In Greater Demand

The year 2022 was a phenomenal year for the real estate sector, particularly the residential segment. Why? Because there was robust housing demand, mainly from end-users, across the top cities and Tier-II and Tier-III cities. In the year's first half, job security had improved vis-a-vis the uncertain pandemic period, say experts. There was robust hiring in the IT/ITeS sector, though the second half brought more sobering news on this front. Financial services showed a good hiring graph throughout, says Anuj Puri, Chairman, ANAROCK Group, a leading real estate consultancy firm. "The Jan-Sept period already saw housing sales and new launches surpass the full-year readings of 2019 with around 2.73 lakh units sold in the nine months period of 2022 and new launches at 2.65 lakh units. Compared to this around 2.61 lakh units were sold in 2019 in the same period, with new supply in that year at 2.34 lakh units," says Puri. "The mid-range (Rs 40 – Rs 80 lakh), premium (Rs 80 lakh – Rs 1.5 crore), and luxury segments (> Rs 1.5 crore) were the showstoppers of 2022. This will continue in 2023 as well," he adds.

The demand for rental housing too increased in 2022. This trend is expected in 2023 as well. This happened because more companies started calling their employees back to the office, at the very least in the hybrid model, thereby fuelling the rental demand. "Rental market demand not only breached pre-pandemic levels but surpassed them, and many housing societies have few or no vacancies. Rentals rose 20-25 per cent against pre-pandemic levels on average, with some of the more popular societies seeing more than 30 per cent increase," says Puri.

During 2022, the central bank raised the interest rates thereby elevating the fears of costlier home loans. While that may hold true in some instances, as per Dhruv Agarwala, Group CEO, Housing.com, Proptiger.com and Makaan.com, the demand continued to improve across all the price categories in the residential segment. "The interest rates on home loans have increased to around 8.5 per cent from 6.5 per cent before May this year, but thankfully we have not seen any impact on housing demand and sales. We feel that there should not be any concern on the demand front while mortgage rates remain under 10 per cent," said Agarwala.

Cost Escalation
As per CBRE South Asia, India’s leading real estate consulting firm, the year 2022 recorded an escalation in material costs due to curtailed production amid

the pandemic and increased global shipping costs led by supply chain bottlenecks. The overall greenfield construction cost increased by 5-7 per cent in the third quarter of 2022 on a Y-o-Y basis. The labour cost also increased by 8-10 per cent. "Looking ahead, inflationary pressures are widely expected to abate in 2023. This, alongside the resolution of supply chain disruptions and more active policy intervention from the government, might limit hikes in material prices," says Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE. The CBRE forecasts a marginal rise in the overall construction costs during 2023 across cities, with Mumbai likely to witness a sharper rise.

Expectations from 2023
Anuj Puri, Chairman, ANAROCK Group wants the government to seriously consider revising the price bandwidths for homes to qualify as affordable housing. Why? Because an upward revision will align with the market dynamics of different cities. "The size of units as per the current definition (60 sq. m. carpet area) is fairly appropriate, but the catch-all pricing band of up to Rs 45 lakh for affordable housing is definitely not appropriate across most cities," says Puri.

Rajat Rastogi, Executive Director, Runwal Group expects demand to remain robust, especially in the affordable housing segment and in the ready to move in or soon to be ready projects. "Keeping aside the concern of the rising interest rates, the growth momentum should continue and the real estate sector should see a great 2023," he said. Angad Bedi, Managing Director, BCD Group says the continuous depreciation of the rupee is a great opportunity for NRIs and foreigners to invest in 2023. "Apart from being a safe haven in these uncertain times, Indian real estate also offers capital value appreciation and rental income," he said. Bhavesh Kothari, Founder & CEO, Property First expects home purchase synergies to remain largely intact for the time being with banks likely to delay passing on further significant hikes to consumers in the immediate term.

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