Construction sector rolls again, but home prices need a leash
The most recent growth numbers show a construction boom. But there is an underlying suspicion that the builders’ lobby is dressing up the demand and pumping up prices. A recent report said that prices in Navi Mumbai had touched Rs 40,000 a square foot, and two-bedroom apartments in this distant Mumbai suburb were selling for Rs 4 crore apiece. Casual inquiries show these figures are nearly twice the actual prices being negotiated on the ground. A more balanced report said that while home sales have been robust, the construction boom raised big, listed realtors’ inventory by over 28 per cent during the April-September half-year. As a result, the value of unsold stock ballooned to over Rs 1 lakh crore by the end of September. High inventory will hopefully keep housing prices on a leash.
Meanwhile, GDP data released this week showed the construction sector growing at a healthy 13.3 per cent during the July-September quarter compared to a year earlier—its best performance in five quarters. This contributed to the GDP growing at 7.6 per cent, making India one of the fastest-growing major economies. While some builders and brokers have claimed that sales sky-rocketed 36 per cent in the July-September quarter, independent consultancies say the sales growth has been around 10 per cent and project price appreciation in large cities has been in the 5-10 per cent range. What emerges beyond the fluff is that sales and prices have regained their pre-Covid levels and consumer confidence is pushing the home market forward.
There is a huge latent demand for housing, driven by an estimated shortage of 19 million units; this is expected to double by 2030. The situation has worsened as the government’s ‘housing for all by 2022’ has been a failure. High land and input costs, and the fly-by-night nature of some parts of the industry have made housing unaffordable for the common man. This in turn has spawned a huge informal industry resulting in burgeoning slums and overcrowded townships. The current attempt to jack up prices, therefore, could contribute to another slump like we have seen in several boom-and-bust cycles over the past two decades. It is a sector that cannot be left to the avarice of private builders. A regular supply of affordable mass housing by government bodies is needed to ensure a balanced market.