DLF, the country’s largest listed property developer, recently sold more than 1,100 apartments worth Rs7,200 crore in Gurugram within three days of the project’s pre-launch. A quarter of the total apartments were bought by non-resident Indians. This follows another such project in Gurugram seeing an inflow of Rs 8,000 crore from buyers in quick time last year.
“Such a volume of sales doesn’t happen in two or three days if the interest is only from those buying to stay in the apartment. This shows investors are coming back in good numbers,” said a senior property consultant who did not want to be named.
Developers, consultants and PE funds say investor interest in the real estate market has picked up in the last few quarters as residential property prices have gone up.
Depending on the market, as much as 15% of the total sales consist of investors, experts said. Investors had mostly stayed away from the market for the last nine years, as prices stagnated in the top markets.
Residential sales touched a decadal high in 2023, with a 31% growth in the top seven cities, according to Anarock Property Consultants.
According to one consultant, investors are buying properties mostly below `1.5 crore and investor activity is on the higher side in Hyderabad and the National Capital Region. But it is moderate in Mumbai and lowest in Bengaluru.
Anuj Puri, chairman, Anarock, said the surge in demand for certain under-construction projects, which offer cost arbitrage, makes it evident that investors are back in the sector. Latest Anarock research shows that over 40% of nearly 477,000 houses sold in 2023 in the top seven cities were in newly launched projects, he said.
“Both end-users and investors have been showing an increased preference for large and listed developers, even if it means paying a premium. With such players increasing their market share since 2021, investors have regained confidence in under-construction projects,” Puri said.
According to Sunil Pareek , executive director at Assetz Property Group, a Bengaluru-based developer, prices have been appreciating gradually almost quarterly for the last eight to nine quarters. “Such markets do provide an opportunity to make short-term gains, which might have prompted some investors to participate,” he said.
Residential prices rose 10% to 24% in 2023 depending on the city, Anarock said.
In plotted developments, investors book plots in the pre-launch phase and wait for a few quarters for prices to go up with an aim to exit for a gain, Pareek said, adding that in some cases, at the pre-launch stage , participants have had 50% or more appreciation on their capital investments/booking amounts in a short span.
Amit Goenka, managing director and chief executive of Nisus Finance, said investors are excited about residential offtake, buoyancy and consolidation in the market. “Already there has been a surge in prices. I don’t know how much headroom is left for prices to go up as enough inventory and launches are coming up to meet the demand. Those who missed the bus want to tap the opportunity now,” Goenka said.
In Bengaluru, nearly 44% of the total sales in 2023 were of new launched units. In Mumbai Metropolitan Region, the share of newly launched units intotal sales stood at 37% in 2023, while in Delhi NCR it was roughly 24%.
“These cities (Mumbai, NCR, Pune and others) have become focal points for real estate investments due to factors like rapid urbanisation, the presence of a dynamic professional class, and robust corporate ecosystems,” said Ashwin Sheth, chairman and managing director of Ashwin Sheth Group. He agrees that the boom in sales and price rise have led to return of investor interest.
According to Sandeep Runwal , director at Mumbai-based Runwal Group, the current set of investors is looking to rent the property to earn additional income, unlike in the last cycle when they were looking at a short-term gain. “Between 2006 and 2012, investors were buying in bulk and selling at a higher price. Today’s investors are families who have double income and using the property for rental income ,” Runwal said.
But Gulam Zia, senior executive director at Knight Frank, said an annual price increase averaging below 7%, which turns negative when factoring in inflation, does not seem like a rationale choice for investing in home purchases. “The luxury home market, however, still operates on the concept of a ‘passion investment’, often defying conventional logic. Media frenzy around this is contributing to the fear-of-missing-out psyche, prompting HNIs to queue up outside developers’ offices,” Zia said.
Furthermore, the currency devaluation risk is adding to the fear of losses that NRIs have experienced in the last decade and hence foreign currency repatriation coming into home purchases is again hugely suspected, he said.
Somy Thomas, managing director, valuation & advisory and capital markets at Cushman & Wakefield, said the challenge is when there is a higher share of speculators who are trying to flip the property within a short time and making a quick buck. “When the share of such speculators increases, any uncertainty in the market will affect the project completion itself,” he said.