The Indian residential real estate sector is entering 2022 with optimism. Sales of houses have picked up pace and were higher by 26% in 2021 compared to last year. In another positive, the inventory overhang has come to under 24 months for the first time in the last six years. However, since the supply is below absorption, buyers should brace up for some price increases in the coming year.
Data sourced from PropEquity show that between January and October, over 3.89 lakh residential units were sold across the country — an increase of 26% over 2020, while the new launches increased by a mere 9% during the same period to a tad over 3.16 lakh units. Meanwhile, the unsold stock is at the lowest in four years at 1.05 crore units versus 1.20 crore units in 2018.
Samir Jasuja, founder and CEO, PropEquity, told FE that prices are expected go up by 5-10% in 2022. “Pricing will marginally inch up due to rising inflation and increase in cost of construction. Also, since there has been no price increase in the last five-six years, some price increase will be in the offing.”
However, developers believe this is unlikely to deter buyer sentiment. Sanjay Dutt, managing director & CEO, Tata Realty & Infrastructure, said, “We believe the real estate business will continue to bounce back with the market’s pent-up demand, the job market’s uptick, the mass rollout of vaccines, and decreased infection rates. These factors have and will play a significant role in increasing the demand for housing in India in 2022.”
Some developers have already started increasing prices. Maninder Chhabra, chief strategy officer (sales, marketing & CRM) at Bengaluru-based Century Real Estate, said, “With strong demand coupled with rising input costs and lowering inventory levels, we expect a firming up of prices in the first couple of quarters. We have already started price mop-ups in most projects and transactions are soaring.” He said the company has seen a 68% increase in net revenue growth in 2021 compared to 2020 calendar year. The appreciation in plotted development projects has been in the range of 20-60%, while its project in ultra-luxury segment witnessed 5% appreciation.
Venkat Narayana, CEO of Bengaluru-based Prestige Group, said, “With the onset of the new year, we believe that residential sector is now plunging into in a new phase of strong housing demands. Various market factors such as revival in economic activities, vaccinations, continued low interest rates, GST and stamp duty, robust hiring by the IT/ITeS, reviving consumer sentiments and growing preference for home ownership amid an increasing need for work and study from home environment, among other factors, emulate this.”
With unsold inventory at safe levels of under 24 months, prices going up, and investors making a comeback after a hiatus of five to six years should result in more supply of residential units hitting the market in 2022. Niranjan Hiranandani, managing director, Hiranandani Group, said, “An uptick in buyers and investors’ confidence will augment new project launches and also fast track home upgrade mode.”
Additionally, the industry expects that low housing finance rates, government initiatives for the growth of the sector and funding from SWAMIH fund of over 55 projects will release significant new inventory from stalled projects.