The Indian real estate sector continues to exhibit exuberance, maintaining a robust growth trajectory. The inventory crunch, high rentals and surge in property prices showcases the sector’s buoyancy, said a new report by NoBroker. This tenacity is an encouraging sign of the market’s overall health and long-term viability, it added.
The ‘Mid-Year Real Estate’ report for 2023 by the online property search platform, captures customer preferences as per a survey conducted with 34,000 consumers as well as the price and locality preference data obtained from its platform.
Key findings of the survey
Surge in Rents and Prices
The real estate sector in India has been experiencing a significant rise in both rental rates and property prices, continuing the trend from 2022. This consistent increase is indicative of a robust and buoyant property market across major cities. A combination of factors, including increased demand, constrained supply, and evolving consumer preferences, has contributed to this visible surge in prices and rentals.
The Pendulum Swing: Buying vs Renting
The report said that the rising rental rates have created a unique scenario where the spread between rentals and monthly home loan instalments (EMIs) has come down. Consequently, many tenants have begun to perceive better value in homeownership, driving a shift in consumer behaviour. This inclination towards buying over renting signifies a pivotal moment in the real estate sector’s evolution.
The Shift from Renting to Buying
According to the report, given the monthly rentals have come close to home loan EMI’s, 65% of tenants are contemplating property purchases this year. This reflects a growing confidence in the stability and potential growth of the real estate market.
Significantly, the majority of participants from Delhi-NCR (73%) and Chennai (71%) feel that purchasing a home is a wiser financial decision as rental costs are currently on par with EMIs.
Bangalore residents perceive an increased affordability post-pandemic, prompting them to consider buying homes. 63% of Hyderabad tenants think it is wiser to buy because property prices will shoot up in future.
Continuation of Renting-to-Buying Behaviour
The shift from renting to buying homes observed in 2023 is set to persist into 2024. This paradigm shift, primarily fueled by the rising parity of rents and EMIs, will play a crucial role in shaping the real estate market dynamics. As more consumers perceive greater value in homeownership, it is expected that this trend will significantly impact market behaviour in the year ahead.
Home Buying Preferences
With home loan EMIs getting close to rental rates, 65% of tenants are considering buying a property this year, reflecting an optimistic view of real estate market stability and growth.
There seems to be high intent to purchase and that to within the main city. The intent to purchase homes within main city areas is most pronounced among residents of Bangalore, Delhi-NCR, and Hyderabad. This suggests a preference for the conveniences and amenities that the heart of the city offers.
Supply-Demand Mismatch and Price Projections
The report also underlined that the market grapples with a defining issue: the supply-demand mismatch. This discrepancy, rooted primarily in the pandemic-induced slowdown in construction activities, has steered the market in favour of sellers and landlords.
A remarkable shift that marks the real estate market’s landscape is the emergence of a sellers’ and landlords’ market. Landlords, experiencing improved conditions after a challenging period, now command higher rents and dictate terms. Sellers, on the other hand, are relishing their asking prices, suggesting a period of heightened demand and profitability.
Property Inventory Crunch
A defining feature of the current real estate landscape in India is the shortage in property inventory. Supply has struggled to keep pace with the booming demand, primarily due to a slowdown in construction activities during the pandemic. This disparity between supply and demand has tipped the scales in favour of sellers and landlords. This is reflective of both buy/sell as well as rentals.
Rise in rental yields
For the first time in decades, rental yields have grown to as high as 6%. This has made real estate a very lucrative option for investors. Many landlords are even looking to buy a second rental property to ride the high return wave.
The Rise of Larger Spaces and Gated Societies
Gated societies near IT parks have observed a significant surge in rental prices. With shorter commute times and enhanced amenities, these areas have become particularly appealing, especially in the post-pandemic world.
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