A report by Cushman & Wakefield estimates that the total new demand that could be generated for residential dwellings in the period 2012 – 16 will be 11.8 million units across India

Demand for homes pegged at 11.8 million units

While housing is defined as one of the three necessities of life, the demand for it seems to be rising much more rapidly than it was before. Current trends seem to indicate that it could surpass previous levels. A report by Cushman & Wakefield estimates that the total new demand that could be generated for residential dwellings in the period 2012 – 16 will be 11.8 million units across India. Of the total additional demand, the top 8 cities will be constituting 18% or 2.1 million units across categories.
The additional or new demand that can be generated in 2012-2016 is calculated based on the past trends for population and household growth and the income classification for the households. Hence, this does not take into consideration, existing unfulfilled demand by those without homes, living in congested homes and or in dilapidated structures. the Ministry of Housing and Urban Poverty Alleviation estimates such demand resulting from housing shortages at 18.78 million units for the entire country. These estimates also do not consider the existing or future demand from those living in rental houses and wanting to shift into their own houses, demand from NRIs or those wishing to purchase second homes/ holiday homes for personal use and/or investments.
Of the total additional demand in the top eight cities, demand for mid-segment is estimated to be highest at approximately 59% or 1.3 million units, followed by demand in the high-end segment which is 451,000 units. The low-end segment is expected to see 362,000 of fresh demand in these cities in the next five years.
Sanjay Dutt, executive managing director, India, said, “The demand creation in leading eight cities is a reflective of the economic strength that these cities have, that attracts new settlers as well as creates conducive environment for natural population growth. We see a higher demand in the mid-ranged segment in these cities that further explains that there is a rapid growth in the economically viable population in these cities which is helping them and the cities in creation of wealth.”
The total demand for housing units is expected to increase at a Compounded Annual Growth Rate (CAGR) of 2.8% across India, with Bengaluru expected to the record the highest CAGR in demand of 4.1% followed by Pune and Hyderabad. NCR is expected to see the highest demand of 381,000 units in mid and high-end segments during 2012 – 2016. The three southern cities namely Bengaluru (338,546 units), Chennai (257,796 units) and Hyderabad (199,575 units) account for approximately 45% of the demand in mid and high-end segments. In the western region, Mumbai is expected to see demand of 188,708 for mid and high-end housing while demand in Ahmedabad for the same category will be an impressive 173,394 units. Pune is estimated to recorded demand of approximately 144,422 units while Kolkata’s mid and high-end demand is touted to be only about 77,000 units.
Sanjay continues, “The residential housing demand can be seen as an indication of the current and future economic activities in these cities. Majority of the growth in demand (in the top 8 cities) is expected to come from the services sector, in cities of Bengaluru, Hyderabad, Mumbai and NCR, Pune and Chennai will see demand on account of both services as well as manufacturing sectors. Ahmedabad’s demand, in addition to migrant population, is driven by indigenous growth in population and also many re-settlers who intend to return to the city after having spent a fair deal of time in other locations across the globe.”
The supply for mid and high-end residential units is expected to be 1.16 million units during 2012–16 in the eight major cities. With the expected demand as stated above, the short fall of new housing units is expected to be approximately 600,000 units across the top cities in India. The total supply for 2012-16 is based on projects that are currently under construction or plans for which have been announced for by developers in each of the top eight cities.
The highest supply in mid and high-end categories will be NCR (334,000) followed by Bengaluru (191,708 units) and Chennai (159,056 units). Supply of mid-ranged properties, which is estimated at nearly 900,000 units in the next five years, is expected to be nearly four times that of high-end residential units, expecting to see a total supply of 260,000 units, across the major 8 cities.
Bengaluru is expected to witness the highest demand-supply gap for both MIG and HIG housing, followed by Ahmedabad and Hyderabad. As a result, property prices in these cities are likely to appreciate during the five year time period. However, moderation of supply by holding back new project launches and unforeseen project delays by developers may reduce the gap between demand and supply in the next few years.