India: Price Gap Between Ready and Under-Construction Homes Down to 3-7% in 2019

• Avg. price difference between these two categories reduced y-o-y - from 8-12% in 2017 to 5-9% in 2018 across the top 7 cities.
• NCR recorded least RTM/UC price disparity in 2019 at 3%; Pune saw the highest at 7%.
• Avg. price of under-construction homes in NCR in 2019 was INR 4,410 per sq. ft., ready homes at INR 4,530 per sq. ft.
• In 2018, NCR had the maximum price difference b/w RTM & under-construction homes at 9%; slow demand & high unsold stock prevented developers from hiking RTM homes prices.
• In 2 yrs, NCR & MMR see the maximum reduction in RTM & UC homes price gap.
• Under-construction homes losing their sole USP over RTM homes.

Mumbai, 17 December 2019: ANAROCK data reveals that the price gap between ready-to-move-in (RTM) and under-construction (UC) homes in the top 7 cities reduced to a mere 3-7% in 2019. The price disparity between the two categories is witnessing a y-o-y decline - in 2018, the difference was 5-9%; in 2017, it was around 8-12% across the top cities.

Cities with Least & Highest Price Difference in 2019:

• NCR recorded the least price difference between RTM and UC homes at 3%. The average prices of RTM homes were INR 4,530 per sq. ft. while for UC homes it was INR 4,410 per sq. ft.
• Pune had the highest price difference between RTM and UC homes at around 7%. The average price of RTM homes in the city is INR 5,600 per sq. ft. and UC homes are priced around INR 5,200 per sq. ft.

"Previously, the ultimate selling proposition of under-construction homes was significantly lower prices over ready-to-move options," says Anuj Puri, Chairman - ANAROCK Property Consultants. "The RTM premium was primarily on the 'instant gratification' quotient, immediate freedom from rent and zero construction risk. In the last two years, the price gap between these two categories has eroded y-o-y. In 2017, the price gap in the top 7 cities was anywhere between 8-12%; this reduced to 5-9% in 2018 and sank further to 3-7% in 2019. Along with the other benefits that ready homes provide, they attract no GST."

This reducing price gap is highly favourable for end-users as well as investors. End-users prefer to see the end-product rather than a floor plan and are usually eager to get off the rental treadmill. Investors previously chose under-construction homes for their lower prices and the compounding capital appreciation as projects neared completion.

"Perhaps the main reasons for the reducing gap is that developers are reluctant to hike prices of ready properties amidst the overall slowdown," says Anuj Puri. "In a market scenario of limited housing sales, price hikes dampen homebuyer sentiments further. Ready unsold stock will not find many takers if prices increase."

The average price difference between RTM and UC homes in other top cities in 2019:

• In Hyderabad, the price difference is 6%. The average price of UC homes in 2019 was at INR 4,015 per sq. ft. while those of RTM properties was INR 4,250 per sq. ft.
• Bangalore witnessed a price gap of around 5% - UC homes cost INR 4,820 per sq. ft. and RTM homes are INR 5,050 per sq. ft.
• MMR, Chennai and Kolkata saw a price disparity of just 4% between ready and under-construction homes. In MMR, the current average price of UC homes is INR 10,075 per sq. ft. while RTM properties are priced at INR 10,460 per sq. ft.
• In Chennai, average prices of UC homes currently are at INR 4,700 per sq. ft. and INR 4,880 per sq. ft. for RTM homes.
• In Kolkata, the average price of UC homes is currently is INR 4,265 per sq. ft. and INR 4,420 per sq. ft. for ready homes.

Among the top 7 cities, NCR and MMR saw the maximum RTM/UC price gap reduction in 2 years.

• In NCR, the price gap was over 10% in 2017 and has reduced to a mere 3% in 2019. In 2017, the average prices of RTM homes were INR 4,440 per sq. ft. while those of UC were INR 4,010 per q. ft. In 2019, it stood at INR 4,525 per sq. ft. and INR 4,135 per sq. ft. respectively.
• In MMR, the price gap was around 11% in 2017; this reduced to a mere 4% in 2019. The avg. prices of RTM were INR 10,365 per sq. ft. in 2017 while those of UC homes were INR 9,251 per sq. ft. In 2019, the prices were INR 10,460 per sq. ft and INR 10,075 per sq. ft. respectively.