INDIA (Commonwealth Union)_Housing sales, which were optimistic throughout 2022, will continue to be positive at least through the first two quarters of 2023, but after that, there may be a decline.
The majority of the leading cities will continue to have regulated new launches in 2023. According to Anarock Group, the launch trend in 2022 was measured caution, with developers abstaining from releasing more inventory than the market could bear, particularly in markets that were already oversupplied.
According to Anarock’s most recent Consumer Sentiment Survey, a “significant decline in housing demand” may result if house loan interest rates rise over 9.5 percent.
“A lot will depend on factors other than the desire to acquire a home, such additional repo rate increases and rising real estate prices. The repo rate increased by over 225 basis points (bps) in 2022, and home loan interest rates followed suit immediately, according to Anarock Group chairman Anuj Puri.
The Pradhan Mantri Awas Yojna, under which Rs 48,000 crore was allotted to finish about 80 lakh homes by 2023, can also be blamed for the segment’s expansion.
Housing sales, which were optimistic throughout 2022, will continue to be positive at least through the first two quarters of 2023, but after that, there may be a decline.
State governments have also taken bold actions to revive market demand following the outbreak. For instance, programmes like SWAMIH, which assists in funding stalled affordable housing projects, will further motivate developers of affordable housing to grow the segment in the upcoming year.
According to Pradeep Aggarwal, founder and chairman of Signature Global (India) Ltd., “Affordable home finance will grow the fastest, with mortgage penetration likely to treble to 8-10 percent over the next several years.”
According to India Ratings and Research, the polarisation of demand will continue to benefit tier 1 developers at the expense of tier 2 developers due to the rise in mortgage rates and the impact of inflation on disposable incomes.
Overall, the ratings agency anticipates that the absorption rate will rise 12% from FY22 to FY23, just barely crossing the pre-covid levels of FY19. It anticipates that new launches, which fell as low as 150 million square feet in 2020–21, will rise to 357 million square feet in 202–23.
Customer affordability has the cushion to absorb some of these risks, supported by an enhanced need for house ownership, even while fears of a global downturn bleeding into IT services and manufacturing exports together with ongoing cost inflation continue to be headwinds for incomes.
The formalisation of the economy following the implementation of the GST and COVID-19, the widespread acceptance of work-from-home policies inside organisations, and the regulatory framework that has increased market discipline and confidence have all contributed to the demand.
According to Aparna Chaughule, Associate Director at India Ratings, “Housing prices could grow 8% from a year ago in FY23 on a pan-India basis after rising 6% in FY22, offering a cushion to the cost increases of 8%-10% over the year.” In the second quarter of FY23, prices in Tier-1 cities rose 7% compared to the same period last year.
Since demand has increased and market pricing has improved during FY19, FY20, and FY21, developers have been able to pass on the majority of cost increases in the final price. According to India Ratings, housing prices for builders in Bangalore and Mumbai are projected to rise in FY23 following a period of price reductions; builders in Hyderabad, the NCR, Ahmedabad, and Kolkata are likely to keep their rate of growth constant from FY22 to FY23.
While launches have increased across price points, according to this analysis, the volume growth potential appears to be in the sweet spot between Rs 30 lakh and Rs 1 crore (with affordable housing below Rs 50 lakh contributing 50% to overall volumes), where sales and launches have shown a significant improvement.
