This optimism and consumer confidence were also visible in the real estate sector which came out of a prolonged downcycle this year and registered growth across the entire real estate verticals, residential, commercial, retail, and warehousing.
While the major global property markets in the United States and China saw a downturn due to high mortgage rates, unaffordability, and the return of the COVID-19 pandemic, India was able to show resilience and recover from the decade-old down cycle. In fact, it will not be wrong to say that the COVID-19 pandemic acted as a booster shot for India’s reeling property market. Property demand in the major cities of India has grown stupendously in the past year as the strong homebuyer demand has propelled developers to launch new projects, pushing the new supply tally to pre-RERA levels of 2015.
Housing Price Index, jointly developed by Housing.com and the Indian School of Business, registered an increase in new property sales volumes in the fourth quarter of the calendar year. Bearing testament to the positive consumer sentiments, credit growth in housing has also grown in double digits since April of 2022 and recorded a growth of 16.2 percent in November of the same year.
The property sales index grew by 36 percent on a yearly basis and registered a sequential but marginal 1.2 percent growth in the October—December quarter. The sales volume breached its pre-pandemic levels recorded in 2019. The rise stems from a renewed confidence towards residential realty as a secured investment avenue and is topped by end-user demand towards homeownership. The tilt in sentiments towards property purchase can be seen in the light of post-pandemic-induced uncertainties that propelled consumers to look at property as a safe haven and not merely as an investment option.
The unit prices on an All-India basis witnessed a 5.5 percent jump from the same period of the preceding year and registered a 2.3 percent increase on a quarterly basis. Due to inflationary pressures, a rise in input cost for the supply side, and the premium on ready-to-move properties, which have become increasingly sought after since the pandemic, the weighted average price of available and new residential properties in top metros have risen sharply year-over-year as seen in the October–December quarter.
The ISB-Housing.com Housing Price Index also gives deeper insights into property trends at the city level. According to data, Bengaluru among the top metros has seen double-digit (YoY 11%) growth in property prices followed by Delhi NCR and Hyderabad. The index on a city level indicates substantial homebuyer activity in Hyderabad, Mumbai, and Ahmedabad. On the other hand, though Bengaluru, Chennai, Delhi NCR, and Kolkata registered upward price movements, the cities saw a decline in their quantity index in the quarter ending December.We anticipate that property markets in major cities will continue an uptrend in the year to come due to the rally in pent-up and new demand. The decrease in the value of the rupee (dropping by 12 percent in the past 8 months) has attracted the attention of foreign investors, who are planning to buy property in India in the future. Developer credibility and a proven track record will be pivotal for such homebuyers.
The increase in institutional investments and increased stakeholder confidence will continue to boost and establish solid foundations for the property market across top metros. However, there are a few headwinds. The outlook for 2023 is moderately optimistic due to looming uncertainties in the global economy. Domestically, the Reserve Bank of India (RBI) in its effort to tame inflation has raised the benchmark interest rates multiple times (currently at 6.25%), which has increased the borrowing cost for home loans. Among these rapid developments, whether this current momentum sustains in 2023 remains to be seen.
(The authors, Ankita Sood is the director and head of research at REA India – Housing, PropTiger and Makaan, Shekhar Tomar is an assistant professor and Saiganesh Ramesh is a research associate in Indian School of Business)
