Affordable Housing Launches Drop 21% in April-June Period Across Major Cities as Builders Focus on Premium Units: JLL Report

The first half of 2024 has seen a significant shift in the focus of real estate developers towards premium and luxury housing segments, resulting in a notable decline in the launch of affordable housing units. According to a recent report by JLL India, the new supply of affordable apartments, defined as those costing below ₹50 lakh, fell by 21% during the April-June period across seven major cities in India. This decline highlights a broader trend where developers are increasingly targeting higher-end segments to capitalize on the growing demand for premium homes.

Shift in Market Dynamics

The report indicates that a total of 1.59 lakh new housing units were launched in the first half of 2024, up from 1.51 lakh units in the same period in 2023, reflecting a 5% increase in new launches across the country. However, this overall growth masks the underlying shift in market dynamics. The premium housing segment, priced between ₹3-5 crore, saw a staggering 170% year-on-year (Y-O-Y) increase in launches, while the luxury segment, priced above ₹5 crore, experienced a 116% growth.

This trend is particularly pronounced in cities like Mumbai and Hyderabad, which together accounted for approximately 43% of the total new launches in the first half of the year. The focus on premium housing is driven by several factors, including higher profit margins, robust demand from affluent buyers, and a strategic move by developers to cater to the evolving preferences of homebuyers seeking larger, more luxurious living spaces.

Decline in Affordable Housing

The new supply of affordable housing units saw a significant decline, with only 13,277 units launched in the April-June quarter, down from 16,728 units in the same period last year. This 21% drop underscores the decreasing emphasis on affordable housing as developers shift their focus to more lucrative segments. Additionally, the supply of units priced between ₹50 lakh to ₹1 crore also declined by 14%, from 55,701 units to 47,930 units.

High-End Housing Dominates

The premium and luxury segments have emerged as the dominant focus for real estate developers. In the ₹1-3 crore price bracket, new supply grew by 3% to 69,312 units from 67,119 units. The launches of apartments priced between ₹3-5 crore more than doubled to 19,202 units from 7,149 units. Similarly, in the above ₹5 crore category, new supply jumped more than two-fold to 9,734 units from 4,510 units.

Regional Trends

The shift towards high-end housing is evident across several major cities. During the second quarter of 2024, Bengaluru, Mumbai, and Delhi NCR emerged as the top cities for new project launches, accounting for around 60% of the total. Notably, Delhi NCR stood out with a 64% share in high-end launches (homes priced ₹3 crore and above), driven by several prominent developers focusing on luxury projects, particularly in Gurugram.

Residential Sales Performance

The residential market has continued to perform strongly, with 1.5 lakh housing units sold across the country in the first half of 2024, marking the highest ever half-yearly residential sales. This represents a 22% increase compared to the same period in 2023. Bengaluru and Mumbai together accounted for a major share of around 45% in half-yearly sales volume.

The robust sales momentum has been attributed to strong supply from reputed developers, favorable economic conditions, and positive buyer sentiments. The demand for premium and luxury housing has been particularly strong, contributing significantly to the overall sales growth.

Price Trends

The continued demand for high-end housing has also influenced residential price trends. Q2 2024 witnessed residential price growth in the top seven cities of India, with year-on-year price increases ranging from 5% to 20%. Delhi NCR saw the highest price increase, with a significant jump of approximately 20%, followed by Bengaluru with around 15%.

In Bengaluru, the high demand for newly launched projects and the subsequent sale of around 28% of its Q2 2024 new launches during the same quarter have driven year-on-year price growth. Additionally, capital value increases in specific locations such as Whitefield and North Bengaluru have acted as catalysts for this price growth.

Factors Driving Price Increases

The report notes that the availability of under-construction inventory in these cities is getting restricted, leading to a subsequent surge in prices. Developers have responded to the high demand for newly launched projects by launching new phases of existing projects at elevated price levels, contributing to overall property price growth.

Conclusion

The first half of 2024 has highlighted a significant shift in the real estate market, with developers increasingly focusing on premium and luxury housing segments. This shift has resulted in a decline in the launch of affordable housing units, as developers target higher profit margins and cater to the growing demand for high-end homes. The continued strong performance of the residential market, driven by favorable economic conditions and positive buyer sentiments, underscores the evolving dynamics of the real estate sector in India.