– By Abhishek Kapoor
The Indian real estate sector has demonstrated remarkable resilience in the face of the significant challenges currently confronting the global economy. The economy, as a whole, is performing well. In the April-June quarter of the current fiscal, India’s GDP grew by 7.8%, making India one of the fastest-growing major economies.
The Indian realty sector is mirroring the resilience shown by the economy at large. According to real estate consultancy Anarock, approximately 1,20,280 units were sold in the July-September quarter of 2023 across India’s top seven cities, a substantial 36 per cent increase over the 88,230 units sold during the same period in 2022.
Due to genuine end-user demand, the growth in sales has been consistent across segments, ranging from mid to luxury housing. Data from another consultancy, CBRE, notes a 130 per cent year-on-year increase for luxury units in the first half of 2023. Similar demand trends have also been observed for plotted developments. Affordable housing, however, is a segment that requires support from the government.
Indian Economy a ‘beacon of light’
Amidst the current global economic landscape characterised by subdued growth, central banks are grappling with the delicate balance of raising interest rates to curb inflation without stifling economic expansion. The US Federal Reserve has hiked rates 11 times since March 2022, from near zero to a substantial 5-5.25% today. Growth tends to be impacted when interest rates rise by such a quantum. The International Monetary Fund (IMF) expects the global economy to grow by 3% in 2023. However, developed world economies are expected to slow down. The US, for instance, is projected to see its growth diminish from 2.1% in 2022 to 1.8% in 2023 and further decline to 1% in 2024. This decline is partially due to weakening consumption resulting from dwindling household savings.
Similarly, the Euro area forecasts modest growth of 0.9% in 2023, with Germany, a major economic driver, experiencing contraction. China’s recovery is also anticipated to be weaker due to challenges such as a contraction in the real estate sector, reduced government spending, poor consumer confidence, and declining exports.
In contrast, India is performing well, driven by fundamental changes in the Indian economy over the years. These include banking sector reforms, the implementation of GST, the launch of India’s digital stack and, particularly for the real estate sector, the establishment of the Real Estate Regulatory Authority (RERA). The geopolitical situation across the world, especially with China’s position, has made India an attractive investment destination.
What’s behind this resilience of growth in the real estate sector?
Several key factors underpin the resilience of the Indian real estate market.
Strong Desire for Homeownership: Indians have long harboured a strong desire for homeownership, and the pandemic has amplified this sentiment. During the pandemic, the shift to a remote working culture sparked a demand for larger and more spacious homes for self-use.
Supply Attuned to Demand: Branded developers have found merit in the volume of sales compared to disproportionate price increases, and home sales today are more volume-driven with stable prices.
Improving Infrastructure: The government’s focus on infrastructure has positively impacted real estate. Constructions of roads, highways, and metro lines have reduced travel time to many outlying areas in the major cities, thereby boosting the desirability of those areas.
The residential demand is expected to remain buoyant in the coming quarters as the sector today is largely driven by end-users. Till sales remain volume-driven, there will be consistency in demand given the demographics and the amount of economic activity in the country. As we navigate the uncertain economic times globally, the performance of the Indian economy and the real estate sector provides a beacon of hope.
(Abhishek Kapoor is the Group CEO at Puravankara Limited.)
(Disclaimer: Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.)