Real estate is coming back on track, thanks to the multiple policy decisions taken by the government recently. The sector seems to have left the tougher times behind and is all geared up for the increase in sales as is suggested by many reports that the year has been good so far. However, it is noticed that the average size of flats has gone down and a recent report said that the average area of residential flats has shrunk 27 per cent over the past five years in seven major cities. However, the buyers in NCR are not bothered much as the dimensions in the NCR region have fallen merely by six per cent.
According to the various reports available in the market, the average size of the dwelling units in major cities — Mumbai Metropolitan Region, Delhi-National Capital Region, Pune, Chennai, Bengaluru, Hyderabad, Kolkata — have shrunk over the past five years from 1,400 sq ft in 2014 to nearly 1,020 sq ft in 2019 so far. However, it would be wrong to call this trend a latest addition as this started immediately after the 2007 slowdown.
In NCR, the current average size is around 1,390 sq ft and the highest drop is in MMR from 960 sq ft in 2014 to 530 sq ft in 2019. The move of reducing the size of the flats gained momentum after the realtors witnessed fear in buyers after slowdown of 2007 to invest large sums of money. Another factor to brought the size was that most of the developers bought the land at high prices and it was difficult to bring down the prices. The only solution at that time was to reduce the size of the apartment and make the prices come into the affordable range.
Another trigger that made the building of small houses was the government’s announcement in 2008-2009 to bring down the home loan interest rates on Rs 20 lakh loan. It was at that time that developers flooded the market with the term affordable housing, which basically were smaller sized houses. In pre-2007 era the market was for upper middle class but preceding years homes with lower prices became the priority of the buyers. The queries flooded in and the buyers swarmed all over the NCR to buy the house of their dream. The developers did not cut down the prices but they brought down the sizes of the apartments in offering. Developer came all out to take advantage of the opportunity given by the government and came out with apartment sizes such as 550 sq. ft or 880 sq. ft. We also had a bevy of developers coming out with three bedroom houses in around 1000 sq. ft. The current drop in sizes is also mainly due to the demand of a particular price band, which is possible only through cutting down on sizes. Thankfully, the developers in NCR do not have to cut down drastically on size because of the difference of overall cost of construction — price of land etc — as compared to other parts of the country.
Increasingly, realtors are depending on ‘properly utilization of space’ to come up with units that will appeal to the buyers. Increasing prices of raw materials leave ‘space engineering’ as the only solution to keep the prices in check. The developers have to go with the demand of the market, which is inclined towards affordable homes, that basically means right pricing. To hope that affordable houses will come in bigger sizes will be a fallacy.