After being hit by the COVID-19 pandemic and coming to almost a standstill for two years, the real estate market has now started gaining momentum. The momentum is expected to continue in 2022-23 on the back of strong demand, and housing sales may jump around 12 per cent year-on-year in the current financial year, according to a report by India Ratings.
The rating agency has maintained an improving outlook for the residential real estate market for the financial year 2022-23. “Between adapting to the pandemic’s impact, industry issues and government policies, the Indian real estate sector anticipates a robust end-user demand in FY23. The steady performance and quick revival in FY22 have likely helped the sector regain buyer’s trust.”
In the financial year 2021-22, for the top-eight real estate clusters, housing sales increased 42 per cent y-o-y on a pandemic-impacted lower base. In FY23, Ind-Ra expects well-known and trusted developers to witness better sales, and affordable housing segments to continue to claim around 50 per cent share of the total sales, the report said.
It added that the current housing sales uptick and increased demand is end-user driven and not speculative. The hike in prices will be sustainable and is likely to be incremental. Prices were up by 6 per cent pan-India in FY22.
“Furthermore, the housing sales surge in India has not been accompanied by a sharp rise in prices so far. After a prolonged period of decline, prices stabilised in the past few years. Ind-Ra expects the price appreciation of residential property in FY23 to be around 8 per cent at the pan-India level, led by Bengaluru, Mumbai, Pune and Hyderabad,” the report said.
It also said housing demand has significantly increased with a substantial push from millennials. India is home to over 400 million millennials, comprising one-third of the total population and 46 per cent of the total workforce, which keeps on increasing year on year. There is a high influx of immigrant population into metropolitan cities every year.
“Tier-I residential players to generate strong sales in FY23 due to the ongoing consolidation in the market. As home buyers remain wary of under-construction projects by Tier II developers, there has been formalisation of the sector with Tier-I and strong local players gaining market share and brands winning the customer preference,” the report said.
Office Demand Also Rises
Apart from the residential market, the office space demand has also started rising. “Demand for offices has started making a swift return with office space leasing registering a 25 per cent year-on-year jump during January-March 2022 to 10.8 million square feet (msf). Bengaluru remained the foremost market with total leasing of 3.5 msf, followed by NCR with 2.3 msf,” according to a report by real estate consultancy firm Knight Frank.
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