Absurdly high prices for residential property have got to a point where consumers are pushing back. Both home sales and fresh construction have taken a hit in the first 6 months of the current calendar, and the downward trend is likely to continue for some time.
In what industry pundits are calling the ‘sticker shock’, first-time home buyers are flabbergasted by the high prices being quoted by builders. Preferring to withdraw from the market, some continue on rent; others lick their wounds and save their fight for another day.
Sample these: The Aditya Birla Group’s Niyaara project in Worli, Mumbai – three residential towers on land which was once Century Textile Mills – has priced two-bed apartments under 1,000 sq ft between Rs 6.5 and 10 crore. A broker’s flyer sent to this writer quoted a Niyaarafour-bed,3,034 sq ft duplex flat at Rs 30.82 crore! Jasdan Heights, a Prestige Group project near Mahalaxmi, is pegging a three-bed apartment at Rs 8.5 crore. Effectively, these under-construction projects, cost an outrageous Rs 65,000 to Rs 1 lakh a square foot.
Pune, which has a robust middle income residential property market, has recently been in the news for falling sales. From January to June this year, there were just 33,510 units sold – a 29 percent drop from the 44,135 units sold in the same January-June period of 2024.
Calling it a ‘sticker shock’, Pune developer Rohit Gera likened it to going to buy a bottle of shampoo, but then walking away after seeing a price tag of Rs 1,200.
Falling sales
The national trend is in sync with Pune with estimates of falling sales ranging from 20 to 28 percent. Brokerage and consultancy firm PropEquityreported housing sales for the April-June quarter this year fell 19 percent year-on-year to 94,864 units, while new supply dropped 30 percent to 82,027 units across 9 major metros.
Mumbai saw the steepest declines– home sales fell 34 percent to 8,006 units while new supply too plunged 61 percent to 4,949 units. Of the 9 cities surveyed, 7 saw declines in sales and supply, but Delhi-NCR and Chennai bucked the trend with sales up by 16 and 9 percent, respectively.
On the other hand, housing sales in Bengaluru declined 6 percent to 14,676 units in the second calendar quarter while supply fell by 13 percent to 14,243 units on a y-o-y basis; Hyderabad registered a sharper fall of 20 percent to 11,815 units.
This is significant. For the first time since the July-September quarter of 2021 all-India housing sales have fallen below the one lakh units. Supply, too, has stayed below the one lakh mark for the fourth consecutive quarter, perhaps to hold up the price line.
Analysts blame the uncertainty on the uncertainty in global markets and the high base effect with the previous two years having experienced rapid sales and upward moving prices. However, it does need rocket science to understand the big factor responsible for consumer resistance is high, and inflexible property prices.
Recent data by Anarock Property Consultants shows properties in Delhi NCR’s Noida, particularly Sector 150, saw capital values spiral 128 percent between 2021 and 2024. In contrast, the monthly rental yields for a two bed, 1,000 sq ft apartment in Noida Sector 150 grew only by 66%.
Unaffordable prices
According to Pankaj Kapoor, who heads the property tracking firm LiasesForas, In many markets, especially in Gurgaon, there is a nexus between builders and investors. Large blocs of apartments are cornered on payment of small tokens by investors. Buyers are then told there is very little inventory, when in fact there are very few genuine sales. The investors hang on to the high prices which suits the builders and their promoters. Between them they manage to rig up the prices beyond market demand.
Developers, on the other hand, have their own sob stories pointing to the high price of land acquisition, rising cost of construction, and extreme corruption. This leaves very little elbow room to cut prices and stoke demand, they say.
Just how unaffordable owning a house is was highlighted by a daily newspaper’s study recently. The study found that for even the wealthiest 5 percent of urban households in Maharashtra, it would need 109 years of savings to buy a house of 110 sq meters (1,184 sq ft) in Mumbai. While Mumbai is the least affordable of India’s cities, the wait time for families saving for a house in other capitals could be quite long too.
In Gurgaon it would be 64 years, Bhubaneshwar 50 years, Bangalore 36 years and Delhi 35 years. The only city perhaps where the wait time is reasonable is Chandigarh where a high income person can save enough in 15 years to buy a house. While the scientific veracity of the study is not tested, it still underlines how costly and unaffordable owning a home in urban India is given our income levels.
The answer then to owning a home is therefore not savings but the route of either selling ancestral property or to take huge home loans that makes us slaves to our jobs and careers for decades. A less painful answer to this tangle unfortunately is not on the horizon.