India’s real estate started its upwards journey post the Covid-19 mayhem in 2021 itself. By the end of 2022, the country’s second largest employment generating sector had gained momentum as reflected in key performance indicators, as buyer sentiment vis-à-vis the sector changed in the aftermath of the pandemic. In that sense, the year 2023 started on a firm footing for the sector that contributes greatly to India’s overall growth.

The resilience of the sector that underwent dramatic alterations in the past one decade — from absorbing several legal changes to facing a plethora of course-altering challenges — is further reflected through the latest quarterly data.

Demand continued to push fresh supply as well as boosting sales numbers amid an economic environment that offers stable housing loans and better job stability.

According to PropTiger’s Real Insight Residential report, India’s eight prime housing markets showed sales growth of 8% while new homes supply jumped 11% year-on-year during the April-June quarter of 2023 when compared to the same quarter the previous year.

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Developers launched 113,770 units in the first quarter of FY24 compared to 102,140 in the April-June quarter of FY23. Mumbai has been the frontrunner in terms of new supply, followed by Pune and Ahmedabad. A total of 80,250 units were sold in the eight cities in Q2 2023 compared to 74,320 in the year-ago quarter, shows the report.

On the other hand, all cities covered in the analysis showed positive price movement in the past one year. Gurgaon was an outlier with double-digit price growth of 12% YoY. Growth has kept investors interested in this segment, which was largely restricted to the more promising office segment in the pre-pandemic period.

Another benchmark that shows sustained demand for residential real estate in the country is the comparatively low inventory overhang. Based on the current sales velocity, developers are likely to take 34 months to sell the existing housing stock in India’s eight residential markets. This is indicative of a greater appetite for ownership of immovable assets even though other asset classes may offer higher return on investment.

What do buyers want?

How consumer behaviour changed post-pandemic has been a topic of great discussion. In the context of real estate, several changes have become prominent in buyer preferences.

For instance, while affordable housing continues to be the biggest demand driver in the world’s second most populous country, data show that buyers are also showing an increased interest in homes prices above Rs 1 crore. This segment in fact contributed 29% to sales during the quarter; the contribution of the affordable sector was at 33%.

Despite global uncertainties, better paying jobs that offer greater security have been fueling the consumer desire to opt for luxury and comfort when buying homes.  

A prominent indicator of increased buyer confidence in realty is the fact that the under-construction segment accounted for 85% of sales during the three-month period. Amid project delays and developer insolvency-induced uncertainties, the share of ready-to-move-in projects was gaining traction in the post-pandemic period. While its comparative affordability continued to keep under-construction homes the mainstay, buyers seemed more comfortable investing in ready homes to avoid facing project delays. As improved market conditions and severe regulatory compulsions make it key for developers to stick with promised timelines to be able to survive, buyer confidence in the sector has firmed up in the past couple of years.

Easy availability of affordable finance (a status quo is expected to be maintained on the repo rate) in the coming quarters is likely to further boost consumer demand. This gives analysts reason to believe 2023 would be a game-changer year for the sector. This expectation is less of wishful thinking and more of an assured outcome achieved through concerted efforts.

(By Vikas Wadhawan, Group CFO, Housing.com, PropTiger.com and Makaan.com. Views are personal)