BY VISHAL DUGGAL
Robust consumer sentiment defuses the continuous spike in interest rates and construction costs to steer Indian real estate onto the growth path in 2022
India’s annual retail inflation eased to a three-month low of 6.77 percent in October, while the annual retail inflation was 7.41 percent in September. With inflation easing leading to expectations of moderation in the pace of interest rate hike by the Reserve Bank of India (RBI) and demand drivers in place, residential real estate in the country is expected to close 2022 on a high and demonstrate strength in the coming year.
Despite global headwinds post the Russia-Ukraine war and a persistent rise in the cost of construction and the repo rate, homes worth Rs 1,55,833 crore were sold in the first half of FY23, rising yearly by 119 percent. The overall value of units sold in the corresponding period of FY22 was approximately Rs 71,295 crore. According to a report by the Anarock Group, overall home sales value in H1 FY23 was highest in the Mumbai Metropolitan Region (MMR) at Rs 74,835 crore, followed by Delhi-NCR at Rs 24,374 crore and Bengaluru at Rs 17,651 crore. The region saw highest yearly total sales value growth of 175%—from Rs 8,896 crore in H1 FY22 to over Rs 24,374 crore in H1 FY23. It was followed by Hyderabad, where housing sales value rose by 130%—from Rs 6,926 crore in H1 FY22 to Rs 15,958 crore in H1 FY23. Approximately 22,840 homes were sold in Hyderabad in the first half of FY23.
In Bengaluru, homes cumulatively worth Rs 17,651 crore were sold in H1 FY23, against Rs 8,218 crore in the two quarters of FY22—an annual increase of 115%. Pune sold approximately 26,580 homes worth Rs 13,532 crore in H1 FY23.
Kolkata and Chennai saw homes worth Rs 4,774 crore and Rs 4,709 crore sold, respectively, in the first two quarters of the ongoing fiscal, rising by 115% and 57% annually.
“The data vouchsafes that the first half of FY23 was a highly upbeat period for the residential market in the top 7 cities, allaying fears that housing sales could be impacted by rising property prices and interest rates,” says Anuj Puri, chairman, Anarock Group.
According to an analysis by Simply Wall Street, investors are optimistic about the Indian real estate industry, and appear confident in its long-term growth rates. The earnings for companies in the real estate industry have grown 38% per year over the past three years. More sales are being generated by these companies, and subsequently their profits are increasing too.
Increasing investment from non-resident Indians (NRIs) too has boosted India’s real estate market. Strengthening of the dollar against the rupee, the rapidly growing Indian economy, robust government support and policy initiatives, and strong infrastructure growth including highways, new airports, and metro rail networks have driven expatriate Indians to buy property in the land of their origin.
Secondly, millennials have emerged as an important class that now prefers buying over renting a home. According to Knight Frank Research, millennials now make up around 43% of all house buyers, more than any other demographic group. They prefer a large home that can fit their work, education and lifestyle requirements. Consequently, developers are pushed to innovate and cater to the requirements and housing needs of these new-age homebuyers.
The buoyant demand for home ownership has led to increase in new supply. The market has registered strong sales backed by robust consumer demand and quality launches by developers. As per a report by JLL India, as many as 184,000 units were launched during the first nine months of 2022. This is the highest number of new launches after 2015 when around 197,000 units were launched. Developers were quite active in launching apartments in both mid and premium segments. Around 54% of the launches were in the price bracket of Rs 50 lakh to 1 crore. A sizeable proportion of new supply was also recorded in the price bracket of above 1 crore, reflecting buyers’ aspirations to upgrade to bigger and premium homes with better amenities. Post-Q4, annual sales in 2022 are expected to be more than 200,000 units. This will be the highest annual sales post-2010 when the sales stood at 216,762 units.
Significantly, increased demand coupled with rising rates of key construction materials has led to steady appreciation in real estate after a prolonged downturn. According to a joint report by CREDAI, Colliers India and Liases Foras, housing prices appreciated by six percent across eight cities during July-September 2022, compared with the same quarter last year.
Delhi-NCR’s property market witnessed the highest annual price increase of 14 percent during July-September at an average of Rs 7,741 per square foot. The region saw the highest increase in housing price across India at 14 percent year-on-year (YoY).
As per the data, the average housing prices in Kolkata rose 12 percent YoY to Rs 6,594 per square foot in the July-September period of this calendar year.
Ahmedabad saw an 11 percent increase in average prices to Rs 6,077 per square foot, while Pune witnessed a nine percent rise in rates to Rs 8,013 per square foot. The average housing prices in Hyderabad were up eight percent to Rs 9,266 per square foot. The rates appreciated six percent in Bengaluru to Rs 8,035 per square foot.
Going forward, according to property experts in a Reuters poll, average house prices in India are expected to rise 5.0% over each of the next three years, lagging the current consumer price inflation rate, after increasing by 7% in 2022. A regional breakdown of the poll data showed prices in Bengaluru, Mumbai, Delhi and Chennai were forecast to rise by a median of 5% to 6% over the coming three years, in line with the national average.
Overall, 2022 has been a profusely encouraging year for the residential market in India.