January 10th, 2024
A shortage of inventory, regulatory tailwind, and infrastructural boost across major Indian cities are driving unprecedented demand for housing in the country.
Despite hardening property prices and home loan interest hikes in early 2023, home sales peaked last year with approximately 4.76 lakh units being snapped up in the top seven cities, registering a 31 percent year-on-year jump.
At approximately 1,53,870 units, the Mumbai Metropolitan Region saw the highest sales, followed by Pune, where 86,680 flats were sold, data from ANAROCK, a real estate consultancy firm, showed.
The National Capital Region (NCR) recorded sales of approximately 65,625 units, a 3 percent growth over the previous year. Bengaluru witnessed the sale of 63,980 units in 2023, an annual increase of 29 percent, while Hyderabad recorded sales of 61,715 units.
According to domain experts, the residential real estate sector saw renewed demand following the pandemic from institutional investors, despite economic global headwinds. The COVID outbreak was, in that sense, a game changer that served to shift Indians’ sentiments towards the housing sector.
Infrastructure upgrades in bigger cities also boosted the demand and opened new areas for development.
Regulatory push to the housing sector
Real estate experts say that after the pandemic, the government provided a significant push in terms of concessions and other benefits to drive demand in the Indian housing sector.
For example in May last year, the Maharashtra government announced a waiver of 50 percent of the premium payable by real estate developers for its cluster development policy in Mumbai for one year, a move to aid the redevelopment of old buildings in the city.
And over the last two years, several state governments like those in West Bengal and Karnataka extended exemptions on stamp duty and reduction in circle rates to boost homebuyer sentiments.
"On the regulation front, too, people are comfortable in buying real estate assets due to RERA (Real Estate (Regulation and Development) Act) and other interventions, and developers are delivering quality projects on time. There is also an effort on the part of the government to revive delayed projects. So there is so much activity that definitely boosts consumer confidence in the real estate market and it is getting more streamlined. We also feel that developers are launching projects more cautiously," said Vimal Nadar, senior director and head of research at property consultancyColliers India.
However, most experts believe that the renewed housing demand in India can also be attributed to both investor participation as well as end users' aspirations to own a home today.
Investors back to the market, cautiously
Post-COVID, with the stock market gaining momentum after an initial downturn, money flowed into the investor class, fostering interest in residential real estate.
"Investors subsequently became key players, prompting developers to launch projects with the anticipation of substantial appreciation, sometimes up to 25 percent. Pre-launches by grade A developers, coupled with staggered payment plans, became a strategic move benefiting investors," said Shalin Raina, managing director of residential services at real estate services company Cushman & Wakefield.
However, while sales steadily appreciated between 2021 and 2023, the growth rate of the residential sector had moderated from 50 percent in 2021 to 35 percent in 2023, on account of regulatory interventions and increased home loan rates, property management company Knight Frank India pointed out.
"Today, investors will have to lock in the money for an under-construction project for three to five years. High capital rates and a lack of easy exit from the investments have put several investors on wait-and-watch mode," said Vivek Rathi, national director, Knight Frank India.
We deliver a high level of craftsmanship with a stress-free approach.