Bangalore Still the Most Affordable Real Estate Market

Published on July 03, 2013, 04:30 AM IST
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Bangalore remains the most affordable residential market with more than 77 per cent of its under construction units falling below the ticket size of Rs 50 lakh. This is followed by Chennai at 75 per cent, says a Knight Frank.

Hyderabad has only 51 per cent of its total under construction units below the Rs 50-lakh ticket size, this despite the city having the lowest weighted average price among the top six cities, the report adds.

Mumbai remains the most unaffordable market with 29 per cent of the city's total under construction units surpassing the Rs 1 crore mark, as compared to 11 per cent and 5 per cent for the NCR and Bangalore markets respectively, according to a new Economy and Realty report by Knight Frank, global property consultants.

The report has indicated that the price movement and ticket size split of under construction units directly impacts the demand for housing in a city. In order to understand the demand supply dynamics of a market, the agency has calculated the
Quarters to Sell Unsold Inventory (QTS) ratio for each of the top six cities.

QTS is the number of quarters it will take to exhaust the existing unsold inventory in the market. A lower QTS ratio indicates a healthier market. For instance, a QTS ratio of 6 in March 2013, signifies that it will take six quarters for the market to absorb the current unsold units.

Hence, going forward if no new units are launched, the report adds that existing unsold inventory would get exhausted by September 2014.

Among the six cities under consideration, the report has identified Hyderabad as having the highest QTS ratio at 9 as of March 2013. A slowdown in demand on the back of political uncertainty, unaffordable ticket size and sluggish growth in the IT/ITeS sector has resulted in the city's residential market witnessing such a high number.

Additionally, a slew of launches in the last four quarters have created a supply glut ensuring a higher QTS ratio, the report adds.

Stating that the real estate market has a strong linkage with the economic growth of a country and any signs of a slowdown in the domestic economy can have a cascading effect on the health of the realty market, the report says among the various segments of the real estate market, office, retail and hospitality are relatively more prone to the vagaries of the macroeconomic situation as compared to the residential segment.

The report adds that the health of the residential market in cities such as Bangalore, Chennai and Pune has remained relatively stable over the last one year.