Real estate has great expectations from the ongoing festive season, and it is not just wishful thinking this time around. Developers are of the view that demand during this period — that traditionally sees intensive sale-purchase activity in India — is going to touch the level manifested before a long and painful phase of slowdown took over nearly two years back.
One may give the credit to the pandemic for this, but the fact is buyers view property quite differently than they did before the virus spread. They remain upbeat about property investments even as RBI-introduced rate hikes continue to make the cost of borrowing more expensive amid average rates of property moving upwards consistently because of a variety of factors.
According to the latest Housing.com and NAREDCO survey, real estate continues to be the preferred asset class for investment. This despite the fact that nearly 50% of prospective customers expect prices to rise in the coming months due to strong demand during the festive season.
As it is, housing prices growth is picking up. The all-India house price index (HPI) rose by 3.5% per cent year-on-year in the first quarter of 2022-23, data released by the Reserve Bank of India (RBI) show.
As homes turn a lot more than places of residences in the aftermath of the pandemic, especially due to hybrid-working policies, buyers are either out purchasing their first home or negotiating deals to upgrade to a bigger and better residence with better facilities. Since this sentiment remains robust, cost-related factors have not been able to upset developers’ apple cart.
Recall here that the RBI recently increased the repo rate to 5.9%, forcing banks to increase interest rates to over 8% annual interest. Till May, when the repo rate was standing steady at 4%, banks were offering loans at sub-7% interest.
Since home purchases are primarily determined by more personal factors than just housing loans interest rates (which continue to change through the loan tenure multiple times), we have a reason to believe growth momentum for the sector would be robust, and the sector would clock much higher growth in the October-December quarter this year. Our colleagues in the banking sector hold a similar view.
This is also reflected in home loan outstanding numbers with India’s banks– numbers available with the RBI show outstanding home loan registered double-digit growth in the first five months (April-August) of financial year 2022-23 even as the apex bank increased the repo rate three time during this period.
Sales and new supply are already on the upwards streak. Data available with PropTiger.com show residential sales have continued to show robust growth, registering 49% YoY growth between July-September 2022 as compared to the corresponding period last year. Considering the buyer sentiment, new supply has also registered a YoY growth of 61% when compared to Q3 2021, numbers indicate.
Government data for several states, including Maharashtra and Karnataka, also show that property registrations have seen remarkable growth during the recently-concluded 9-day Navratri festival—a precursor to the mega festival season that spreads beyond the new year.
Rupee fall fueling NRI demand
Another factor pushing the demand as well as price rally is the falling rupee. Amid the India currency breaching the 80-mark against the US dollar in recent times, NRI interest in domestic properties has got a major push with a boost to their purchasing power. The rupee fall has in fact given a major push to demand for the luxury housing segment in India. Developers are already finding a great many takers for high-end properties from buyers from countries like GCC, US, UK, Singapore, etc.
Data indicate India’s international ultra-high net-worth population is mostly made up of NRIs. About 55% of those who own real estate in India are likely to buy a second home, show industry reports.
If these trends are any indication, India’s real estate sector may be headed towards achieving the much-awaited “normalcy” period.
Are developers prepared for the festive rush?
With an aim to cash in on the festive spirit, real estate developers in India have come up with lucrative festive offers to make the purchase deals sweeter for buyers. Festive offers this year range from complete waiver or GST and stamp duty payments to convenient payment schemes. Since the festive season is a great time for developers to sell off this existing stock, they are also offering various deals on ready-to-move-in home purchases as well.
(By Vikas Wadhawan, Group CFO, Housing.com, Proptiger.com & Makaan.com)