Demand for homes in major cities to outpace supply by 130% in the next five years: Cushman & Wakefield

NEW DELHI: There will be a shortfall of 1.3 million housing units in the country;s top seven cities over the next five years, says a new Cushman & Wakefield and Global Real Estate Institute study. The report estimates the total demand in five years to be 2.3 million units while the supply will only be of around 1 million homes.

The report analysed demand for top seven cities—NCR, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata. The demand for the entire country will be close to 3.94 million housing units, growing at a CAGR of 11%.

Of the 2.3 million units in the top seven cities, NCR is expected to record the highest demand of over 700,000 units, while Mumbai is expected to see the highest CAGR of 14% between 2011-15. Bangalore is expected to see a demand of approximately 287,000 units in this period. This demand will emerge primarily because of significant migration into tier I cities.

“The present economic situation may be viewed as a transitory point for the real estate dynamics in India. Although, the market looks positive in the medium term with considerable demand across sectors, the industry seems to be affected by the rising interest rates, rise in construction costs and inflation. However the long term perspective suggests that the sector will continue to witness demand in all as,” says Anurag Mathur, managing director, Cushman & Wakefield India.

The report points out that this anticipated demand is likely to push property prices upwards, especially in markets like NCR, Mumbai and Bangalore where the demand supply gap will be very high. On the other hand, the tier II cities such as Pune, Hyderabad, etc, as a result of the relatively lower demand supply gap between 2011-15 in tier II cities, are likely to see appreciation of capital values at a slower pace compared to the tier I cities during this time period.

In the top seven cities, 45% of the demand will come from the mid-ranged housing segment. Most developers in these cities are focusing on the mid-range segment, which will reduce the demand-supply gap. In the affordable housing segment, though, this game will increase further as the demand will be almost three times more than the supply in the next five years. “We understand that majority of the supply will be for mid ranged housing, however, there is a very large latent demand for lower income group and economically weaker sections housing,” says Akshay Kulkarni, executive director, Cushman & Wakefield India.