Affordable housing is affecting the profit margin of real estate companies

India’s real estate market has ultimately recovered after seven long years in 2018. Along with higher sales, the inventory of unsold houses touched a new low. These positives were largely driven by the government’s incentives for affordable housing.

According to global property consultant Knight Frank, which analysed trends across top eight cities, “60% of the new launches in 2018 were within the Rs.50 lakh bracket, or the affordable and mid-range segment”. Another trend in the last two-three years was increased offtake in tier II and tier III cities. Property prices were, however, range-bound across most cities. Some regions such as Mumbai even showed a drop.

A study of 25 listed real estate companies by CARE Ratings Ltd shows that the revenue grew by 11.3% in the first half of FY19 over the year-ago period. Sales bounced back from the previous year’s low base, when sales were impacted because of regulatory hurdles and increased compliance under the Real Estate (Regulation and Development ) Act.