An overwhelming 58% developers feel that housing prices are likely to rise in 2023 amidst volatile input costs, economic uncertainties and sustained inflation rates. However, about 32% of the developers believe that the prices will remain stable in 2023. Housing prices have been on the rise over the last few quarters, led by robust housing demand as well as rise in input costs, according to a survey.
As per the survey, 43% of developers feel that residential demand would remain stable in 2023, followed by 31% who feel that the demand would increase up to 25%. Although developers remain undecided about unsold inventory levels, 62% of them feel that buyer enquiries and engagement have increased in 2022 compared to 2021.
During 2022, developers across the spectrum saw increased enquiries led by continued inclination towards home ownership since the pandemic. Homebuyers realized the importance of homes in gated complex with amenities and ample open spaces. The rise in home ownership was further supported by interest rates that continue to hover below 9% and discounts and offers by developers.
The Colliers-CREDAI-Liases Foras joint report on Real Estate Developers’ Sentiment Survey 2023 explores different perspectives of developers on how the residential sector spanned out in 2022 and which transects the sector is likely to take in 2023.
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It may be noted that raw material costs have surged significantly in the last two years due to global supply chain disruption, which has led to inflationary pressures. About 43% of developers saw a 10-20% rise in project costs in 2022 compared to 2021 amidst rising input costs. This is in line with Colliers’ construction cost Update: November 2022, which states that the cost of key construction materials has jumped about 32% in a span of three years. This has led to increased costs of construction for the developers.
Commenting on the same, Harsh Vardhan Patodia, President of CREDAI National, said, “The previous year provided the much-needed impetus and led to record-breaking sales in the last decade. Hence, more than 70% of developers believe the demand for home ownership will either increase by 25% or remain stable in 2023. With such sentiment, most of the developers in the community (87%) are looking to expand their offerings and the year is likely to see a surge in new launches equal to the current supply under construction.”
“Rising population, wealth growth, and rapid urbanisation are the key influencing factors driving the sector’s growth. Hence, to help maintain the momentum, almost 40% of developers anticipate improved ease of doing business from the government in 2023, while another 31% anticipate rationalization/income tax credit GST,” he added.
“During 2022, developers across the spectrum saw increased enquiries led by a continued inclination towards home ownership since the pandemic. The survey reveals that developers remain optimistic about the market. About 43% of the developers feel that residential demand would remain stable in 2023. Homebuyers remain enthused about purchasing homes, despite rising interest rates. Developers too are focusing on launching projects that are aligned as per the needs of the homebuyers and are also formulating strategies to complete their pending projects and bring in demand-led supply,” said Ramesh Nair, Chief Executive Officer | India & Managing Director, Market Development | Asia, Colliers.
“2022 witnessed the highest-ever sales and new launches across major cities in India. We have also seen a marginal increase in property prices. The market is likely to maintain the momentum that the sentiment survey re-affirms,” said Pankaj Kapoor, Managing Director, Liases Foras.
Branded residences – a clear favourite among developers
Branded residences have emerged as a clear favourite among developers as about 31% of the developers are willing to explore plotted developments as an alternative business model, followed by branded residences which were preferred by 19% of developers. Higher disposable incomes and an increased need for best-in-class amenities and open spaces have pushed up demand for self-contained residential complexes. Plotted developments are also becoming popular, especially in Tier II cities due to lower land rates and the flexibility they offer to homebuyers.
Next year is likely to see a spurt in new launches, as around 87% of the developers are willing to launch new residential projects in 2023. This cements the optimism among developers despite inflationary pressures and any potential slowdown. However, developers are likely to adopt a wait-and-watch approach to see how the economy, job freezes, and layoffs pan out over the next few months.
Ease of doing business – A top ask from developers
As per the survey, ‘Ease of doing business’ is developers’ top expectation from the government. In the Union Budget last year, the government announced the launch of ‘Ease of doing business 2.0.’ The sector expects further clarity and parameters over the index, including aspects such as single-window clearance.