Reality Sector experiences double digit price growth

Housing prices across India’s top eight cities rose, on an average, by 8 per cent year-on-year in the first quarter of 2023. Six of these markets experienced double-digit price growth, with the highest increases observed in Delhi-National Capital Region (16 per cent), Kolkata (15 per cent), and Bengaluru (14 per cent), according to a recent report by Credai, Colliers India and Liases Foras.

Demand amid high loan rates

Prices stagnated across the country from 2015-16 and witnessed a correction during the Covid-19 pandemic. “These developments reshaped the relationship between property prices and purchasing power, thereby enhancing affordability. In India, which has considerable housing shortage, such conditions typically spur demand.”

The real estate market started rebounding from the latter half of 2021. According to Colliers India,”A significant portion of the sales growth during this period can be ascribed to the release of pent-up demand from 2020 and the first half of 2021, due to the pandemic.” The sustained sales momentum thereafter was owing to the desire for homeownership that intensified during the pandemic.

Over the past two to three years, developers have come up with offerings that are in sync with buyers’ needs.

“There has been an enhanced focus on launching and delivering properties that closely align with market needs in terms of location price, timing, and configuration.”

A good time to enter

The market has only recently emerged from a lengthy period of stagnation and correction. “A considerable price correction appears unlikely at this juncture. A rising trend in property prices seems more probable.”

The current price levels are “productive”, implying that prices have not yet reached levels that could hinder future gains. Economic activity, infrastructure developments (leading to reduced travel time to emerging locations), and inflation will continue to propel price growth.

Other risks

An investment in residential real estate often carries concentration risk for retail investors as they usually don’t have enough money to diversify across properties.

Says Plan Ahead Wealth Advisors: “Real estate investment involve substantial additional costs-such as stamp duty, registration charges, and society charges-which increase the breakeven point.”

During a downturn, housing becomes an illiquid asset class, and exiting it proves challenging.

Mistakes to avoid

The Delhi-NCR region still contains a number of unfinished projects, underscoring the importance of selecting a developer with the financial muscle to complete his project.