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Affordable housing policy spurs home sales in small towns
Live Mint  |  November 29, 2019

Bidya Sapam Mumbai

Property markets in top metros may be caught in a grinding slowdown, but there is cheer in smaller cities.


Driven by the government’s push for affordable housing, home sales in smaller towns and cities have steadily grown in the last five years, shows data from real estate advisor Liases Foras. Sales in 20 tier-II cities including Jaipur, Vadodara, Nashik and Nagpur made up 25% of nationwide sales at the end of 2018-19, up from 16% five years ago.


By the end of the September quarter of 2019-20, the share of tier-II cities had risen further to 26%. In the same quarter, overall housing sales across the country including major cities like Mumbai Metropolitan Region (MMR), Delhi-National Capital Region (NCR), Bengaluru, Chennai, Hyderabad and Pune fell by 2% to 91,115 units, as per Liases Foras.


“If you look from 2014, sales of tier-II cities have jumped by 112% while tier-I cities have grown by 28%. Contribution of these smaller cities to the overall housing market is increasing. The push for affordable housing is driving this growth," said Pankaj Kapoor, managing director, Liases Foras.


Apart from government’s initiatives like Pradhan Mantri Awas Yojana (PMAY) which has helped push demand in the affordable housing segment, smaller towns and cities offer “more conducive land" to develop low-cost homes, Kapoor said.


While most cities saw a decline in home sales in the September quarter, some such as Jaipur, Nashik and Ahmedabad saw jumps of 22%, 25% and 4%. While big cities creak under a huge supply overhang, smaller towns and cities where there is little speculative buying has seen no downturn, real estate developers and consultants said.


“While the growth in the smaller cities is nothing prominent as of now, these places were less affected by the bubble which was there in the market. Some of these cities have remained very stable and have not been affected by the downturn. That’s why these cities are showing a relatively healthier position," said Saurabh Mehrotra, national director, Knight Frank, a property consultant firm.


Cheaper land helps developers in smaller cities execute low cost projects as they can reduce capital cost by 25-30%, he said.


“Mega affordable projects (like those costing below Rs 10 lakh) have come up in smaller towns. Reasonable land prices along with government’s subsidies have helped local developers to build low cost housing projects such places, “ Mehrotra said. However, developers say growth in the last five years in tier II cities is only “a green shoot" as job markets expand beyond the metros but would take few more years to reach similar demand in the major cities like Mumbai and NCR.


“Many smaller cities in India are likely to see incremental development because of the kind of thrust that the government is giving on creating smart cities. But it is a long-term story. However, some of the smaller cities in the south like Mangalore and Kochi have seen significant changes in the last few years. More jobs and development will lead to offtake of residential housing in these cities," said a spokesperson with property developer Puravankara Ltd. The Bengaluru-based developer has ongoing affordable housing projects under the brand Provident in cities like Kochi, Coimbatore and Mangalore.