Mumbai Metropolitan region leads in home demand; Delhi NCR lagging behind: Pankaj Kapoor

Demand has been affected in the affordable and priority segments. In the mid and upper segments, the demand is strong and it is showing growth. But in the priority sector, which is less than Rs 30 lakh apartment cost and then the affordable segment, which is less than Rs 50 lakh, we have seen a bit of a decline largely because these are the people who are highly impacted by any increase in the cost and they are the fence sitters, says Pankaj Kapoor, Founder & MD, Liases Foras

Kapoor also says that the Mumbai metropolitan region has been the highest grosser in terms of the sales and despite increase in the property prices as well as the interest costs,

What exactly is happening? Are people buying more homes in the affordable category? What is the price we are talking about? Are people dreaming small?
It is contrarian. Post pandemic, we have seen that the people's aspiration for bigger houses has increased. In new projects which are being launched, 1 BHK, 2 BHK sizes have been slightly increased from what it used to be earlier. My own sense is that we have already touched the minimum threshold in most of the cities.

Like in Mumbai, my 1 BHK carpet area is around 400 square feet. If you go to Bangalore and some other north Indian cities, the 1 BHK sizes could be slightly bigger in the range of 450 to 500 square feet. In the case of 2 BHKs also, they are in the size range of 550-600 in Mumbai and around 700 in most of the cities in north India and Bangalore. That is basically because the local demands are for the bigger size apartments.


My own sense is that pre-pandemic, the sizes of apartments had really squeezed quite a lot and that is where the demand really got impacted. During the pandemic, people realised that they need bigger houses and the new launches came up with bigger size apartments. However, we need to see how the new launches post 2023 are going to be trending because the EMI has increased close to 15%. The cost of the houses because of the increase in the prices in recent times has also increased close to 12% to 13% across most of the cities.

So, the cumulative increase in the cost of owning the houses by virtue of increase in EMIs and the increase in the cost is close to 28% to 30%. Despite a 10% increase in income in the last one year, we still see affordability has shrunk close to 15%. So, my own sense is that impact will be felt, but I do not see there is too much scope for reducing the sizes beyond this point.

Builders may look at moderating the cost in the hands of the consumer by providing certain incentives and benefits and absorbing the increased cost of the EMIs to themselves. That is what is the way forward looks like.

Given this scenario in mind, I want to understand the pockets where the demand is slightly up as compared to maybe urban areas or where there has been a demand shift in certain pockets. Even the kind of sizes which builders are also offering, is there any kind of data which you can share with us where builders are seeing a huge demand in small size houses or maybe tier II towns where people have moved considering the pandemic impact?
Pankaj Kapoor: What we are seeing, especially in case of 1 and 2 BHKs, is demand from first-time home buyers. The 3, 4 BHKs are generally upgradation projects. In that case, the reduction possibilities are much lower. But when we look at 1 BHK and 2 BHKs apartments, in the last one year ever since the property prices or interest rate started going up, we have seen that the overall decline in the sizes on average at the top six cities in India is less than 3%.

But when we see the demand side, we are seeing that it has affected the affordable and the lower segments of the people. In the mid and upper segments, the demand is strong and it is showing growth. But in the priority sector, which is less than Rs 30 lakh apartment cost and then the affordable segment, which is less than Rs 50 lakh, we have seen a bit of a decline largely because these are the people who are highly impacted by any increase in the cost and they are the fence sitters.

Apart from that, the Mumbai metropolitan region has been the highest grosser in terms of the sales and despite increase in the property prices as well as the interest costs. It has been staying strong. Bangalore has been doing good, Hyderabad has been doing good. Some of these micro markets have been doing well. Ahmedabad has been doing good.

But in Delhi-NCR, because of the past issues of many projects which are still stalled, we have started seeing the prices increase in those markets because we have a limited supply which is marketable. The new launches are still much lower than most of the other cities.

So, in NCR, we are not seeing much recovery to be able to reach old times when the market size used to be as big as the Mumbai market. But look at Hyderabad, Ahmedabad, Kolkata, Mumbai and Pune. The markets are very productive and they are selling. Mid and luxury, ultra-luxury segments are showing good demand though the priority sector has seen a dip.