Today’s homebuyers should look to invest in property along the lines of metros and expressways in the city outskirts to access premium properties in an affordable manner. Considering the rapid expansion of cities such as Mumbai, Bengaluru and Hyderabad, homebuyers and investors should make use of the early mover advantage to invest in properties before land rates spike, says Bhavesh Kothari, Founder & CEO, Property First.

In an exclusive interview with Sanjeev Sinha, Mr Kothari talks about the real estate market and shares his views on the realty trends likely to prevail in 2024. Excerpts:

Given the current economic climate, what trends do you anticipate in the residential real estate market in India for 2024, and how these trends might impact property values and demand?

The Indian real estate industry has faced several economic storms over the last 2 decades, including the Global Financial Crisis of 2008 and the recent COVID-19 induced pandemic, and has emerged stronger every time. This has helped the industry remain largely unaffected by the global sluggishness and continues on its growth path. According to a Naredco-Knight Frank report, the size of the Indian real estate sector is estimated to jump more than 12-fold to $5.8 trillion by 2047 from $477 billion last year and will contribute over 15 per cent to the total economic output of the country.

Also Read: Home Loan Insurance in India: To Buy or Not to Buy?

In this year, residential real estate in particular is expected to continue its bull run on the back of tailwinds such as rising land prices propelling prospective homeowners to invest, the growing importance of houses as an asset to tide over crisis and the emergence of newer segments such as student and senior living. While these trends began a few years ago, they are going to pan out and emerge as micro segments contributing to the overall growth of the sector. These will be driven on the back of the country transitioning from a lower-income economy to a middle-income economy, fueling a change in people’s preferences. They are demanding a better lifestyle to suit their evolving needs of work, learning and entertainment. In line with this, premiumisation is another trend which will drive growth of the sector with an increasing number of homebuyers turning to luxury properties for an enhanced living experience and to act as a high return yielding investment tool.

Affordability has been a concern for many prospective homebuyers. How do you think the affordability landscape will evolve in 2024, and are there any developments in financing options that might ease this concern?

On the contrary, historical low interest rates for several years have brought back greater interest in the residential segment. According to data from the State Bank of India, home loans for a 10-15 year period were available around 11.25% for a salaried employee which is now trending in the range of 8.60% to 9.15%, making it financially viable to invest now more than ever. Furthermore, government initiatives such as Pradhan Mantri Aawas Yojna, staggered payment schemes by developers are making it further affordable for homebuyers to invest in a residential property.

In addition to this, we expect premiumisation to be the biggest trend of 2024 for residential real estate where mid-premium, luxury and ultra luxury properties define the sector’s landscape. This, in the backdrop of increasing land rates, will make investing in properties feasible and attract fence sitters to invest in the sector increasingly.

With the growing emphasis on smart technologies and sustainability, how are these factors shaping the residential real estate market, and what role do they play in influencing property values?

At the end of the day, the aim of every business in the world is to fulfil the requirements of its customers. Today’s homebuyers are seeking enhanced comfort through greater inclusion of technology such as app-enabled support services and want to stay sustainably with elements of nature around. Identifying this trend, an increasing number of developers are coming up with residential projects which fulfil these needs of homebuyers. From vedic-themed projects offering amenities such as large green parcels and gardens to grow fresh vegetables to mechanisms to reduce carbon emission such as recycling and treatment of wastewater along with utilising solar energy. Developers are also integrating smart home systems such as video door monitoring, night vision technology, motion-sensing cameras for enhancing security. Similarly, these homes also come with systems to detect intrusion, raise an alarm for fire, and gas leakage.

These elements are offered to homebuyers at more premium rates and since it’s a customer-led trend, they are open to investing in such properties, thereby giving confidence to developers to tap into these emerging trends. It also contributes to the premiumisation of industry’s offering which plays out well for both parties- while homebuyers get an elevated product and service, the developers improve upon their margins, making it a win-win for everyone.

How do you assess the significance of location dynamics in the residential real estate market in 2024? Are there emerging areas that present unique opportunities or challenges for homeowners and investors?

In 2024, formats such as satellite townships or dedicated economic zones beyond the original Central and Secondary Business Districts are going to expand their presence across the top metros. Regions such as Electronic City in Bengaluru and Bandra Kurla Complex (BKC) in Mumbai, which have witnessed a planned development of commercial and residential complexes and are expected to be replicated in several other cities. Hyderabad, for instance, is developing its eastern region of Uppal as its next hub for industry after Hitec City and area ahead witnessing immense inflow of companies, thereby rapidly increasing property rates and straining current infrastructure. This, complemented with the expansion of metro connectivity in respective metros is enabling homebuyers to look for properties beyond the city centres in order to be cost-effective without compromising on connectivity to the mainland.

Today’s homebuyers should look to invest in properties along the lines of metros and expressways in the city outskirts to access premium properties in an affordable manner. Considering the rapid expansion of cities such as Mumbai, Bengaluru and Hyderabad, homebuyers and investors should make use of the early mover advantage to invest in properties before land rates spike.

Given the evolving preferences of homeownership, over rental, what is your outlook on the price momentum in 2024, and how might this impact investment strategies in the residential real estate sector?

We see both trends panning out in the industry. While homebuyers are looking to purchase properties for self-stay, a large section of the affluent homebuyers are also purchasing second homes to earn a rental income. According to a research report by 360 Realtors, second homes or holiday homes in India have become immensely popular after the pandemic with the aggregate size of holiday homes by the end of 2021 amounted to US$1.394 billion, a jump of 88.63 per cent compared to pre-COVID times in 2019. Propelled by a growing number of entrepreneurs, lawyers, doctors, senior corporates, artists and technology professionals, they are increasingly investing in second homes as they see residential real estate as a steady and robust investment tool.

Secondly, expectations of a rise in interest rates in the near future is expected to drive hordes of homebuyers into purchasing their primary house while second home owners will see it as a good time to enhance their returns on investment.