India’s residential housing segment is witnessing massive growth. Of all the metropolitans, Chennai is leading with an impressive record of having the highest increase in property prices during the quarter ending of March 2022, according to Dhruv Agarwala, Group CEO, Housing.com, PropTiger.com and Makaan.com. He informs that this rise reaffirms a sustainable turnaround in the residential realty sector. Read on SURFACES REPORTER (SR) to know more.
Developments in the residential realty sector
India’s top eight cities have witnessed a substantial price rise in residential properties as per the recent analysis done by PropTiger.com, an online real estate major which is a part of REA India that also owns Housing.com and Makaan.com. Titled Real Insight Residential – January-March 2022, the report highlights several facts and emphasizes developments in the residential realty sector in Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai Metropolitan Region, Delhi-National Capital Region and Pune.
As per the report, this rise in property price is crucial as it showcases the overall buoyancy in the sector, which is important for stakeholders, developers, building material suppliers, the government exchequer and the ultimate buyer. It brings to light that a definite recovery in the residential real estate sector is most likely to sustain in the months and quarters to come. A few pointers included in the report are: increase in overall demand in various segments across different major cities of India and also efforts on the part of developers to make available affordable as well as mid-segment houses to prospective homebuyers.
Pan India, nearly 70,623 units have been sold in calendar Q12022 as compared to 66,176 units in calendar Q12021, thereby registering a growth of 7 per cent year-on-year. However, the improvement in terms of new supply was higher with a Y-o-Y growth of 50 per cent during the same period. In calendar Q1 2022, 79,532 units had been launched as compared to 53,037 units in calendar Q1 2021.
The report also showed that many buyers preferred residential units ranging from Rs 45 lakh to Rs 75 lakh, where Mumbai and Pune recorded the biggest share of the housing sales pie. The cities collectively accounted for 56 per cent of the overall sales during the period. Additionally, the rise in preference for under-construction properties was also one of the significant factors. Unlike before, homebuyers have now started showing interest in under-construction properties due to the cost advantage over ready-to-move-in properties.
Change and shift in demand
A few years back, homebuyers preferred to opt for ready-to-move-in properties because of a trust deficit. According to Agarwala, ‘this trust deficit is slowly yielding ground to confidence among the buyers as developers have become more conscious of adhering to delivery deadlines.’ This allowed several developers, especially the reputed ones, to command a premium on their under-construction developments.
That said, the price rise in residential properties has majorly been due to the rising cost of building materials. This indicates the increasing demand for homes in different market segments. The report notifies that the steepest increase in property rates had been witnessed in Chennai. The average price of residential units rose by 9 per cent on an annual basis in Chennai, followed by Pune and Ahmedabad, which saw an average price increase of 8 per cent.
According to Agarwala, the main factor responsible for the rise in demand and increase in prices of residential property is the improvement in consumer choices and perception toward home ownership post the drop in COVID cases. Post-COVID, the economy is getting back on track with companies hiring employees. This has also resulted in a rise in aspirations. Developers and builders have also smartly promoted their projects on social media platforms to attract the younger crowd toward the housing sector as an investment and end-use.
Road map ahead
Despite this, the number of unsold housing inventory continues to remain high and is a matter of concern for developers. Agarwala believes that this could be due to an oversupply of units at the wrong price points and also to units, which might never see the light of day. While Bengaluru and Kolkata recorded the lowest, Delhi NCR was at the lead in recording the highest inventory overhang. However, these inventories are expected to reduce once the residential real estate cycle continues to grow further.
In the wake of RBI hiking interest rates, India’s housing sector would be in need of additional support from the government to maintain buyer attraction. For Agarwala, an extension of the PMAY-Urban scheme beyond September 2022 and Section 80EEA would be the right steps in that direction.
Image credits: Bain & Company (image for representational purpose)