Future of real estate market in India in 2023

The residential real estate market in India had astounding progress in 2022, setting new sales records of 68% YoY, further demonstrating the industry’s prominence as one of India’s fastest-growing industries. After two years affected by COVID, Tier 2 and Tier 3 cities have arisen as fresh major real estate trends in 2022, and the real estate market has set unprecedented benchmarks which continued its growth momentum from 2021 amid the global slowdown.

Real estate market in 2022

Hari Movva, Senior Vice President, SILA said despite the faltering economy we are currently experiencing, the real estate sector lived up to its best in 2022 – According to an industry report, the top 7 prime residential markets in India recorded the highest sales during the first half of the financial year 2022-23 as compared to the last 10 years. The growing awareness of home ownership and the government’s favourable affordable housing schemes has led to significant growth in the affordable housing segment. With people realising the long-term potential of owning a house, v/s renting led to sustainable growth in the segment. An increase in earning potential, a need for a better standard of living and the growing base of aspirational consumers and their lifestyle changes have led to substantial growth in the sector. With suited economic growth, the premium housing segment will also witness higher demand in the years to come. Reforms in stamp duty, the introduction of affordable rental housing complexes and government-aided schemes will boost this asset class while providing relief to the many who do not have access to it.

Real estate market in India in 2023

Robin Chhabra – Founder and CEO of Dextrus Workspace said “Y2023 should be an exciting year; though we anticipate further downward trends in the global economy, this, however, should be an opportunity for the Indian economy to become world leaders. The real estate sector is going to continue on its journey of long term growth as we see a continuous rise in GDP per capita, larger disposable incomes, growing urbanization and most of all a larger focus of the world on us as the next big economy.”

“India’s strong growth potential shall lead to high demand in offices and commercial space in Tier 1 and Tier 2 cities. We are seeing this materialize in the rapid commercial growth in Pune, Hyderabad etc. The rising star, the coworking industry, has successfully adapted to changing work requirements and will continue to service the needs of young growing India. The co-working sector in India is expected to cross 50 million sq ft by the end of the year 2023 which would be a YOY 15% increase. Managed Office spaces shall continue growing at 10% in 2023. According to a recent JLL report, the net absorption of office space in 2022 across the top seven cities (Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Chennai, Kolkata and Pune) has been 38.25 million sq ft,” said Robin Chhabra.

Hari Movva, Senior Vice President, SILA said “We are bullish on the scope of real estate in 2023 – we expect the momentum on the residential side to be steady in most markets, office providers to have a similar year, while Retail, Hospitality and Industrial Real Estate will continue having strong momentum. Due to the new RBI regulations, where NBFCs are disallowed for early-stage RE investing, we expect there to be a significant amount of capital required to fuel the supply, especially on the residential side. AIFs and HNI investors are two pockets that could fund this growth.”

“The RBI’s monetary policy is a testament to the country’s commitment to financial stability and economic growth. The focus on maintaining inflation in check while supporting the growth of the sector is commendable. The increased repo rate could impact residential sales to some extent, particularly in the affordable segment but in mid-term, it will have no impact. The increase in cost of borrowing will have a direct impact on home buyers, leading to higher EMI’s and decreased affordability. It is important to understand the impact of this policy on the market and advise clients accordingly. While the hike may increase the cost of borrowing, it also reflects the central bank’s efforts to control inflation and maintain stability in the economy. The real estate market will continue to be driven by various other factors such as supply and demand, regulatory framework, and overall economic conditions.” said Shiwang Suraj,Founder & Director of Inframantra

Anuj Sharma – Chief Operations Officer – IMGC said “As we have another 25-bps hiked repo rate marking an end to the current rate hike cycle Lenders have done their utmost to mitigate this impact and keep EMIs at the same level by lengthening loan duration whenever possible. However, with the rise in repo rate by 25bps banks’ ability to assist is limited (as loan term extensions have already been exhausted), and the increase would eventually be passed on to borrowers, increasing the monthly payments. RBI monetary policy statement might have far-reaching consequences for the home finance and real estate sectors. With the rise in the repo rate again in response to an inflation goal, the cost of borrowing for housing finance businesses would rise, resulting in higher home loan interest rates for borrowers. It will raise the cost of taking out mortgages and purchasing properties. This may result in a decline in home demand. Furthermore, an increase in interest rates will make it more difficult for consumers to qualify for mortgages, lowering demand even further. To help control inflation, the repo rate has been raised six times in the current financial year (the current repo rate is at 6.5% vs 4% a year ago). With the last push of 35 basis points in December 2022, which was subsequently passed on to end users in total, retail consumers began to feel the heat as their EMIs on current loans began to rise.”

Mr. PL Narayana, CEO & Founder, Nesca Homes said “The Union Budget 2023–24 is remarkable in many ways, especially in terms of the real estate sector. The Finance Minister has announced “Green Growth” as one of the priorities of the budget. Organisations already working on the concept of green, sustainable living in India are already moving towards sustainability and this move will help to achieve their goals more efficiently. We welcome this move and hope to see a brighter future in terms of sustainable infrastructure which is a need of an hour keeping in mind the environmental challenges of the country. PMAY allocation of 79,000 crore is also a good approach for affordable housing. Additionally, this budget is also helping MSMEs and Budget allocation for skill India development is also appreciated.”

“Considering the prevalent domestic and international scenarios and keeping up with the growth achieved so far, the budget is holistic and growth oriented. Increased tax rebates will definitely pump in more liquidity in the markets which will provide more disposable income to the lower end of the income spectrum. It may motivate individuals to purchase homes which would further enhance the growth of the real estate sector,” said Mr. Devanshu Bansal, Director, UK Realty.

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