By 2030, more than 590 million people (nearly twice the current American population) will live in Indian cities, compared with about 380 million today. 210 million new urban Indians will need about 60 million new homes in the next 18 years. Additionally, there is already unmet demand for about 21 million homes. So, urban India needs 81 million new homes by 2030, or an average of 4.5 million homes per year.
Against this huge demand (more than 12 times the size of the American housing demand), it is estimated that less than 700,000 homes were sold in India last fiscal. In comparison, 27.7 million personal vehicles (cars and two-wheelers, including pre-owned ones) were sold. So why were less than 700,000 homes sold last year, if the demand is for 4.5 million homes?
For finding the answer to this 125 billion dollar question, we need to see the break up of the personal automobile market by price segments. Of the 27.7 million personal vehicles sold last fiscal, 33% were pre-owned two-wheelers, 47.2% were new two-wheelers, 10.5% were pre-owned cars, 6.6% were new cars costing under five lakhs, 2.5% were new cars costing Rs. 5-10 lakhs and only 0.2% were new cars priced above Rs. 10 lakhs.
It would thus be fair to conclude that the Indian market needs 80.2% one-bedroom homes (ranging from 250 square feet carpet area to 400 square feet), 10.5% small two-bedroom homes (450 – 650 square feet), 6.6% large two-bedroom or small three-bedroom homes (650 – 900 square feet), and only 2.7% can afford homes larger than 1000 square feet.
Thus, of the 81 million new homes needed by 2030, 90.7% need to be homes with less than 650 square feet of carpet area. Looking at the scenario on an annual basis, of the 4.5 million annual demand for new homes, only about 420,000 can be homes larger than 650 square feet. Even in Singapore, until as recently as 7-8 years ago, more than 70% of all new homes supplied in the market had two bedrooms or less.
This answers the question why less than 700,000 homes were sold last year. It’s probably because less than 280,000 of these were smaller than 650 square feet – and all got sold – while the balance of about 420,000 comprised larger homes – and that’s the maximum demand for larger homes.
Of the 3300 luxury apartments being developed in Mumbai (priced between Rs. 10 crores and Rs. 100 crores), about 60% are unsold. About 1880 units in this price range came up in the last year alone. The scenario is not different anywhere else – Bangalore has more than 3500 unsold homes in the one crore plus segment.
An average DLF employee makes Rs. 3.44 lakhs per annum and can therefore afford a home costing no more than Rs. 14 lakhs. An average Sobha employee makes Rs. 5.1 lakhs and can therefore afford a home costing no more than Rs. 20 lakhs. How many homes do DLF and Sobha build in this price segment? DLF has 3700 employees and Sobha 2500.
India doesn’t just need 97.3% of all new homes to be smaller than 1000 square feet in carpet area, but also a much wider and more sensible variety – in order to cater to some very “unique” Indian needs.
One of the most important is the need for homes that can accommodate multiple generations under the same roof, while allowing each generation to lead their own lifestyle. This is required because our social habits have changed drastically over the last 10-20 years. Millions of youngsters from strict vegetarian families eat meat (or at least chicken) today. People in the age group of 21-35 eat out (or order home delivery) up to 15 times a month, compared with just 1-2 times a month during their parents’ younger days. Music habits have changed. TV habits have changed.
But the Indian home has not changed. It is the same 2BHK or 3BHK model being cut and paste for 15 years or more. Compare this to cars – up to 1982, we had just two types – the Ambassador and the Fiat. From 1986 to 1996, we had six varieties, including four from Maruti (Maruti 800, Maruti 1000, Van and Gypsy). From 1998 onwards, with the entry of Tata Motors and Hyundai, the choices increased to double digits. Today, we have more than 80 models and several different “varieties” – from the Nano to hatchbacks, sedans, minivans, SUV’s, and what not. While the Nano can accommodate a maximum of four, the Innova can accommodate up to eight people “under the same roof”.