Mumbai, 23 September 2019: The liquidity crisis, changing buyer preferences, and growing concerns about affordability. These market realities have caused real estate developers to rethink the conventional wisdom of ‘bigger is better’, and to significantly moderate unit sizes across the 7 major cities.
Anuj Puri, Chairman - ANAROCK Property Consultants says, "ANAROCK’s most recent data indicates that average apartment sizes in the top 7 cities have shrunk by 27% over the last five years – from 1,400 sq. ft. in 2014 to nearly 1,020 sq. ft. in 2019 so far. Surprisingly, NCR – one of the worst-hit residential markets in recent years - has seen the least decline of merely 6% during this period. The current average size of apartments in NCR is nearly 1,390 sq. ft., pulling ahead of Bangalore where average flat sizes reduced to 1,300 sq. ft. in 2019."
MMR already has the least average apartment size among all top cities, and also recorded the highest drop of 45% – from 960 sq. ft. in 2014 to 530 sq. ft. in 2019. Pune followed with a 38% reduction in sizes during this period, with the average apartment size currently at 600 sq. ft.
(Average sizes in both MMR and Pune are calculated on the carpet area while for the remaining cities it is based on the built-up area.)
"Interestingly, the main southern cities of Chennai, Bangalore and Hyderabad have seen size reduction of 8%, 9% and 12% respectively over the last five years," says Puri. "What also makes these cities unique is that the prevailing average sizes of apartments are among the highest."
For instance, the current average size of properties in Hyderabad (at 1,570 sq. ft.) is the maximum among the top 7 cities. Similarly, the average size of properties in Bangalore is also comparatively bigger at about 1,300 sq. ft. while in Chennai it is approx. 1,190 sq. ft.
Meanwhile, Kolkata saw sizes reduce by 9% over the last five years to stand at 1,120 sq. ft. now against 1,230 sq. ft. in 2014.
Among the major factors contributing to the escalating 'claustrophobia effect' of shrinking apartment sizes, demand for affordable homes in metros tops the list. Also, buyers are increasingly looking to avail the government’s credit subsidy benefits for affordable housing. These require a home to be priced <INR 45 lakhs and not exceed 60 sq. mt. carpet area or approx. 850 sq. ft. built-up area (including overall loading).
Seen in that light, the reduction in sizes – particularly in the affordable segment - helps buyers to avail of the subsidies. Moreover, buying an affordable home also comes with GST benefits. The GST for affordable housing is 1% as against 5% for mid-segment homes.
In short, buyers get reduced costs and added benefits, but lose out on space. Developers get to attract more buyers, but many have had to shed their cherished 'luxury' market categorization and stoop to conquer.
On further analysis, it emerges that affordable homes priced <INR 40 lakhs have seen the maximum decline in sizes over the previous years, while ultra-luxury homes saw the least:
Anuj Puri, Chairman of ANAROCK Group is a highly respected industry authority and thought leader with 30 years' experience in leveraging Indian and global real estate opportunities. His company ANAROCK has a staff complement of over 1800 qualified and experienced professional, with offices in all major markets in the country, dedicated services in Dubai and a global footprint with over 80,000 preferred channel partners.