The residential housing segment in the country has continued its northward march with Chennai leading the various urban centres by recording the highest increase in property prices during the quarter ending March 2022. This also reaffirms a sustainable turnaround in the residential realty sector.
The prices of residential properties have been showing an increasing trend in varying degrees in the top eight cities of the country as per the recent analysis carried out by the online real estate major PropTiger.com, a part of REA India that also owns Housing.com and Makaan.com. The rising prices of property is an important factor as it is a reflection on the overall buoyancy in the sector, which is important for all stakeholders, may it be developers, building material suppliers, the government exchequer or the ultimate buyer.
The report clearly highlights several facts suggesting a definite recovery in the residential real estate sector, which in all probability is likely to sustain in the months and quarters to come. These pointers include 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 home buyers.
The report titled ‘Real Insight Residential – January-March 2022’ covers developments in the residential realty sector in Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai Metropolitan Region, Delhi-National Capital Region and Pune.
On an all India basis, as many as 70,623 units were sold in calendar Q12022 as compared to 66,176 units in calendar Q12021, thus registering a growth of 7 per cent year-on-year. More significantly, the improvement in terms of new supply was much higher with a Y-o-Y growth of 50 per cent during the same period. A total of 79,532 units were launched in calendar Q1 2022 as compared to 53,037 units in calendar Q1 2021.
The demand matrix also showed that the bulk of the buyers preferred residential units in the range of Rs 45-75 lakh. The cities of Mumbai and Pune recorded the biggest share of the housing sales pie, with their combined share accounting for 56 per cent of the overall sales during the period.
Another significant factor suggesting improvement in overall sentiment was the rise in preference for under-construction properties. Unlike the recent past, home buyers have again started showing interest in under-construction properties because of the cost advantage over ready-to-move-in properties.
Earlier, most of the prospective buyers were opting for ready-to-move-in properties because of a trust deficit. This trust deficit is slowly yielding ground to confidence among the buyers as developers have become more conscious of adhering to delivery deadlines. As a result, several developers, especially the more reputed names, are in fact able to command a premium on their under-construction developments.
Although a large part of the price rise in residential units can be attributed to the rising cost of building materials, it is also a reflection of increasing demand for homes in different market segments.
As per the analysis, the steepest increase in property rates were witnessed in Chennai, where, on an average, prices of residential units rose by 9 per cent on an annual basis, followed by Pune and Ahmedabad, which saw an average price increase of 8 per cent.
The main factors responsible for the rise in demand as well as for the increase in prices of residential property are overall improvement in consumer sentiment on account of the fall in the incidence of coronavirus cases and the change in consumer perception towards home ownership driven by the pandemic. With the overall economy improving and more and more companies hiring new employees, aspirations have also started rising. Also, the extensive use of digital and social media platforms by developers to market their projects have helped in attracting younger people to the housing sector, both for investment and for end use.
On the flip side, the high number of unsold housing inventory continues to remain a matter of concern for developers. This, however, may be attributed to oversupply of units at the wrong price points and also to units, which might never see the light of day. Among the cities, Delhi NCR has the highest inventory overhang, while Bengaluru and Kolkata recorded the lowest. These inventories will only gradually come down as the residential real estate cycle continues on its upward march.
As the going gets slightly tougher, with the interest rates cycle moving upwards in the wake of the RBI hiking interest rates, housing in India would require additional support from the government to maintain buyer attraction. An extension of the PMAY-Urban scheme beyond September 2022 and Section 80EEA would be the right steps in that direction.
(By Dhruv Agarwala, Group CEO, Housing.com, PropTiger.com & Makaan.com)