Demand-supply Gap Spurs Prices

in Demand
Demand for housing will outstrip supply with about 60% of the total estimated residential demand by 2014 expected to come from the top seven cities.
Despite increased construction activities in the country, the demand for houses, especially in the metro cities of the NCR and in Mumbai, will outstrip supply in the coming years. This is likely to push the real estate prices up in the region giving a good return on real estate investment.
According to Cushman & Wakefield India Real Estate Investment report 2010, Riding the Wave Re-emergence of Indian realty sector, the pan-India residential demand for the period 2010-14 is estimated to be approximately 4.25 million units of which mid-range and affordable sectors continue to capture a significant share of 70%.
Manish Aggarwal, executive director of Investment Services of Cushman & Wakefield India, says: With India's economic environment showing signs of stability and buoyant growth, coupled with improvement in affordability and access to finance, housing demand in the country is expected to witness a revival in the near future.
According to the report, about 60% of the total estimated pan- India residential demand by 2014 is expected to be spread across Indias top seven cities, with Tier I metropolitan cities of NCR and Mumbai expected to account for approximately 40% of the total demand.
The report estimated that Mumbai is likely to witness the highest cumulative demand of 830,000 units followed by the NCR. After NCR and Mumbai, it is Pune that is expected to witness the highest demand in residential sector, nearly 270,000 units during the given period. The growth in demand for residential units in Pune can be attributed to rapidly growing city population (both migratory and local population) coupled with improvement in economic environment with simultaneous growth in both IT and other manufacturing sectors in this city.
The report points out that while the housing sector has recorded a spike in demand over the last two to three quarters, supply largely remains constrained owing to the slow pace of construction activity during 2009-10. As a result of which, demand across the top seven cities is estimated to be three times higher than supply during 2010-14.
However, this ratio differs within segments. The report said that affordable and mid-segment is expected to witness about three times higher demand and the economically weaker section would be six times higher than upcoming supply whereas high-end segment is expected to witness a demand-supply gap of approximately 1.5 times, despite the oversupply scenario it is likely to witness in Tier I cities in the medium term.
With the rise in demand, the market has witnessed new launches in the mid-segment category. In the NCR, a large number of projects have been launched in the mid-segment categories in Noida, Greater Noida, Ghaziabad, Raj Nagar Extension, Faridabad, Kundli, Gurgaon and Manesar. In the Noida and Grater Noida, a large number of townships have been launched in the affordable price range. The revival in these markets is also because of the development in basic infrastructure like roads and the Metro rail link.
Because of such a large number of launches in Noida, Raj Nagar Extension and Greater Noida, buyers are getting a good deal as the developers are not able to raise prices, which remain in the range of Rs 1,800-3,000 per sq feet. However, in the next couple of years, as the supply will be absorbed by the huge demand here, prices in this market are likely to go up.
But in other micromarkets like Gurgaon and Manesar, as the supply is limited, prices have gone up by 25% to 40%. According to the C&W report, even the premium segment properties witnessed appreciation over the quarter, indicative of a steady revival of the residential market.
Courtesy Times Property dtd:-16/10/2010
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Demand-supply Gap Spurs Prices

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This article was published on 2010/10/28