Unused Properties in India: Meeting Millennial Demands
As the population in India steadily increases each day, so does demand for homes across the country. With a population touching 1.32 billion as of 2016, India has a housing market that is raking in more demand and money each day. Unfortunately, people are finding it harder and harder to locate suitable living spaces and the demand for homes seems to be surpassing its supply greatly. But what is the reality of the situation? A study of the Indian real estate industry conducted by the Knight Frank Group has come up with some statistics about unused properties in India that are rather surprising.
The Origins of Unused Properties in India
Unlike the luxury real estate in LA, real estate sector in India is facing a ramification of the same problem, unseen to a large part of society, which is excess supply in the form of unused properties. Some reasons for these properties remaining unused or unsold may be due to the work of people investing in real estate to cover up black money transactions as well as moves by developers to create a situation of lack of supply so as to hike prices. As of now, the scenario is that developers are facing problems in selling these units and have been forced to curtail supply. A move that has been made to discourage the excessive creation of unsold properties is a tax imposed on all unsold houses which have been left vacant for a time period of over one year. This tax will impact developers negatively but will boost buyer confidence and affect their sentiments positively. Developers cannot predict when their properties will be bought by customers and they must finish construction completely before any formalities. Currently, it is in the best interests of both the citizens and the developers to bring to light, the realistic housing scenario of the nation.
Underleveraged Properties in India
In a recent article written by Anshuman Magazine, chairman and managing director of CBRE South Asia, it was cited that around 12 million completed houses were lying vacant and underleveraged across urban India. Despite this unimaginable number, there is a huge gap between the demand for housing and the supply for them in India. In fact, the latest official economic survey stated a shortage of a whopping 20 million homes in India.
On one hand, you see there is actually enough supply and on the other, you see the housing demands of the people of India are not met. There is a huge gap which somebody is not addressing. Having said that, we see huge potential and opportunities that lay at the core of the real estate industry. In an era of technology and artificial intelligence, innovative tech-enabled businesses such as Nestaway, Oyo Rooms, YourOwnROOM are taking advantage of this opportunity to identify underleveraged property and service segments of the Indian population that are in real need for decent housing.
A Supply/Demand Mismatch with Unsold houses
There are over 5,28,494 unsold housing units as of 2017, which although has reduced from 6,52,996 in 2016, is still a surprisingly whopping number in terms of inventory that remains to be sold. Government schemes that were implemented to show transparency within the government as well as to remove fraudulent and weak developers are ones like the Real Estate (Regulation and Development) Act, and the Pradhan Mantri Awas Yojana (PMAY). These acts, as well as the regulatory taxes, are slowly dissuading builders and developers from constructing more units till the current ones are sold. They are the ones at a loss since they have to bear the tax fully. Consumers are affected due to the excess demand, but these measures will ensure low prices and better quality homes in the future. The decline in sales in 2017 was 38% and the decline in launches was a massive 78% in the same year.
The Situation in Indian Cities with a Focus on Bangalore and Pune
Out of 0.1 million units launched, around 0.23 million were sold. 2017 saw the largest drop in the percentage of supply volumes and the supply currently, is a mere one-fourth of that of 2015. The maximum year-over-year drop was 26% in Bengaluru last year. Both residential, as well as office spaces, are focused on and these properties are located all over India, with the main focus being on Bangalore and Pune, the IT hubs of India. Pune saw a decline of 7% in the weighted average price year over year. Cities like Mumbai, Bangalore, Ahmedabad, Chennai, Delhi, Noida, etc. are facing large setbacks with regard to property vacancies and their demand. Growth in the demand for office spaces is going unmet even with all the unsold properties around the country.
Affordability is a key factor in the sales process and developers, as well as sellers, have to take care to price it reasonably so as to incentivize buyers. The excess supply automatically will cause a slight drop in prices which will lead customers to unsold properties. Acquisition of land is a tough process, which is not being made any easier due to the wastage of land going towards houses and buildings which are unoccupied and empty. The identification and sale of the properties across India will benefit future buyers, investors, and developers as well. The growth rate of the Indian housing sector will increase as well as the growth in residential supply, which is now facing a de-growth.
Small Steps Towards Affordable Living for Millennials
Millennials happen to be one of the most underserved segments in India. We’ve observed over the years a huge inflow of migrant millennials moving to metros for a better standard of living and job opportunities. We see a great solution in putting the vast amount of underleveraged properties to good use by serving this demand for decent homes for millennial. These unsold properties are a great investment opportunity and should be developed or purchased immediately and sold or rented out to the people who are in real need of it.
Companies like, Nestaway, Oyo Rooms, SquarePlums, Zolo, No Broker and YourOwnROOM have been at the core of addressing this problem by actively identifying unused properties in India across cities and refurbishing it so that citizens (especially single millennials) in need of living or working spaces can rent and use them in the form of co-living spaces. As more and more people are informed about the availability of property spaces, we’ll eventually see an increase in demand, but this demand will now be met with a supply (underleveraged properties) which will hopefully be the right match. As vacant properties are slowly filled, developers can also benefit by constructing new projects without worrying about taxes and excessive vacancy. A network of these unoccupied living and working spaces can be built and circulated among a number of people and companies (again particularly for millennial singles in India).
