Home sales have been strong throughout the year, on account of low interest rates and pent-up demand from the pandemic days. While home loan rates today are at around 7.9 per cent, after staying at around 6.6 per cent for the last two years, demand continues to be on a strong footing.
This trend is expected to gain momentum during the upcoming festive season, when buyers tend to invest in properties, because it is considered to be an auspicious period for home buying. If we look at it, the hike in home loan rates has not really dented demand, because interest rates are still lower than the pre-pandemic levels.
The Housing Price Tracker Report 2022, released by the Confederation of Real Estate Developers Association of India (CREDAI) and real estate consultancy firms, Colliers India, and Liases Foras, shows that demand for residential real estate has increased in eight cities, including Mumbai Metropolitan Region (MMR), Delhi-NCR, Chennai, Kolkata, Bengaluru, Hyderabad, Pune, and Ahmedabad.
Buyers know that home prices are on the rise and they want to close in on a home, before prices escalate. In the last few months, real estate developers have increased home prices because of the high cost of raw materials such as cement and steel. According to the Housing Price Tracker Report 2022, real estate prices have increased by 5 per cent, across Delhi-National Capital Region, Mumbai Metropolitan Region, Kolkata, Pune, Hyderabad, Chennai, Bengaluru, and Ahmedabad. The highest price increase was seen in Delhi-NCR at 10 percent on a year-on-year basis, followed by Ahmedabad and Hyderabad at 9 and 8 per cent, respectively.
The desire to buy a home before prices escalate is expected to generate a lot of interest in residential real estate, during this year’s festive season. In anticipation of the high demand, real estate developers are launching many new projects with new features. Developers are also offering freebies and other incentives to attract buyers. While festive season incentives are almost a regular feature every year, this time around it could be the key to ensuring that the prolonged growth momentum in sales continues over the next several quarters.
Many builders are offering discounts on property prices and innovative payment schemes to attract home buyers. Developers are offering freebies such as personal wardrobes in all bedrooms, a modular kitchen with a chimney etc. There are some who are offering schemes, wherein developers will pay rent to buyers, til they get possession of their home. This is to get home buyers to buy under-construction properties. Buyers have shown a clear preference for ready-to-move-in apartments, because it saves them money on house rent, while they pay home loan EMIs. Developers believe that incentives such as offering to pay rent will motivate buyers to invest in under-construction homes.
Developers are optimistic about sales because they believe that the sales momentum is based on strong fundamentals, such as demand from end user buyers rather than speculators. Sales in the first half of 2022 (January-June) were the highest in over a decade and second only to the first half of 2010. This is because of a rising preference for home ownership among millennials. Millennials are a big percentage of first-time home buyers as they settle down and build families. The Covid pandemic was a wake-up call for many, including millennials, who are looking for a sense of permanence. Nothing offers more security and stability than owning a home. This aided by the fact that disposable incomes are rising is driving demand for home.Tier two cities such as Ahmedabad, Vadodara, Nashik, Gandhi Nagar, and Jaipur, where millennials are buying homes, are expected to see good sales.
There is also a growing desire for larger and more spacious homes, given the work from home or hybrid model of working. In the last few months, there has been a surge in demand for large homes, with dedicated office space, extra rooms, balconies, gyms and modern gadgets and appliances. This trend is expected to continue for the rest of the year. A Knight Frank report shows that 60 percent of all home registrations in Mumbai in August, 2022, were in the price band of over Rs 1 crore. Home buyers are increasingly showing a preference for larger apartments between 500-1000 sq ft in size.
Demand is also strong for luxury and uber luxury homes, especially from the NRI community. A weakened rupee has increased the purchasing power of NRIs, who have shown interest in buying luxury homes in the cities and towns they originally belong to. NRIs have also shown preference for plotted developments, which has seen many developers entering this space.
This festive season, a wide array of homes are on offer. Developers are optimistic that given the strong desire to own a home and attractive offers and freebies, the uptake for homes will be healthy. Expectations are high that the festive season will strengthen home sales, and sales numbers will see a tremendous increase post the festive season.
(By Shiwang Suraj, Founder & Director, InfraMantra)