Independent Home Building: Betting Beyond The Metros
What’s powering the housing boom in tier II cities in India?
- Most people choose independent houses* because it gives them the chance to pick their own building material
- Only one in four people take out home loans to pay for building their houses
- Contractors, architects etc., tend to have a big influence in categories where consumers have limited knowledge
India is in the middle of a building boom, largely because of factors like rising disposable income, improved standards of living, a growth in nuclear families and easy access to mortgage financing.
The Corporate Catalyst India Survey Report had pointed out in 2011 that the country’s residential real estate sector would continue to experience robust growth through 2016, egged on by growing availability of housing finance options and tax incentives.
This budding demand has created broad opportunities for players in the real estate sector—opportunities that are immense and still growing. The country’s urban areas are in need of at least 12 million housing units. Studies show that in the next five years, there is scope for around 400 real estate projects to be developed in 35 cities for housing about half a million people. The value of the projects for low and middle income groups alone will touch $40 billion in seven years.
Consumers in metros are more likely to buy apartments in high rises than single-family homes. That’s primarily due to the lack of affordable real estate in core urban areas, low level of involvement in building a house due to a fast-paced lifestyle and provision of premium amenities at apartments and closed-gate communities. In contrast, people in tier- II cities tend to build independent houses.
A recent Nielsen survey sought to better understand the upper-middle and middle-income consumers who chose to build their houses in the past year. The survey shed insight into the purchase process, the influencers, the factors consumers considered while buying construction material, and the profiles of the consumers themselves – data that’s invaluable for companies looking to tap the potential of the sector. The survey covered tier II cities Amritsar, Jamshedpur, Sagar and Salem, all of which have seen explosive growth in real estate.
Upon observing the engagement independent home builders have with the various categories, we found that contractors, engineers, architects etc., play a significant role in categories where the consumer has only limited knowledge. For example, in the steel category, the influence exerted by contractors/ engineers/ architects was highest at 52 percent. This proves that companies stand to gain if they equip their staff at retail outlets and dealers to sway consumer purchase decisions in their favour.
* Pertains to individual home owners who purchased a plot of land and was closely involved in the construction of their residential building including material purchase.