Mid-Segment Homes in India: A Delicate Balance of Demand and Supply
Real estate, housing, mid-segment homes, demand and supply
Real EstateHousingMid Segment HomesDemand And SupplyLuxury HomesAnarock GroupKnight FrankJll IndiaCbreReal EstateJul 15, 2024
Experts attribute the decline in mid-segment supply to rising land prices, more buyer interest in luxury homes, and developers' higher profit margins in pricier properties. Anuj Puri, chairman of Anarock Group, said that steep land prices and inflationary construction costs in the last few years have driven a shift in the trend. Anshuman Magazine, chairman and chief executive officer (CEO) - India, South-East Asia, Middle East & Africa, CBRE, added that these pressures have made it challenging for developers to launch new projects within the mid-segment price bracket.
Developers now see higher returns in the costlier segment. A growing interest in costlier homes has only helped them push the margins higher. Vivek Rathi, head of research at Knight Frank, said that the share of costlier homes in total sales has risen to 41% in the first six months of this year from 30% last year. In 2022, it was 25%.
The phenomenon of mid-segment homes being overshadowed by luxury homes has been seen more in the National Capital Region (NCR), especially in Gurugram. Data sourced from CBRE showed that between July and December last year, there were zero project launches in the mid-segment in Gurugram. From 4,392 of these units in 2021, supply fell to 952 units last year.
Rathi said this is because the demand for ultra-luxury homes has been very high in this region, even more than in other big markets like Mumbai and Bangalore. Several top developers have also reported the sale of their ultra-luxury projects within days of launch.
A top developer, who did not wish to be named, said they have shifted their focus to the premium segment recently because getting that much margin in mid-segment homes was simply not feasible.
In the coming quarters, the new supply of mid-segment homes is likely to remain strained as the focus on the luxury segment continues. But the impact on prices may not be that much. Puri said that it is unlikely to have an impact on the prices in this segment as there are over 175,000 units available for sale in this segment currently.
Rathi said that it would also depend on the demand for costlier homes. If there is any slowdown in the premium segment, then we may see higher activity in the mid-segment, he said. Magazine added that potential buyers in this category may find themselves adjusting their budgets — some may move towards higher price brackets if financially feasible, while others may need to consider more affordable options or smaller units within the same segment.
Information
Anarock Group is a leading real estate consultancy firm in India.
Knight Frank is a global real estate consultancy firm with a presence in India.
JLL India is a leading real estate consultancy firm in India.
CBRE is a global real estate consultancy firm with a presence in India.
Anarock Group is a leading real estate consultancy firm in India, providing end-to-end solutions to its clients. Knight Frank is a global real estate consultancy firm with a presence in India, offering services in residential and commercial real estate. JLL India is a leading real estate consultancy firm in India, providing services in residential and commercial real estate. CBRE is a global real estate consultancy firm with a presence in India, offering services in residential and commercial real estate.
Frequently Asked Questions
What is the mid-segment of the Indian housing market?
The mid-segment of the Indian housing market is priced between Rs 50 lakh and Rs 1 crore.
What is the current market share of mid-segment homes in India?
According to a report by Knight Frank, the mid-segment had a strong 32% market share in the total demand in the first six months of 2024.
Why is the supply of mid-segment homes declining?
Experts attribute the decline in mid-segment supply to rising land prices, more buyer interest in luxury homes, and developers' higher profit margins in pricier properties.
What is the impact of the decline in mid-segment supply on prices?
According to experts, the impact on prices may not be that much as there are over 175,000 units available for sale in this segment currently.
What is the future of mid-segment housing in India?
In the coming quarters, the new supply of mid-segment homes is likely to remain strained as the focus on the luxury segment continues.
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