Housing sales in India’s top eight markets (Mumbai, National Capital Region, Bengaluru, Pune, Chennai, Hyderabad, Kolkata, and Ahmedabad) hit a nine-year high in 2022 amid strong post-pandemic demand to own homes. Even as interest rates rose sharply and developers raised prices, residential realty sales surged 34 per cent last year to 3,12,666 units, according to consulting firm Knight Frank.
The forecast is that the momentum in home sales will continue in 2023, but a further expected rise in interest rates and deteriorating affordability in many markets will clearly cast a shadow this year.
Since May 2022, the Reserve Bank of India raised the benchmark repo rate to 6.25 per cent from 4.0 per cent. At the same time, the average residential prices have gone up 4-7 per cent in most markets. Yet, the sales momentum has remained fairly strong.
In the second half of 2022, Hyderabad saw 32 per cent sales growth; in Ahmedabad sales were up 25 per cent and in the National Capital Region, sales grew 24 per cent. Sales in Mumbai were up 19 per cent, Chennai18 per cent, Bengaluru 15 per cent and in Pune, sales was up 9 per cent.
Kolkata was the only market, which saw a 37 per cent decline in sales in the July-December 2022 period and a 10 per cent full year fall.
“As the annual income itself has gone up, the total impact of rate and price increases hasn’t been felt as much. But, having said that, the affordability index has deteriorated by a couple of points. Continuous increases would have an impact on demand at some stage or the other. At this point of time, the perception towards housing changing drastically during the pandemic time, the latent demand for housing still continues strong,” said Shishir Baijal, chairman and MD of Knight Frank India.
He further said if the interest rates are not increased further beyond 1-2 cycles, and prices of homes are kept within control by developers, there is reasonable confidence that the momentum of residential sales will continue in 2023.
As housing sales has increased, so has the supply. Overall in 2022, new launches accelerated 41 per cent to 328,129 units. The NCR region saw 207 per cent jump in new launches at 63,233 units. In most other cities, new launches registered between 20-60 per cent increase.
Last year also happened to be a strong year for the office real estate market. As the pandemic eased and offices started pushing return-to-work policies, total gross office leasing rose 36 per cent year-on-year to 51.6 million square feet in 2022. After 2019, this was the second best year for office transactions.
New completions have also seen a rise in 2022 with 49.4 million square feet in new office space delivered, a 28 per cent year-on-year growth, according to Knight Frank.
However, with the world economy seen slowing down this year, and developed markets staring at a recession, there are worries that the growth could slow even as domestic demand is likely to remain strong and more people will be heading back to working from offices.
“A lot of the big tech firms, and third-party IT services firms, given what is happening globally, and large part of the commercial real estate in India is driven by the international business, the technology business that happens out of India, they are sitting on the fence. There is normalisation happening on wages, contracts, discretionary spends, you see some of them realigning and right sizing their work force, that will also play down in the office market,” said Desai.
The slowdown trends were very much visible in the October-December quarter, after a strong first three quarters of 2022. In the second half of 2022, Bengaluru and Hyderabad saw a 22 per cent and 20 per cent decline in office space transactions. Pune, which also has offices of big tech firms, saw only 6 per cent growth in the same period.
Mumbai, on the other hand, saw 59 per cent growth in office transactions, while NCR saw a 20 per cent uptick. Similarly, Chennai and Ahmedabad grew 29 per cent and 24 per cent respectively.
Of the total office space transacted in the second half of the year, other service sectors (e-commerce, education, healthcare and logistics firms) accounted for a 30 per cent share, followed by IT, which had a 22 per cent share.
Over the last one year, office rentals in Bengaluru rose 11 per cent, while at the other end Kolkata and Ahmedabad saw no rise. Rentals in the other top cities rose in 2 per cent to 7 per cent range.
The forecast is that the momentum in home sales will continue in 2023, but a further expected rise in interest rates and deteriorating affordability in many markets will clearly cast a shadow this year.
Since May 2022, the Reserve Bank of India raised the benchmark repo rate to 6.25 per cent from 4.0 per cent. At the same time, the average residential prices have gone up 4-7 per cent in most markets. Yet, the sales momentum has remained fairly strong.
In the second half of 2022, Hyderabad saw 32 per cent sales growth; in Ahmedabad sales were up 25 per cent and in the National Capital Region, sales grew 24 per cent. Sales in Mumbai were up 19 per cent, Chennai18 per cent, Bengaluru 15 per cent and in Pune, sales was up 9 per cent.
Kolkata was the only market, which saw a 37 per cent decline in sales in the July-December 2022 period and a 10 per cent full year fall.
“As the annual income itself has gone up, the total impact of rate and price increases hasn’t been felt as much. But, having said that, the affordability index has deteriorated by a couple of points. Continuous increases would have an impact on demand at some stage or the other. At this point of time, the perception towards housing changing drastically during the pandemic time, the latent demand for housing still continues strong,” said Shishir Baijal, chairman and MD of Knight Frank India.
He further said if the interest rates are not increased further beyond 1-2 cycles, and prices of homes are kept within control by developers, there is reasonable confidence that the momentum of residential sales will continue in 2023.
As housing sales has increased, so has the supply. Overall in 2022, new launches accelerated 41 per cent to 328,129 units. The NCR region saw 207 per cent jump in new launches at 63,233 units. In most other cities, new launches registered between 20-60 per cent increase.
Last year also happened to be a strong year for the office real estate market. As the pandemic eased and offices started pushing return-to-work policies, total gross office leasing rose 36 per cent year-on-year to 51.6 million square feet in 2022. After 2019, this was the second best year for office transactions.
New completions have also seen a rise in 2022 with 49.4 million square feet in new office space delivered, a 28 per cent year-on-year growth, according to Knight Frank.
However, with the world economy seen slowing down this year, and developed markets staring at a recession, there are worries that the growth could slow even as domestic demand is likely to remain strong and more people will be heading back to working from offices.
“A lot of the big tech firms, and third-party IT services firms, given what is happening globally, and large part of the commercial real estate in India is driven by the international business, the technology business that happens out of India, they are sitting on the fence. There is normalisation happening on wages, contracts, discretionary spends, you see some of them realigning and right sizing their work force, that will also play down in the office market,” said Desai.
The slowdown trends were very much visible in the October-December quarter, after a strong first three quarters of 2022. In the second half of 2022, Bengaluru and Hyderabad saw a 22 per cent and 20 per cent decline in office space transactions. Pune, which also has offices of big tech firms, saw only 6 per cent growth in the same period.
Mumbai, on the other hand, saw 59 per cent growth in office transactions, while NCR saw a 20 per cent uptick. Similarly, Chennai and Ahmedabad grew 29 per cent and 24 per cent respectively.
Of the total office space transacted in the second half of the year, other service sectors (e-commerce, education, healthcare and logistics firms) accounted for a 30 per cent share, followed by IT, which had a 22 per cent share.
Over the last one year, office rentals in Bengaluru rose 11 per cent, while at the other end Kolkata and Ahmedabad saw no rise. Rentals in the other top cities rose in 2 per cent to 7 per cent range.
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