Christmas is just around the corner. But, for residential real estate, celebrations began early, given the strong traction this sector has had through 2023. Post COVID-19, demand for homes picked up as people chose to move into their own larger homes or shift to housing complexes. Even rising interest rates over 2022-23 didn't dent demand. Various estimates now suggest that 2023 is likely to be the best ever year for home sales as well as launches in more than a decade.
According to real estate consultants JLL India, between January-September 2023, 196,227 residential units were sold in the top seven cities in India; the number is 91 per cent of the total homes sold in 2022. During the same period 223,905 units were launched, up almost 22 per cent from a year ago. The data excludes row houses, villas and plotted developments.
JLL now expects full year sales to surpass 260,000 units and launches to reach 280,000, which will be highest since 2008.
"Despite the increase in home loan interest rates and rising prices, the overall sentiment in the domestic housing market remains positive, with homebuyers maintaining an upbeat attitude towards purchasing homes," said Samantak Das, chief economist and head of research, India, JLL.
Property consultant Anarock pointed that homes worth Rs 3.49 lakh crore were sold across the top seven cities between January-September 2023, which was 7 per cent higher than the total sales value recorded in full year 2022.
At current momentum, another Rs 1 lakh crore worth homes would be sold in the October-December quarter, driving the total home sales value over Rs 4.5 lakh crore, noted Anarock.
"COVID-19 was the genesis of demand. People realised the need for that additional space, they saw the advantage of large gated communities. Many people also decided to upgrade. That also created great opportunity for luxury developers across cities," said Ashish Dhami, EVP sales and marketing at Mumbai-based K. Raheja Corp Homes.
Overall the sales value was highest in the Mumbai metropolitan region at Rs 1.64 lakh crore, followed by the National Capital region at around Rs 50,188 crore. Sales value in Kolkata was the lowest at Rs 9,025 crore.
Dhami of K. Raheja pointed that in many micro markets of Mumbai, rentals have gone up 30-40 per cent over the past 12-18 months.
"Therefore, many people are choosing to buying homes over renting," he said.
Even in cities like Hyderabad, government initiatives like infrastructure projects played a pivotal role in driving demand, said Prashant Rao, managing director of Poulomi Estates. Notably, significantly larger sized apartments gained traction.
"Unlike previous years, where apartments were limited to 4,000 square feet, 2023 witnessed the launch and enthusiastic acceptance of apartments ranging from 6,000 to 15,000 square feet, presenting an entirely novel dimension in the market," said Rao.
As K. Raheja Corp's Dhami pointed, 2023 was a strong year for luxury real estate. A number of luxury homes were sold in major markets like Mumbai and MMR this year. According to CBRE, sales of luxury homes priced upwards of Rs 4 crore surged 75 per cent year-on-year in the first nine months of 2023.
It is not just luxury homes. Consumers are now seeking smart homes too, with the advent of technology and developers have been quick to adopt.
"No longer satisfied with mere extravagance, consumers are increasingly seeking residences that integrate intelligent systems for seamless living. The rise of smart homes, equipped with state-of-the-art automation and connectivity features, has become a defining trend in the real estate market," said Pritam Chivukula, vice-president of CREDAI MCHI and the co-founder, director of Tridhaatu Realty.
Since raising the repo rate from 4 per cent to 6.50 per cent over 2022-23 financial year, the Reserve Bank has left the benchmark rate at which it lends commercial banks unchanged for five consecutive times. Stability in rates helped boost sentiments. In 2024, with inflation expected to cool, central banks around the world, including RBI, are expected to cut interest rates. That could further drive the momentum in the residential market.
And its not just apartments that are in demand. Demand for second homes, vacation homes and plotted developments is likely to remain unabated in 2024, according to Badal Yagnik, CEO, Colliers India.
"Given the envisaged momentum in high-end segment, companies with related expertise in hotels and luxury segment are expected to increasingly foray into the premium residential market of tier I cities. A perceptible increase in share of luxury housing in overall residential market sales is on cards for 2024," said Yagnik.
With new airports, metro rail routes and arterial roads, most major Indian cities are undergoing a massive infrastructure upgrade. This infrastructure facelift will act as a catalyst for residential activity in the influence zones, he added.
Ratings agency ICRA expects the area sold in the top seven cities in India to grow by 13-15 per cent in the current financial year ending March 2024 and by 10-11 per cent in 2024-25.
"The collections of ICRA's sample set companies are likely to increase by 19-21 per cent in both FY2024 and FY2025, supported by an expected increase in unit sales, hike in average selling prices and a ramp-up in project execution, thus resulting in an improvement in cash flow from operations," said Anupama Reddy, co-group head and vice-president - corporate ratings, ICRA.
Dhaval Ajmera, director, Ajmera Realty and Infra India said the inclination of non-resident Indian (NRI) buyers and investors towards the Indian real estate market have also contributed to increased demand in the housing sector.
Furthermore, "as the redevelopment of older residential societies and structures accelerates, particularly in prominent cities such as Mumbai, we anticipate a substantial shift in demand towards premium and mid-range homes, with a preference towards projects initiated by branded developers," said Ajmera.
