Advantages Of Small Unit Sizes

In these times where finding an affordable house in big cities such as Mumbai and Delhi has become difficult, real estate markets across the country are increasingly witnessing reduction in residential units sizes. While this has become a common trend across various cities, smaller units also offer advantages. For example, they improve affordability of residential projects. There are various other advantages of buying smaller units.

Residential units reduce in size

Many major cities in India are witnessing reduction in unit sizes in the last few years. According to Common floor data, the average apartment size in Bangalore in 2012 was about 1,640 sq.ft, 43% higher than the national average. However, it saw a reduction of about 10% during the third quarter of 2013. Similarly, areas in the Mumbai Metropolitan Region (MMR) saw a fall in apartment sizes in the last few years. According to Jones Lang La Salle, sizes of flats in Greater Mumbai in 2008 were an average 20% higher than those on a pan-India level. However, the unit sizes have greatly reduced and are currently almost 15% lesser than other cities, indicating a fall of approximately 31% since 2008.

Increasing property prices and slow economy can be cited as major reasons for this reduction in sizes. Minimization of risks is another reason cited for reducing unit sizes.

Smaller units increase affordability

Affordability has become the buzz word for the past 2-3 years when it comes to residential projects in the country. India currently faces a shortage of about 18 million units in urban areas. On the other hand, there is an average inventory pile up of 2.5-3 years. This disparity is because the supply does not match the demand. The demand is for affordable houses while the available units are beyond the reach of the middle-class segment. The only way to ensure reduced prices in cities, where costs are high, is to reduce unit sizes. When the unit size becomes smaller, the ticket size too reduces.

Other advantages

While affordability is the buzz word, there are other advantages of buying small units as well. For example, maintenance costs of smaller units are lower compared to those of bigger properties. It is also easier to manage and maintain smaller units. In modern times, due to the cost factor, smaller houses sell quickly. This minimizes the risks and liabilities involved in buying bigger houses.

Builders see advantages

For a builder, a reduced unit size immediately translates into a smaller ticket cost and more sales, as buyers prefer smaller ticket properties. From a larger perspective, it also offers other advantages. It certainly offers a competitive edge over other builders who have slow sales due to larger apartments selling at larger ticket sizes. At the same time, it significantly reduces the risk of inventory pile up. Several builders across the country are facing a situation of tight liquidity. Faster sales can release some of the pressure on them.

According to builders, buyer requirements have changed with increasing prices. Buyers and investors are willing to compromise on unit sizes. Hence, a good balance between unit sizes and ticket sizes can significantly improve sales.