HOUSING TRENDS
November 06, 2006
The Economic Times

By 2030 India will need up to 10 million new housing units per year. Rapid population growth, rising incomes, decreasing household sizes and a housing shortage of currently 20 million units will call for extensive residential construction. This is the finding of a study conducted by Deutsche Bank Research.

Deutsche Bank Research further says that about one in every sixth person on earth lives in India, and the growth rate of the population is still rapid, (Source: UN Population Division, medium variant). Households are presently an approximate of 5.4 persons per number of inhabitants. The last census survey in 2001 reported roughly 192 million households in India, about 40 million more than ten years earlier. The number of households has thus risen slightly faster than the number of inhabitants.

This means average household sizes are decreasing a little, although at roughly 5.4 persons per household they are still extremely high. It is, however, very likely that the average household size will continue to shrink in the coming years, as sustained economic growth enables more and more young people to make a home of their own. The trend towards fewer children is ongoing.

In that case, between 5.9 and 8.7 million dwellings, including replacement demand, would have to be built each year. Factoring the present supply gap of 20 to 30 million housing units into this equation, another million dwellings would need to be completed each year to achieve equilibrium on the housing market by 2030.

In addition to this strong volume growth, rising incomes will also alter the quality of demand. The upshot is increasing bottlenecks in better quality and premium housing. This could refer to living space, the number of rooms and the basic facilities. It should not be forgotten that although the rate of growth was strongest in the highest income bracket, the most rapid volume growth in absolute terms is taking place in the second-lowest income bracket. Moreover, tax incentives have been granted to finance property. Now days higher interest and debt service can be claimed against taxes than in the 1990s. Tax savings have thus made owner occupied property more attractive. Houses are still affordable despite rising prices

Cushman & Wakefield Research based on the scenario specifically in Mumbai, has highlighted an interesting trend in a recent report that leading corporates and MNCs continue their divestment of owned surplus assets to cash in on substantial capital gains from properties acquired at historic rates. Earlier, housing was provided as a perquisite to employees but with more and more companies looking at moving to a Cost-to-Company (CTC) concept, employees are looking at purchasing apartments thereby building an asset in the long-run .

This has resulted in surplus properties being available with the corporations for disposition thereby not only improving their balance sheets but also avoiding the high costs of maintaining the units. The suburban locations are expected to continue to grow with the government actively concentrating on improving the infrastructure as is witnessed in the new initiative of the launch of the Versova-Ghatkopar Metro Link. Both the end users as well as investors will continue to drive this market, which offer some quality projects under construction.

In the city like Delhi, the growth is happening in the adjoining areas, which is called national capital region. As the demand is growing, more and more areas are coming into the mainstream.
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