Indian housing market robust, more stable than its peers: Report

Indian real estate sector will remain robust this year despite rising interest rates, sky rocketing house prices, stubborn inflation and global headwinds faced by the economy, according to industry experts.

The housing sector in India is also more stable than most other developed economies such as the US, UK and Dubai largely due to strong demand and a much faster recovery despite most sectors taking a hit under lockdown during the COVID-19 pandemic, the housing sector per se witnessed a faster recovery. The average property prices increased at a rate of 8 percent and is now quite steady in terms of recovery.

Quarterly housing sales are at an all-time high in the last decade, with nearly 1,13,770 units sold in the first quarter  2023 across the top seven cities, shows latest ANAROCK research data. That is a 14 percent yearly rise against about 99,550 units sold back in the first quarter 2022.

“The residential market’s winning streak continued in the first quarter of 2023 with housing sales in top cities breaching the previous high of the first quarter of 2022. The quarter has recorded the highest ever sales in the last decade amid significant rise in demand for high-ticket priced homes,” says Anuj Puri, Chairman of ANAROCK Group.

“The residential market’s winning streak continued in the first quarter of 2023 with housing sales in top cities breaching the previous high of the first quarter of 2022. The quarter has recorded the highest-ever sales in the last decade amid a significant rise in demand for high-ticket priced homes,” said Anuj Puri, the chairman of ANAROCK Group.

“However, emerging headwinds could pose a challenge in the short-term,”  Puri said, adding, “Persistent inflation concerns along with another possible rate hike by the RBI in the near future could dent the housing market’s growth trajectory in the upcoming two quarters. Once the dust of the ongoing economic disruptions settles, it is likely to regain again, backed by rise in homeownership sentiment.”

The real estate market in the US has taken a hit from the Federal Reserve's aggressive interest rate hikes to tame high inflation, with residential investment contracting for seven straight quarters, the longest such streak since the housing sector collapse triggered the Great Recession in 2007.

With most banks' tightening lending standards, the housing market could be close to bottoming out in the world's largest economy. The housing sector will also possibly cool off due to the mass layoffs in tech companies and the ongoing banking crisis.

UK's housing market has already cooled off in the past few months, hurt by slowing demand for new homes as higher mortgage rates and a surge in the cost of living discouraged people to buy new homes.

In Dubai, inflation remains a key concern for consumers and is expected to impact sentiment resulting in price discovery and rent increases leading into 2023, according to a Deloitte report.

Market experts think India is more stable than most other developed countries in the world.

Anarock’s Puri said the gradual rise in interest rates as the nation emerges from the pandemic has helped the housing sector to sustain, unlike the other countries which have seen a devastating impact of interest rate hikes and untamed inflation.

“It is expected that the housing market will continue to grow driven by the fundamentals,” Puri added.

Last year recorded the highest-ever sales of 3.65 lakh units, surpassing the previous peak of 3.43 lakh units in 2014. There has also been a significant annual increase of 54 percent compared to the previous year. All of this was achieved when a major part of 2022 witnessed the continued trend of rising interest rates.

This is largely due to a majority of working population, who are migrating to metro and tier 1 cities in India with the prospective to settle. Mumbai, Delhi and Bengaluru are the majorly progressing cities with adequate supply and equivalent absorption in the housing sector.

The growth of this sector is supported by this year’s Budget with more funds directed towards real estate development, rampant infrastructural development as well as urban and semi urban migration.

That, compared to UK where house prices last month dropped by the most in more than 10 years and Dubai, where high inflation has caused trouble for home sellers as well as buyers.

“If we see Dubai trends, the variation of the market at the slightest disruption ranges between 35-40 percent; be it COVID-19, any political reformation or any other occurrence. India on the other hand has a maximum variation of 8-12 percent even in the situation of complete lockdown; the recovery, as already stated is much faster and market sentiments balances itself," said Ritesh Mehta, Head-West & North, Residential Services at JLL.

“UK, although has a stable property situation but the occurrence of Brexit which was a major political halt did impact both rental and outright purchase market. The market confidence was all time low and recovery was rather slow,” he added.

Housing affordability in India may suffer due to increased costs of construction being transferred to the consumer, lower vacancy levels and increase in interest rates. Also, the economy may slow a bit if the RBI raises rates over 7 percent that in turn could affect housing demand and supply.

“The affordability is reflected in the demand due to the increased interest rates. Additionally, the raw material cost has increased, the approval costs have risen and land prices have gone up. However, with the new Budget announcement, this is going to be a short – lived present,” added JLL’s Mehta.