The Demand And Supply Gap In Real Estate - Is It Real ?
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The Demand And Supply Gap In Real Estate - Is It Real ?

By siliconindia   |   Wednesday, January 8, 2014
Bangalore : Yes, it is there (the demand and supply gap). The bigger and more relevant question here might be that why is a gap there and if at all anything is being done to bridge the gap. There is a gap because the population in India is growing at a pace which is faster than the growth of residential apartments being constructed. The higher income segment and the middle income segment constitute for the maximum demand of residential units. As per the latest data, the supply of HIG (Higher Income Group) and MIG (Middle Income Group) housing is going to be a little more than half of the demand during 2013- 2017 it the top eight cities. Also there is a very large underlying demand for Lower Income Group (LIG) and Economically Weaker Sections (EWS) housing. To combat this demand several states are thinking about allocating a certain percentage of developed land for LIG and EWS so that they can meet the demand from this segment. This will also help in boosting the supply in the affordable housing segment. The demand however, will continue to increase but the supply of residential apartments will still trail behind owing to factors like land acquisition bill and real estate regulatory bill. Also the uncertain political scenario will affect the supply of residential units. In India, the top 10 states contribute to three fourth of the urban housing shortage. All these will make the prices move in an upward direction. Most developers today have unsold inventory, for which overpricing can be blamed. The first and foremost thing which the developer will look at is reducing this pile-up, which will improve their liquidity. Let us take a look at the constraints which the real estate developers face: => Unavailability of Urban Land-The shortage of land in urban area is termed as artificial. With Government support, the large chunks of unused lands can be used for development of residential units => Deferment in sanctions from local authorities-Once a developer purchases land it takes him nearly 2-3 years to get all the sanctions before he can start construction work. => Rising Construction Costs and labour shortage- The cost of labour and cement has seen a substantial rise in the last one year => Financial Constraints for buyers as well as developers- Both face shortage of funds. Home loans are given in accordance to one's income. Many buyers struggle here since the cost of the desired apartment is way beyond their budget. Similarly developers face the problem of funding These constraints will remain at least till the 2014 elections. There are many measures which can overcome these hurdles like improved planning, subsidized construction costs, better funding for developers, ensuring availability of housing loans to the weaker segments, etc. All these measures should lead to reducing the gap between demand and supply of residential units.

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