That India’s real estate sector would make such a spectacular comeback in the aftermath of adversity as gargantuan as the coronavirus pandemic was an idea not many could entertain.
To be fair to the naysayers, they did base their rather pessimistic outlook toward the sector on its previous performance.
Despite the policy support and excess of incentives, the sector continued to reel under the impact of a multi-year slowdown that started sometime in 2015 and continued to get more aggravated with the systematic launch of demonetization, the RERA, and the GST regime.
Combined efforts of all stakeholders failed to yield the desired results as home sales continued to be dismal amid swelling unsold inventory, previous data showed.
While the lockdown period of 2020 made matters worse in the short term, the pandemic changed the buyer mindset on a fundamental level. This change of approach has been evidenced in buyers putting their faith in immovable assets when compared to other asset classes. Due to this factor, the sector is seen making continuous progress despite the many challenges that it still faces.
PropTiger’s Real Insight Residential-July-September 2022 shows new supply in the July-September period was on a par with the 2015 levels for the second consecutive quarter. Due to strong demand, sales have continued to show robust growth with 49% YoY growth in the quarter that ended September 30.
Robust demand is also reflected in the fact that from 44 months in July and September period of 2021 to 32 months in the same period this year, there has been a significant decline in the inventory overhang — the estimated period builders in a particular market are likely to take to sell off their unsold stock at the current sales velocity.
While robust demand has helped developers reduce their unsold stock, price growth across markets has also turned real estate investments profitable for investors and landowners, data show.
The new-found resilience of the sector is also reflected in the fact that this growth happened despite home loan interest rates going up (In batches, the RBI has increased the repo rate to 5.9% from the 4% earlier; consequently home loan interest rates have moved to over 8% annual interest as against sub-7% interest seen during the pandemic period in India) and some of the government-backed subsidies ending in mid-2022.
Credit must also be given to the developer community which despite the tremendous price pressure continued to support demand by coming up with innovative sales offers. More importantly, they pulled their socks up on the promise delivery front— promise delivered late is akin to breaking it altogether. Unfortunately, developers have learned it the hard way.
Nonetheless, those lessons are coming quite handy as we march towards a new year of growth and promise.
As the year 2022 draws to a close, India’s real estate sector and its stakeholders have a lot to be proud of. They also have a lot to look forward to as the realty sector is set to take on new challenges in the coming year.
As the country’s second-largest employment-generating sector takes on these new challenges, continued policy support and incentives would go a long way in keeping the growth momentum going.
In the year 2023, we are hopeful that the government will dole out new sector-specific measures to benefit all stakeholders, be it the homebuyers, the developers, the landowners, or the tenants.
While the government has already extended the deadlines of the two verticals of the PMAY programme, it may have to announce further extensions to support the affordable housing dream. We are also expecting the government to announce an extension for Section 80EEA of the income tax law in Budget 2023. While buyer sentiment remains positive, small measures will go a long way in effectuating positive reinforcements.
