The festive season is upon us, and stakeholders in India’s real estate sector have more than just the holiday cheer to be excited about this year. What has kept the growth momentum going for the second-largest employment sector in the country at a time when global economies are reeling under the impact of geo-political tension?

Resilient comeback with policy push

The Indian real estate market’s journey in H1 2023 is nothing short of remarkable. Despite a backdrop of global uncertainties and economic fluctuations, the sector has displayed a surprising degree of resilience. A significant contributor to this comeback story is the series of favourable government policies. Supportive policies have not only injected vigour into the real estate market but have also made it more attractive for investors and homebuyers.

The RBI deserves credit for its prudent decision to hold the interest rates steady. This move has not only provided a stable economic environment but has also acted as a significant sentiment booster for the sector. It underscores the Central bank’s commitment to economic recovery and sustainability.

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Price movement and regional dynamics

At a time when demand for housing peaked, price trends across India’s major cities during the first half of 2023 present an impressive narrative. Topping the charts here is Gurugram, which clocked a remarkable 12% year-on-year price increase. On the other hand, cities like Chennai and Mumbai have exhibited more modest growth at 3%. Collectively, the top-eight cities average a 6% price rise, reaffirming the continued allure of investment opportunities in major urban centres.

Additionally, Hyderabad and Pune are maintaining steady growth at 5% and 3%, respectively, while Kolkata remains a consistent performer with a 6% price increase. These trends are reflective of regional disparities, demand-supply dynamics and the influence of price sensitivity on investment decisions.

Premium real estate leading the way

India wants bigger and better homes, and this trend is reflected in the increased demand for properties with a ticket size of Rs 1 crore and above. In H1 2023, this segment constituted a 24% market share, up from 16% during the pre-pandemic period of 2019. Mumbai has been a dominant player in this category, with nearly half of the sales concentrated here. This segment has also witnessed significant growth in cities like Pune and Hyderabad. Notably, emerging markets like Noida and Faridabad are now making inroads into the premium segment, attracting prominent builders and broadening the horizons for high-end real estate.

Anticipating external factors

While the real estate market is on an upward trajectory, external factors such as geopolitical issues and global economic slowdowns do loom on the horizon. It’s crucial to remember that the sector is no stranger to long cycles of ups and downs. Emerging from a down cycle that began in 2013 and concluded around 2021, the sector is now set for continued growth. However, a watchful eye on external factors is paramount for making informed investment decisions.

Tier-2 cities rising to prominence

A fascinating shift in the Indian real estate landscape is the ascent of Tier-2 cities. Cities such as Lucknow, Jaipur and Indore have emerged as promising destinations for prospective homebuyers. This transformation has been expedited by the pandemic, which not only accelerated digital adoption but also ignited a surge in online property searches. Tier-2 cities are now entering a new phase of growth, and cities like Chandigarh, Ahmedabad, Pune and Lucknow are witnessing a rapid surge in online property searches.

Institutional funding: Shaping the future

Institutional investments in the Indian housing sector have experienced a remarkable surge in recent years. This surge reflects the evolving economic landscape of India, the burgeoning middle class, and the increasing appetite for real estate assets. Institutions like private equity firms, real estate investment trusts and foreign direct investors are now capitalising on the opportunities in India’s housing sector, not only in major metropolitan areas but also in emerging Tier-2 and Tier-3 cities.

The future of India’s real estate sector is shaped by these significant investments. These investments are driving innovation in construction technologies and sustainable housing solutions, contributing to the sector’s overall growth.

As we usher in the festive season, the Indian real estate market stands as a symbol of hope, resilience, and opportunity. The conjunction of favourable policies and improved affordability has set the stage for a period of tremendous growth in high-end real estate.

(By Amit Masaldan, Business Head, Housing.com. Views are personal)