RESIDENTIAL PROPERTY MARKET

SCENARIO

DEEPAK SACHDEV
DIRECTOR
ANSAL TOWNSHIP & PROJECTS
LIMITED
TABLE OF CONTENTS
 INTRODUCTION
 RESIDENTIAL PROPERTY- MARKET SCENARIO
 INDUSTRY OUTLOOK
 CHANGING DEMOGRAPHIC AND THEIR
IMPACTS.
 RESIDENTIAL REAL ESTATE OPPORTUNITY
 KEY ASPECTS FOR FUTURE SUSTAINABILITY
INTRODUCTION
 In India the importance of the housing Sector can be judged by
the estimate that for every Indian rupee invested in construction
of houses, the INR 0.78 is added to the GDP of the country.
 Real Estate sector is subservient to the development of 269 other
industries.
 It is the second largest employment generator in the country
 The nationwide housing shortage is estimated at 22.4 million
residential units and continues to increase. Rapid population
growth and the growth of India’s middle class is creating the
demand for housing.
 Household formations are increasing and to increase
homeownership, a vibrant mortgage market is under
development. Considering that mortgages account only for 2
percent of India’s GDP, compared with 54 percent in the United
States there is enough room for growth in the future.
RESIDENTIAL PROPERTY – MARKET
SCENARIO
 Residential property market constitutes almost 80% of the real
estate market in India in terms of volumes and has been
growing at 34% annually.
 The 10th Five Year Plan document on urban development has
estimated an additional requirement of about 4.5 million
houses each year during the Plan period (2002-07). This is in
addition to the current shortfall of about 22.4 million units
 The Residential mortgage debt as a percentage of GDP was
2.21% in FY04, which is still miniscule when compared to the
approximate 45% in the European Union, 70% in the US and
upwards of 30% in East Asian economies.
RESIDENTIAL PROPERTY – MARKET
SCENARIO
 The Era of Nineties witnessed frenzied boom in residential
property on the back of a booming stock market and a
liberalization process that was kicked off in 1991.
 The stock market and real estate markets crashed in quick
succession between 1994 and 1995 respectively, followed by a
prolonged period of about 8 years of little or no appreciation
in real estate.
 Reversal in trend has been visible in the past 2-3 years with
real estate prices inching up on back of strong demand. The
demand in turn is largely being driven by demographic shifts
and the emergence of a favourable interest rate environment
INDUSTRY OUTLOOK
The residential property prices in some markets have recorded a growth
of about 15 to 20 per cent in the last two years and have witnessed
substantial activity in the year 2004 -05. The increase in values in the
current scenario can be attributed to several factors such as :
 Stronger economic fundamentals
 Increased purchasing power
 Revision of salaries,
 Lower interest rates.
 Rising employment opportunities
 Nuclearization of families have led to high disposable income with
relatively smaller households.
 Substantial increased demand from NRI investors.
 High number of First Time Apartment purchasers.
 CHANGING DEMOGRAPHICS &
THEIR IMPACT
Key factors responsible for the transformation:

 Rising Income levels: Average household income in urban

areas has grown at a 5% Compounded Annual Growth Rate
(10% in nominal terms) over the last decade. By 2010 the higher
income earning group (>USD 2000) is expected to constitute
48% of the total earning population.
 CHANGING DEMOGRAPHICS &
THEIR IMPACT
Target group to 2002 2002 2010E 2010E
show rapid growth

Category Annual No. of % of No. of % of

household households total households total
income (m) (m)
(USD)

Higher income >2000 52.6 28.0 106.6 48.0

Middle income 1000 – 2000 69.6 37.0 79.9 36.0

Lower Income <1000 65.8 35.0 35.5 16.0

TOTAL 188 222

 CHANGING DEMOGRAPHICS &
THEIR IMPACT
Key factors responsible for the transformation:
 Changing age profile: As of 2004, about 53% of the population
in the country is less than 25 years of age. This compares
favorably with China where the comparable number is 42%.
According to Asian Demographics Report, the 20-54 years age
bracket is growing faster than the rest of the population and
will represent more than 50 % of the population in 2013.
 CHANGING DEMOGRAPHICS &
THEIR IMPACT
Key factors responsible for the Transformation:
 Increasing Urbanization: The urban population in India will grow by 85
million over the next 10 years, the second highest in the world. This
will almost be equal to the combined change in urban population in
Thailand, Malaysia, South Korea, Taiwan, Indonesia, Pakistan and
Vietnam. This is bound to create demand for new cities and townships.
 CHANGING DEMOGRAPHICS &
THEIR IMPACT
Key factors responsible for the transformation:
 Impact of each of these factors when looked upon in isolation
may not be significant, but when viewed in totality they offer
enormous potential for housing market growth.
 Rising income levels in combination with a reduction in
average population age has over the years resulted in the fall
of average age of a house buyer .
 Analyst expect the trend to sustain in due course of time.
RESIDENTIAL REAL ESTATE
OPPORTUNITY

 Scope exists for new Township projects over the

next 5 years spread across 30-35 cities, each having a
population of 3-4 lacs or more.
 Stronger Retail market for mortgages.
KEY ASPECTS FOR FUTURE
SUSTAINABILITY
 Future Availability of housing finance around the
prevalent rates.
 Conducive Investment climate.
 Greater transparency needs to be imparted to
property markets.
 Enhanced regulatory Framework to safeguard the
interest of house buyer.
 Simplified and rationalised registration process and
charges.
THANK YOU