: The Financial Express