Property prices in three big Indian cities may fall due to millions of jobs lost in the auto sector

  • The automobile sector workforce is one of the biggest drivers of affordable housing especially homes which are priced under ₹4million.
    Due to an auto sector slump, key real estate hubs like Pune, Chennai and National Capital region were affected which also happens to house auto manufacturing plants.
  • The sector has 124,000 affordable homes which are unsold, and the auto slowdown will add more to the pile.

Millions of jobs have been lost in India’s auto sector as sales of both cars and trucks have been falling for months in a row. The rising unemployment is a risk for three of the country’s biggest property markets — national capital region including New Delhi and Gurgaon, Pune, and Chennai-- which are also hubs for car makers.

The three auto hubs constitute over 40% of total affordable home sales in India. The job losses and the subsequent cash crunch may not only hurt people who already burdened with home loans and monthly instalments, it may even force potential buyers to stay away from new investments in property.

The result may be a fall in home prices.“The automobile sector workforce is one of the biggest drivers of affordable housing especially homes which are priced under ₹4 million. A crisis in the automobile sector creates a significant perception of job risk, which causes this key clientele to desist from home buying decisions,” said Prashant Thakur, Director & Head – Research, ANAROCK Property Consultants.

Developers hope that the cut in goods and services tax for automobiles will ease the stress and bring back jobs.

The real estate sector in India has been stuck in a rut for the last four years with some sign of improvement in 2018. The current slowdown may curtail the recovery.

Table: New Affordable Supply H1 2017 – H1 2019

CityNew Launches in 2017 (<INR 40 lakh)New Launches in 2018 (<INR 40 lakh)New Launches in H1 2019 (<INR 40 lakh)

Source: ANAROCK Research

There are already 124,000 unsold homes in the affordable segment (priced under ₹4 million) and any further increase in inventory will hurt prices if there isn’t enough demand for new homes.

See also:

Indian auto manufacturers axed 350,000 jobs in four months — and there are more to go

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